Renting and Netflix

The movie rental industry is a living industry; there are constant changes with advances in technology, rights management, and the slow, but steady, move away from physical Media. Companies such as Netflix, Hulu, RedBox, and Blockbuster are being forced to look at new business models and try to keep up with these changes.

1. Netflix’s original marketing strategy offered several flat-rate monthly subscription options; in which, members could stream movies and shows via the Internet or have disks sent to their homes in a pre-paid and pre-addressed envelope. Free from the despair of due dates and late fees, members could keep, up to, eight movies at a time. Upon the return of a disk, Netflix would automatically mail out the next movie from the customer’s video queue. Members were able to change and update their queues as frequently as they liked. The sheer innovation of Netflix’s strategy encouraged several competitors to enter the market to compete directly,

Currently the competitive forces in the movie rental marketplace are not very strong. There are not very many players seeking to gain share in the market. The only competitors that come to mind when thinking of the movie rental marketplace are Netflix, Blockbuster and Red box. The evolution of technology has allowed many people to stream movies from online at no charge, for most and without any required subscription. Places like Blockbuster and Movie Stop are not as vivid as they have been in previous years due to the market shifting

Netflix is an entertainment company that specializes in streaming media and online video-on-demand. Over the years, it has grown to include film and television production and other distribution services. Its business model has changed, and so has its overall production cost grown to keep up with the increased market share. As a result, its current position in the market has made it more exposed to competition from other firms, which is why it needs to develop new strategies to remain profitable. Netflix has grown over the past years despite competition and its unprofitability (Helft, 2007). Therefore, to understand its success, it is important provide a microeconomic analysis of Netflix, its history, its products, and the market.

Netflix began in 1997 as a revolutionary idea by CEO Reed Hastings and software executive March Randolph. Before long, in 1999 Netflix launched its major line of business, the online subscription service, which radically changed the way consumers viewed movies and television. For a young company in an innovative and growing industry, Netflix has set itself up for a tremendous journey. The company has had much success due to its adaption of a modern business model and strength in operations management. Its continued reliance on and improvements of operation management principles is necessary to continue growing and bringing in profits.

The CineMatch software also allows Netflix to maximize their library utilization. Increasing the demand for older or smaller market movies not only assists Netflix in better meeting subscriber demand but also decreases the payout of revenue sharing that often accompanies the most popular new releases. Netflix has revenue sharing contracts with most of the major movie studios. Under the agreements the firm pays a percentage of the subscription fees for a predetermined period of time in exchange for receiving the most popular titles at a considerably discount over the whole sale price (Netflix SEC).

Netflix previously had a plan in which it included both online streaming, as well as unlimited DVDs by mail, 4 out at a time, for $9.99 a month (Gregory, 2011). However, in July of 2011, CEO, Reed Hastings, announced that they were going to separate the online and DVDs plan and charge

The presence of Netflix and Blockbuster in the movie rental industry has assisted me in developing this analysis of each corporation’s strength, weaknesses, opportunities, and threats as followed:

The online movie rental business is changing. As technology changes, DVD’s will not be the medium of choice. The shift will be downloadable movies. Most people enjoy the ability to watch a movie immediately, thus another of Netflix’s

Netflix was founded in 1997 by Reed Hastings who is the current CEO of the company. He noticed that there was a demand for the

Many of their competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than Netflix does. Some of their competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantially more resources to marketing and Web site and systems development than Netflix does. The rapid growth of their online entertainment subscription business since their beginning may attract direct competition from larger companies with significantly greater financial resources and national brand recognition. For instance in 2003 the extremely wealthy Wal-Mart used their online site to launch an online DVD subscription service, Wal-Mart DVD Rentals. With increased competition reduced operating margins may result as well as a loss of market share and reduced revenues. In addition, our competitors may form or extend strategic alliances with studios and distributors that could adversely affect our ability to obtain titles on favorable terms.

Wal-Mart Stores, Inc., the largest company in the world, has achieved leadership in the retail industry as a result of its efficient supply chain management practices. Setting record sales and earnings for fiscal year 2008, Wal-Mart’s total net sales were $374.5 billion, an 8.6 percent increase over the previous fiscal year and a record for any retailer.

In many ways, Netflix is an amazing company to analyze. By being disruptive, the company has changed drastically the disc rental business and the streaming industry. In addition, the ecommerce business model Netflix has developed was one of a kind, focusing mainly on the consumer’s needs and experience. Now, it might seem obvious that ecommerce marketers should focus on these aspects but at the time it was a first.

Netflix was founded by Reed Hastings and Marc Randolph in 1997 and was originally based out of Scotts Valley California. The business model that they were working towards was to create a company that would offer online movie rental service made available by streaming media as well as DVD’s that could be ordered online and delivered to the customers’ homes. (Wheelen, Case 12). Netflix had a strategic plan to undercut the competition in an effort to stress the market and force weaker competition out of the field. This was a very successful plan and over a period of years it was able to force the closings of most of its competing market to include the mega giant Blockbuster video. Using a business

Over the past 18 years, Netflix has greatly evolved, changing the way movies and television shows are watched. It was founded in 1998 by Marc Randolph and Reed Hastings as a DVD mail-order service. Netflix knew that it had to grow and innovate in order to compete with other big-name movie rental services such as Blockbuster and Redbox. Because of this, both Randolph and Hastings decided to integrate streaming in 2007. Although one could only stream on a desktop or a laptop,