Netflix Case Study

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Netflix Case Study The video rental industry began with brick and mortar store that rented VSH tape. Enhanced internet commerce and the advent of the DVD provided a opportunity for a new avenue for securing movie rentals. In 1998 Netflix headquartered in Los Gatos California began operations as a regional online movie rental company. While the firm demonstrated that a market for online rentals existed, it was not financially successfully. Netflix lost over $11 million in 1998 and as a result significantly changed the business model in 2000. The new strategy included focusing on becoming a nationally based subscription model and focusing on enhancing the subscribers experience on their website. The change in strategic focus has allowed Netflix to grow into the largest online entertainment subscriptions service in the United States with over 6.3 million subscribers (Netflix). Netflix first grabbed the attention of many customers when, unlike the local video rental store, they eliminated due dates and late fees charged by traditional video rental stores. The Netflix model allows customers to pay a monthly subscription fee for which they receive as many movies as they want in a month. The subscribers order DVD’s via the firms website and delivered through the United States Postal Service. Subscribers keep the movie as long as they want and when finished return it to Netflix in a postage paid envelop. Netflix’s derives a much of their competitive advantage from their ability to offer each subscriber convenience and a personalized experience. The firm’s CineMatch software gathers data from subscribers’ online profiles, movie rental history and a subscriber’s movie ratings to develop a person... ... middle of paper ... ...iding convenience, selection, personalization and a low cost method for product delivery. Netflix posted gross profits for the fiscal year ending December 2006 of 996.7 million and increase of 314.5 million over the prior year. Net income increased by 16.8% during the same period. On February 25, 2007 the firm, hit a milestone when they delivered the 1 billionth DVD. Sources Datamonitor.com “Netflix” 2007, Jan EBSCOhost. . Laudon, Kenneth C. Traver, Carol. E-commerce: Business. Technology. Society 3th ed. Pearson Prentice Hall. Upper Saddle NJ, 2007. Netflix.com 2007. 18 April 2007 . Netherby, Jennifer. “Pressure on Netflix” Videobusiness.com. 29, January 2007. United States Securities and Exchange Commission. (2006). Form 10-K: Net flixr, Inc. Annual Report. Washington, D.C. Wikipedia.com “Netflix”. 18 April 2007.

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