| 2012 |
| Prof. Gervais
A case analysis on the movie rental company Netflix. |
The major portion of revenue that Netflix derived came from its unlimited streaming plans that included either one, two or three DVD’s out at a time from the mailing system.
Netflix began as a DVD rental provider that allowed customers to use the internet to select the DVD’s they wanted to rent.
Netflix’s strategy so far has included offering various plans that incorporate unlimited streaming to a viewing device from the internet and a mail order system that sends physical DVD’s to the customer for an unlimited amount of time without any additional fees (so ...view middle of the document...
The movies then are shipped out after subscribers go online and add titles to their wanted list. The movies are then shipped to them on a ‘receive, view, return and repeat’ basis. Whereas with the competitors, if one specific store (or vending machine) does not have the title the member is looking for, it may take a few days to get the movie in through store to store exchange. Sometimes, the member may have to go to various stores in the chain to find the video they want. In both cases with competitors, this is seen as an inconvenience.
By offering both video [streaming] on demand or VOD services through the use of an internet compatible device, and one day delivery of physical DVD’s Netflix, may be portrayed as the best contender in the movie rental industry. The availability of VOD services attracts the younger tech savvy target markets of Generation Y and the Millennial’s, while the mail order DVD’s attract the older Baby Boomer and Generation X target markets. This not only gives subscribers more options, but satisfies everyone equally, giving Netflix the competitive advantage based on its perceived value and market coverage as a video provider.
The various subscription categories and prices attract customers of all different economic backgrounds. By offering unlimited mail delivery movies starting at $8.99 a month that subscribers could keep for an unlimited amount of time and never have a late fee, Netflix ‘out-did’ most of their competitors. This is so, based on the fact that competitors charged per-DVD rates, limited the amount of time members could have a DVD in their possession and penalized members for bringing the movie back past its, usually one week or less, due date. Netflix also has the competitive advantage because the company pays postage on all DVD’s that are shipped to and from a subscribers home. Then by including unlimited streaming, Netflix provides even more incentive for subscribers to enroll in a plan because they have the ability to watch over 14,000 movies and TV shows while they wait for their next DVD to arrive in the mail. This offers a competitive advantage because subscribers do not have to pay any additional fees for the streaming.
The idea of a free one month trial is something that attracts many prospective subscribers to the Netflix approach. Whenever a subscriber signs up for Netflix, the company automatically enrolls them to have their first month free as a type of ‘try before you buy’ incentive. If the subscriber does not like the service they have signed up for, all they need to do is cancel before their first month is up and Netflix cancels their subscription. This provides the company with an advantage over their competitors because it alleviates any skepticism of how the process works therefore building the necessary trust from subscriber to company.
2. Analyze the evolution of the US market between 2006 and 2009 and the Netflix subscriber data (exh. 1&2). Identify 5 to 6 key success...