Technological Innovations
Since the turn of the century, technological innovations and high tech electronics have exponentially increased the number of ways in which a consumer can view a movie. These ways include, but are not limited to, movie theatres, at-home DVD players, on planes, in hotel rooms, and even in a car equipped with TV consoles in the back of headrests. Movies could be obtained in a multitude of ways, including purchasing from retailers such as Wal-Mart and Target, renting DVDs from local video rental stores such as Blockbuster and Hollywood Video, streaming movies on a pay-per-view basis or subscribing to premium movie channels through their television provider, or streaming videos online from sites such as Hulu or Netflix.
In order to have a better understanding of Netflix’s success, taking a brief glimpse into the history of the organization is necessary. This includes analyzing the original business plan, as well as the necessary changes created to distinguish itself in the competitive movie rental/streaming marketplace. Using SWOT analysis helps examine the internal and external forces acting upon Netflix, and Porter’s Five Forces helps analyze the movie streaming/rental industry, as well as Netflix’s business strategy development. From here, a reasonable conclusion regarding Netflix’s strategy can be reached.
In 1999, Netflix was created by Reed Hastings, allowing consumers to rent movies without having to leave their home. Netflix was able to do this by establishing several distribution centers throughout the US and mailing the customer’s selection from the closest distribution center available. Originally, Netflix had a similar business strategy to Blockbuster: an individual fee for each DVD rental, including late fees. However, Netflix soon decided to differentiate itself in the marketplace by charging a flat rate per month without late fees. This has led Netflix to become the world’s largest online movie rental service, with 33.1 million domestic subscribers and 9.19 million international subscribers as of October 2013 (Lawler).
Analyzing Netflix’s business model is a great way to understand how it became the industry leader in the movie rental and streaming marketplace. Performing a SWOT analysis of Netflix’s strengths, weaknesses, opportunities and threats, as well as analyzing Porter’s Five Forces of industry analysis and business strategy development, helps comprehend Netflix’s success and get a clearer outlook regarding the future endeavors of the organization.
It has been a widely held belief for some time now that movie streaming is the future of at-home movie viewing, due largely in part to a number of technological advances which has made watching movies more desirable. These advances include a significant decrease in the price of high definition quality televisions and television providers beginning to offer video on demand (VOD) services for premium channel subscriptions. Due to these