Management – Streaming Movies Service – Netflix
Its distribution centers can be built in low-cost areas, and current distribution centers can cater to distant customers until local penetration rates justify building new ones (Jackson).
Furthermore, the streaming movies service provided by Netflix is more cost effective than these other substitutes because Netflix plans to allot its users a total amount of stream time. For instance, if a customer decides after 20 minutes of watching a movie that he does not want to watch it anymore, switching to another movie incurs no extra cost. Substitutes such as buying per download or traditional renting do not offer this convenience. For this reason, these are weak substitutes to streaming videos.
Netflix has lower proportional upfront capital requirement than a chain of traditional movie rental sotres.
The movie theatre experience: This is a huge threat to Netflix because movie theatres are a greater source of entertainment because they provide a whole movie experience with food, phenomenal sound and picture that for the most part the average person cannot experience at home. Also, they offer the most recently released movies, which Netflix cannot offer.
Video games: Today, there are so many different types of videos games, everything from computer games to one of the latest game consoles released, the Xbox Kinect. Companies such as GameFly and Gamemine are similar to Netflix in the fact that the customer pays a flat fee monthly and are able to get different video games mailed to their house. This is a threat to our company because there are many young people in the world along with some older fans that would rather choose to spend their extra money on video game rentals than renting movies through Netflix.