The rental movie industry has seen enormous changes over the past ten years. The industry has seen a rapid change from in store movie rentals to online movie rentals that has caused Blockbuster and Movie Gallery, the two largest in store movie rental companies in the United States, to file for bankruptcy and go out of business. This industry movement has allowed many online movie companies to emerge, most notably Netflix which is the world’s largest online subscription service of online movie rentals. Background and History of Netflix:
Netflix was founded in 1997 in California as an online video rental and streaming company. Since launching its online movie rental service in 1999, Netflix has experienced rapid financial growth. Netflix’s net income grew approximately 40 percent annually from 2004 to 2009 while their top in store movie rental competitors, Blockbuster and Movie Gallery, experienced large decreases in sale which ultimately led to both companies filing for bankruptcy. In addition to excellent financial growth, Netflix has also experienced rapid subscriber growth with total number of subscribers increasing each year since 1999.
Netflix Case Essay Example
Industry trends and Netflix’s excellent strategy to keep customers returning to use their site and also bringing new customers to the site has allowed Netflix to remain the industry leader they are today. However, rival companies such as Amazon have begun to enter the industry with large video rental libraries of their own. Netflix’s Strategy: Since the introduction of Netflix’s online movie rental service in 1999, the company’s CEO and founder, Reed Hastings, mission has been to create the world’s best online movie provider and increase subscribers and earnings per share each year.
He plans to do this by imposing a subscription-based business model and the use of a multi-pronged strategy to build a growing subscriber base. This business model allows for customers to choose from eight different subscription plans that ranged from $8. 99 per month to $47. 99 per month. Movie rentals are sent to subscribers from one of Netflix’s 50 distribution centers in the United State. Approximately 98 percent of subscribers live within one day delivery of the distribution centers which provided customers with close to instant access to all of
Netflix’s movies. Also, Netflix provides no shipping or late fees which allows customer to have more flexibility when renting movies. As the industry has evolved, Netflix has been able to remain the industry leader because of their large streaming library that is provided to all subscribers. The industry has seen a change from physical movie rentals to a greater increase in online streaming of movies with creation of new technology that allows many different devices to stream movies online.
Netflix has done an excellent job of keeping up with this growing trend by allowing customers to install Netflix on many of these devices such as iPads, Blue-ray players, and gaming consoles. Also Netflix has kept up with this new industry trend by doing an excellent job of new content acquisitions which allows them to expand their video library and gain the rights to new releases faster. Netflix’s easy to use website and video library has also allowed the company to remain the industry leader and continue its strategy to increase subscriber base.
Its website and video library contains approximately 100,000 movie titles. The video library is organized in a way that makes it very easy for subscribers to navigate through and even does a number of things to help customers find the best movie for them such as movie recommendations based on past movies watched, subscriber ratings, and most viewed movies on the site by other subscribers. Netflix has done an outstanding job of communicating its strategy to customers and employees. The company uses multiple marketing and advertising channels to reach its subscriber base.
Marketing strategies such as one-month free trials has done an excellent job of allowing the company to continue to increase its customer base. In addition to communicating effectively with customers, the company has done a great job of communicating with its employees by having a set business strategy and business model with a concrete mission and set of goals and a concrete model on how to reach those goals. The company’s great understanding on how to communicate to external and internal stakeholders has led them to remain as the industry leader.