Netflix Case Study
Netflix: Why it Works
Tava Dennis
MGT 323
February 5, 2014
Stephen Theriault
Abstract
Netflix is a popular and affordable choice for film entertainment enthusiast and has seen significant growth in just over decade. As a novice and avid Netflix subscriber, we have found a company that has found its target market in our home. It appears that Netflix founder, Reed Hastings, made the right business moves at the right time. He entered the market at a time when he could have found himself failing to succeed. Realizing that the demand for instant streaming was a bold move in the late 1990’s when the internet and personal computers were still new and a developing phenomenon. A risky business venture proved to dominate the market and based on a small idea developed at the gym; and, Hastings didn’t know the outcome of his business or the consequences of changing to unlimited due dates and no late fees.
Netflix: Why it Works
It appears that Netflix managed to put itself in the enviable position that is occupied at the end of the fiscal 2010 due to its ‘no late fees’ testing that occurred in 1999. Up until then, the market of video rentals had never heard of a ‘no late fee’ when a rented video wasn’t returned by the due date. This began an industry shift, changing the game of movie rentals from ‘reel’ to ‘real’ and Netflix allowed its customers to view the rented movie at the leisure of the renter paying only a flat rate per month. As the article stated, founder Reed Hastings, had to pay a $40 late fee for a Blockbuster movie rental. Even in 2014, a newly released cinema DVD costs just around $20 plus tax. Back in 1997, Hastings could have possibly purchased two copies of Apollo 13. In addition to the ‘no late fee’ shift, Netflix also began allowing its customers to stream movies live from their home computers. In 1997, only 18% if the American population had internet in their homes (File, Thom. 2013). Jump to 2010 and the American
Tava Dennis
MGT 323
February 5, 2014
Stephen Theriault
Abstract
Netflix is a popular and affordable choice for film entertainment enthusiast and has seen significant growth in just over decade. As a novice and avid Netflix subscriber, we have found a company that has found its target market in our home. It appears that Netflix founder, Reed Hastings, made the right business moves at the right time. He entered the market at a time when he could have found himself failing to succeed. Realizing that the demand for instant streaming was a bold move in the late 1990’s when the internet and personal computers were still new and a developing phenomenon. A risky business venture proved to dominate the market and based on a small idea developed at the gym; and, Hastings didn’t know the outcome of his business or the consequences of changing to unlimited due dates and no late fees.
Netflix: Why it Works
It appears that Netflix managed to put itself in the enviable position that is occupied at the end of the fiscal 2010 due to its ‘no late fees’ testing that occurred in 1999. Up until then, the market of video rentals had never heard of a ‘no late fee’ when a rented video wasn’t returned by the due date. This began an industry shift, changing the game of movie rentals from ‘reel’ to ‘real’ and Netflix allowed its customers to view the rented movie at the leisure of the renter paying only a flat rate per month. As the article stated, founder Reed Hastings, had to pay a $40 late fee for a Blockbuster movie rental. Even in 2014, a newly released cinema DVD costs just around $20 plus tax. Back in 1997, Hastings could have possibly purchased two copies of Apollo 13. In addition to the ‘no late fee’ shift, Netflix also began allowing its customers to stream movies live from their home computers. In 1997, only 18% if the American population had internet in their homes (File, Thom. 2013). Jump to 2010 and the American
References: File, Thom. 2013. “Computer and Internet Use in the United States.” Current Population Survery Reports, P20-568. U.S. Census Bureau, Washington, DC. Griffin, R. & Moorehead, G. (2012). Organizational behavior : managing people and organizations. Mason, OH: South-Western/Cengage Learning.