In the late nineties, successful entrepreneur and CEO Reed Hastings created Netflix, an online video retailer. The concept was designed to offer subscribers an online library of DVDs from which they could rent, for a flat monthly fee, a prescribed number of movies at a time and exchange them at their leisure. Once finished with the DVDs, the customers would return them via the postal service and receive their next batch of selected movies. All this was accomplished with neither late fees nor shipping fees. The primary goal of Netflix was to provide its large and growing subscriber base with a premier, filmed-entertainment service. By the end of 2004, Netflix had 2.6 million subscribers and although it experienced losses in the first few years of operations, it had a 2004 net income of $21 million. For these and other reasons, Netflix was named one of the most successful dot-com ventures to date.
Although the Netflix model proved valuable to its customers and the company was experiencing high profits, there were still numerous questions and concerns that involved the future of Netflix. In 2005, in an attempt to copy the Netflix concept, both Wal-Mart and Blockbuster had moved their DVD rental services online. Considering these were both billion dollar companies, would they have the ability to take over Netflix and its competitive advantage? Netflix’s stock had also lost 78 percent of its value and in 2004 there were talks of a proposed partnership with TiVo that would allow Netflix to upload its movies to its customers via the Internet rather than send them by mail. As it continues to grow and move forward in this fast-paced industry, it has become vital that Netflix quickly addresses these issues and re-evaluates its strategic initiatives in order to account for changes in its aggressive competitors, the market as a whole and the company itself.
Demographic Segment: 27 percent of... [continues]
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