Netflix operates within the Entertainment industry, which has seen significant changes over the past 10 years. The market has trended towards digitization, globalization, and a demand for original content. All of these trends suit Netflix well, and the company’s state of innovation is being positively impacted by the current market conditions. In fact, as I will discuss below, the current conditions within the Entertainment industry are partially a result of the Netflix’s own efforts and innovations. (The Current State of the Entertainment and Media (E&M) Industry, 2012)
The Entertainment industry currently is comprised of an interesting dichotomy. On one side are movie and television studios, still producing feature-length movies and serialized shows that are mimicking the same format used when these mediums of entertainment were first introduced. Conversely, the new players in the industry, including Netflix, are allowing consumers to access media content in virtually any location through computer-enabled devices. The following chart illustrates this trend, showing steadily declining DVD sales. (Culp, 2015)
Figure 1: DVD Sales & Revenue (2007-2012)
When Netflix began operations in 1997, their CEO Reed Hastings envisioned a future of online content streaming. However, Hastings knew that the current Internet streaming capabilities were far too slow, and would not allow for streaming just yet, which is why Netflix originally offered a mail-order DVD service. Next, when market conditions continued to trend towards digitization as Hastings predicted, Netflix was ready to act and began offering their Internet streaming service. This shows that Netflix had the foresight and innovative mindset to anticipate the next major trend within the Entertainment industry, and execute a strategy to capitalize on it. Netflix’s successful launch into digitization and online content delivery has further propelled the market and pushed other players towards this trend....
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