Netflix Situation Analysis

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  • Topic: Renting, Netflix, Marketing
  • Pages : 8 (2501 words )
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  • Published : December 15, 2012
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Anthony Morelle, Meghan Moran, Jose Velez Borbon, Melissa Greco Lopes

Marketing Communication Page 1

Netflix Marketing Plan

Industry Analysis

There have been many changes in the ways people view movies. Since the invention of the VCR, people have been going to a store to rent the latest movie release or view a classic. Now with the advent of the Internet, people have many different media to view a movie. They can download from a website, view in a video player, or stream the video from a vendor’s website. This was made possible because of Netflix. Netflix pioneered the way people rent movies. The company introduced low monthly rental fees instead of daily rental fees. There were no penalties for late movies because there were no stores to return the movies to. Instead, Netflix came up with the idea of allowing a customer to choose from a list of movies online, the movies are mailed to them within 1 business day, and could be returned the next day for another movie on the customer’s list complete with a self-addressed envelope with the postage paid. The only thing the customer had to do was drop it in the mailbox. Then in 1-3 business days, another movie from the list was delivered. As long as your subscription to Netflix is current, a customer can enjoy as many movies in a month at the cost of one DVD. This concept proved to be the death-knell for “mom-and-pop” video stores that require a customer to walk in and make a selection. It also caused traditional movie rental companies like Blockbuster to rethink its position within the industry as the leader. Netflix has no storefront, no employees to fill stores, no retail space to pay for. It could offer customers the ability to rent movies without the hassle of going to a store and do so with very little cost to the customer. New technology has also made competition fierce within this market segment. “New technologies and products, including online video, DVR, VOD, broadband, and video subscription services have attracted consumer dollars” (US, 2009, para. 1). Cable companies like Time-Warner are offering their “On-Demand” service that allows viewers to purchase movies to watch before they are released to other vendors. Netflix currently offers customers the ability to stream movies right from their computers without

Anthony Morelle, Meghan Moran, Jose Velez Borbon, Melissa Greco Lopes

Marketing Communication Page 2

downloading. Sears is joining Bestbuy and teaming up with Sonic Solutions to sell equipment that is capable of delivering streaming movies to your cell-phone, Blu-ray, and television through their RoxioNow software. “As part of the multi-year agreement, Sears has licensed the RoxioNow™ platform, which will power digital entertainment delivery services for both Sears and Kmart” (www.sonic.com). Still other companies like Redbox are delivering new movie titles in places that traditional movie rental companies never thought possible. Redbox, which was a subsidiary of McDonalds Ventures LLC until Coinstar bought the company in 2009, first started out in McDonald’s fast-food chains and are looking to expand to grocery store chains. “It has placed the machines in 75 grocery stores, and has signed agreements for 400 more grocery locations, including Stop & Shop and Giant stores owned by Royal Ahold NV in the Northeast” (Freed, 2006, para. 8). Blockbuster intends to roll out its version of the Redbox vending machine. “Blockbuster has signed a deal to place DVD rental vending machines in Kwik Trip convenience stores. Blockbuster is planning to have 10,000 kiosks across the country by the middle of the year as it attempts to catch up to Redbox” (Associated Press, 2010). Netflix was the catalyst that virtually changed the way customers rent movies. As newer technology becomes available, new media will follow. Already customers of Netflix can access movies from the Nintendo Wii and Playstation 3. Soon streaming movies will become available to handsets...
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