In 1997, Netflix became the first online movie by mail Rental Company. Hastings and Randolph co-founded the company. By 1999, they had come up with a $19.99 per month price plan for customer to rent as many movies that they wanted with no late fees. In 2011, Netflix shocked their customers with their new price plan by splitting the streamlining of movies to one price and DVD by mail with another price. With the change, Netflix lost one million customers.
Pertinent facts in the case
The pertinent facts in this case study are that in 1997, Reed Hastings and Marc Randalph co-founded Netflix. Hastings was upset due to late fee’s he received when he went to return movies that he had rented six weeks earlier. At first, when Hastings came up with the idea, VHS tapes were used for rental, so the cost to ship VHS tapes was too expensive. Then one of Hastings friends advised him of the new DVD technology. With the new DVD technology, Hastings packages the DVD’s in a single envelope and shipped it to himself to see if the DVD would be damaged. When he received the DVD and found that it was undamaged, he began to create mail-order movie rental business.
When Netflix first started, the price to rent a movie was $4 with a $2 shipping fee. With this new service, customers were able to have movies mailed to them, but they had to be back by a certain date or they would be charged late fees. In 1999, Netflix launched a new subscription service, which gave their customers unlimited rentals for a monthly fee of $15.95 per month. With the subscription, subscribers were able to rent four movies per month. Within a year, Netflix improved the unlimited movies subscription plan and changed the price to $19.99 per month. With the new plan, customers were able to rent as many movies as they desire and they could keep them as long as they wanted, but they could only keep four movies at a time.
By 2007, Netflix had him a major...