Netflix Case Study
Netflix Case
Network Externalities Example
User Linkage DVD players link users together. The DVD player itself serves as a uniform platform. In the case of Netflix, the DVD player allows for users to rent various movies in the form of DVDs and play them in the convenience of their own home. This can be on their televisions as well their computers. With the possibility of VOD, this linkage would be completed by the internet. With VOD, the use of the Netflix’s website and therefore computers would allow for users to link together. Even as a means of social identification, watching various films, whether they are independent or mainstream allows for topics of conversation.
Availability of complementary products Netflix has established many strong partnerships within the retail and electronics industry. Netflix’s name was spread through promotions with DVD players stemming from both retailers and manufacturers. A complementary product within Netflix is the large database it has of films. A user of the database can find films that are similar to those they like based off of actors, directors, genres, and other characteristics. While this cannot be used with other products, for a time, non-Netflix users were welcome to use this database.
Switching costs The biggest switching cost for Netflix would be the movie queue. The advantage with Netflix is that a user develops a queue for films that they want to watch. The queue allows for a constant stream of films. Another cost is the limited accessibility of independent films. Netflix works with studios to distribute small budget indie films while also distributing film festival favorites to garner an audience. Other film rental companies don’t offer such a wide selection. The library and recommendations are other switching costs. Netflix’s library is comprehensive and the recommendations are tailored to fit individual users. These are unique attributes of Netflix and are very much personalized for users.
The
Network Externalities Example
User Linkage DVD players link users together. The DVD player itself serves as a uniform platform. In the case of Netflix, the DVD player allows for users to rent various movies in the form of DVDs and play them in the convenience of their own home. This can be on their televisions as well their computers. With the possibility of VOD, this linkage would be completed by the internet. With VOD, the use of the Netflix’s website and therefore computers would allow for users to link together. Even as a means of social identification, watching various films, whether they are independent or mainstream allows for topics of conversation.
Availability of complementary products Netflix has established many strong partnerships within the retail and electronics industry. Netflix’s name was spread through promotions with DVD players stemming from both retailers and manufacturers. A complementary product within Netflix is the large database it has of films. A user of the database can find films that are similar to those they like based off of actors, directors, genres, and other characteristics. While this cannot be used with other products, for a time, non-Netflix users were welcome to use this database.
Switching costs The biggest switching cost for Netflix would be the movie queue. The advantage with Netflix is that a user develops a queue for films that they want to watch. The queue allows for a constant stream of films. Another cost is the limited accessibility of independent films. Netflix works with studios to distribute small budget indie films while also distributing film festival favorites to garner an audience. Other film rental companies don’t offer such a wide selection. The library and recommendations are other switching costs. Netflix’s library is comprehensive and the recommendations are tailored to fit individual users. These are unique attributes of Netflix and are very much personalized for users.
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