Netflix: The US DVD Rental Company's Competitive Strategies



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Code : COM0054

Year :
2005

Industry : Internet and e-commerce

Region : USA

Teaching Note:Available

Structured Assignment :Available

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Introduction:"I'm not trying to convince the market fast – I'm trying to build a big stable business", said Reed Hastings, Founder and CEO, Netflix Inc. (Netflix). LosGatos (California)-based Netflix, with a market capitalisation of $1.6 billion in 2004, was the world's first and largest online DVD rental firm. The company with its innovative business model –where customers paid a fixed monthly fee, ordered the movies through the Web and received the titles bymail (direct to their letter box) – emerged as a strong player in the DVD rental industry. Compared to the traditional video shops, where customers had to travel to the store to rent the video and had to return it to the store within a given time to avoid a late fee, Netflix's customers did not visit the physical stores and did not pay any late fees. As the online DVD rental model gained popularity, Netflix began to pose a threat to the established players like Blockbuster Inc. (the world's largest video rental chain) and Hollywood Entertainment Corporation (the No.2 video chain in US). However, observing the growing popularity of online DVD rental business, traditional players also jumped on to the online rental bandwagon. Blockbuster Inc. (Blockbuster) launched its rental-based service through mail in 2004, while Hollywood Entertainment Corporation did not evince interest to deviate from its existing businessmodel...

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