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Case Title:

Will the Red Envelopes at Netflix get Obsolete?

Publication Year : 2008

Authors: Brinda. G, Bharathi S. Gopal

Industry: Internet and e-commerce


Case Code: COS0074B

Teaching Note: Available

Structured Assignment: Available

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Since the time it was launhed till the present (2008), Netflix has been the leading player in the online video rental market. Its revolutionary business model heightened the industry competition. But, with the movie download service launched by powerhouses like Apple and Amazon, industry veterans speculated about the certainty of Netflix to retain its market position. It was felt that, if Netflix did not experiment with the movie download technology, it might end up losing its position in the industry ladder. Finally, in late 2007, Netflix entered into the movie download market. It differentiated its offering through a technology called streaming movies. This technology did not turnout to be a big hit as it was not feasible for offline viewing and on high definition screens. In order to make-up for its drawbacks, Netflix partnered with LG Electronics in early 2008. Netflix’s founder, Reed Hastings stated that the firm also had similar partnership plans with few other companies in the digital landscape. Reed expects that the Netflix-LG partnership will help the firm rectify its shortcomings in streaming movies technology. Analysts on the other hand are skeptical about the success of the technology and feel that in the longrun it might lead to shrinking of Netflix’s core service of DVD-by- mail. It remains to be seen if the technology convergence at Netflix will succeed and render its red envelopes obsolete.

Pedagogical Objectives:

    The case study helps the students to analyse and understand:
  • The importance of innovation (technology convergence) in the success of Netflix through years
  • How Netflix gained popularity with its DVD-by-mail service
  • The future of Netflix’s idea to partner with firms in the digital landscape.

Keywords : Red Envelopes; Netflix; Amazon; Apple; DVD-by-mail; technology convergence; Reed Hastings; Netflix-LG deal; moviedownload service; streaming movies; innovation; online DVD rentals; subscription based business model; pay-per rental; late fees

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