Entertainment on Demand: The Case of Netflix

• Published in: Business Model Pioneers pp. 127 - 141
• Main Authors: Voigt, Kai-Ingo, Buliga, Oana, Michl, Kathrin
• Format: Book Chapter
• Language: English
• Published: Cham Springer International Publishing
• Series: Management for Professionals
• Subjects: Business Model; Business Prospect; Franchise System; Streaming Service; Video Rental
• ISBN: 9783319388441; 3319388444
• ISSN: 2192-8096; 2192-810X
• DOI: 10.1007/978-3-319-38845-8_11

Netflix is a company that reinterpreted business ideas and processes from other industries and brought these to a field where it perceived an upcoming market demand. At the end of the 1990s, with more and more people owning a PC and beginning to feel comfortable online, the Netflix founders, Reed Hastings and Marc Randolph, saw an opportunity for improving the pattern of watching movies at home. They understood that customers did not necessarily like to drive back and forth to a video store in order to rent movies, and used this insight as a new business prospect. Netflix’s main disruption came from introducing DVD technology to the market, and establishing the DVD-by-mail business. The company started a technological transition, which soon became unescapable for competitors such as the movie rental chain Blockbuster. Since its launch, Netflix redefined its value proposition twice: first, it switched to a subscription model in 1999, providing customers unlimited DVD rentals for a monthly fee, without due dates or additional late fees. Hereby, Netflix introduced a form of flat rate for DVD rentals. Second, in 2007, Netflix did what it considered the next logical move, by launching its online movie streaming service, which is the main pillar of its business model today.