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Question completion Status Introduction UTTATRS Netflix was co-founded in 1997 by Reed Hastings and Mark Randolph. At that time, they were offering customers the opportunity to rent movies de vered by mail for a flat. The sort Hastings got the idea for Netffor only after he received a large late fee for a film herunted from his video store in California. Hastings had lost the film and after searching for wat we had to pay St. Later, on his way to the gym, he reflected on the sym's business model; you pay a set lee and work out as little or as much as you want. This became Netflies offersstomers content for as long as they like and no late fees are ever charged Netflix is the world's leading internet television network, with more than 100 million members in over 190 countries. Source: Diables/shutterstock.com Netflix has gone through a number of changes since it began in 1997 as a DVD mailorder service. The company has navigated the change from DVDs to streaming to become global TV network th dominant competitor during its inception, Blockbuster, has long since gone bankrupt. Today, Netflix is the world's leading internet television network with more than 100 million members in 1 countries enjoying more than 125 million hours of TV shows and movies per day. This includes original series, documentaries, and feature films. Netflix members pay a sutription to watch a much they want any time, anywhere, on nearly any internet connected screen. Members can play. pause, and resume watching all without commercials or commitments Was it inevitable that Netflix's way of doing business would succeed over Blockbuster's and its use of streaming technology become the dominant format? Were there any gals which might warned blockbuster of a potentially disruptive technology? The truth is something always exists which might point to a change in competitive conditions. However, senior managers need to open it eyes to perceive the change. Competitors in the Same Market In 2000, Netflix was little more than a failing start-up. Far from making any money, the company was incurring increasing losses. The CEO, Reed Hastings. New to Dallas to propose a partnership Blockbuster CEO, John Antioco as Blockbuster was the established competitor in the market. A year earlier, Netflix had revised its business model from customers paying for sth ovo they entedt subscription service, which worked better for consumers. Hastings proposal to Blockbuster was simple. He was offering to sell Netflixto Blockbuster for $50 milion. As part of the deal, Netflix wa run the blockbuster brand online and Antioco would promote Netflix in its store. On the face of it, the idea made sense: Netflix was an online retaler while Blockbuster had a bricks and mor would have the last laugh. presence. Why not try to expand the DVD market by helping each other? However given Netflix's loss-making business, Hastings and his team were laughed out of the office within ten years Ham Back in 2000, Blockbuster was the dominant player within the video rental industry. It had access to more than 9,000 retail stores across America and 528 stores, at its peak in the UK. It had million customers, a massive marketing budget, and efficient operations. Viewed from this perspective, the approach from Hastines seemed to be asking Mr Antioco to hand over the brand they had war hard to build. The trouble with Blockbuster's business model wasn't entirely clear at that time, but it could be seen if you looked hard enough. The company's profits were headly dependent on Late fees it charges its customers. Netflix, in contrast, had no retail locations, which reduced its costs. And, as it charged customers a subscription for its DVDX, this made inte fees redundant, customer paid their subscription, it was up to the customer to decide how long they wanted to keep the DVD. At the same time, they could return their DVDs and cancel their subscription Competing in Different Ways A major advantage of Blockbuster was that the customer could walk into a store and immediately rent a DVD. With Netflix, customers received their DVDs by post which was slow in comparis Blockbuster. Also, the Netflix brand was not as developed as Blockbuster's, making it more difficult for consumers to find. However, as resistance to the Netflix model for renting DVDs was overton would reach a tipping point. This occurred as existing customers shared their enthusiasm for the Netflix service with their friends and family. If Blockbuster wars to compete effectively with Net would have to change its business model. It's easy to think 'Why do this, why incur a fall in profit just because a small niche player is operating in the market Nevertheless, Blockbuster opportunity to recognize that Netti's customer offering might cause the video rental industry to evolve in a manner which put it at a disadvantage Questions 1. Use PEST analysis to identify the weak signals which were starting to Impact Blockbuster's rental business before it went bankrupt 2 Marks 2. What are the main reasons for Netflix's continued growth and profitability? 2 Marks 3. How sustainable is Netflix's subscription-based business model? 2 Marks that the AI TE DAITLENET , Competing in Different Ways A major advantage of Blockbuster was that the customer could walk into a store and immediately rent a DVD. With New customers recher Vs by post with window Blockbustes. Also, the Netflix brand was not as developed as Blockbuster's, making it more difficult for commers to find. However to the ele med for would reach a tipping point. This occurred as existing customers shared their enthusiasm for the Nette service with the friends and family own complete the would have to change its business model. It's easy to think, "Why do this, why incur a fall in profit just because mal niche player in operating in the met the odds opportunity to recognize that Netflix's customer offering might cause the video rental industry to evolve in a manner which put it tape They were faced with a choice of monitoring the changes taking place around them or smply continuing with business as usual blindly believe what has worted in the contes the future. Unfortunately for Blockbuster this was not to be the case. Blockbuster's US parent company filed for Chapter 11 bankruptcy protection 100 Network through a bankruptcy auction in 2011. Hy 2013, both US and UK blockbuster businesses were placed in administration. Was this inevitablerhaps not. There were al Blockbuster had been scanning its environment and monitoring for signs of charge or disruption By 2013, both us and UK Blockbuster businesses had been placed in administration Source JL.Rohoteraply/Shutterstock.com Blockbuster is not the only competitor to underrate Netflix and other streaming providers. In 2007 Netflix introduced streaming, which wiows me to stay at how to be personal computers. By 2010 it had partnered with consumer electronics companies to stream on the Xbox M, P, Internet connected TV, and other internet connected indir devices. In the same year, executives from the cable and entertainment industry predicted that the early so offers streaming is be show. The then supply of content from him studios and TV networks would soon slow down to trick Around 2011, Netflix esecutiwe began to wonder of the day will cheaply might be coming to an end. TV and film companies were starting to realize how valuable streaming were with the word Netflix made the decision to start making its own shows and movies, starting with the hugely couse of Candy and more on The war "Tiger King The huge investment Netflix has made in its originals over the past few years has paid off in a ring of Nite which has won consumer loyalty and direction Netflix's market capitalization was a huge sot billion (9 billion) By 2020 it had risen to a staggering 156 billion, ang increased its market value by more than the 2020. With its share price hitting a record high of around $427, it was now worth more than its rival, Disney, Unibe Diney, Net is entirely dependent on paid cons for rent is much more varied, being as reliant on tourism and merchandise sales as it is on the content it puts out for streaming, What diversity has traditional bestry, it becawa in 2020 when the pandere forced Disney to shut down its theme parks and delay it im releases. For lockbuster it was a che of the worsendung which you initially ignored. Unfortunately for Blockbuster, this relation came too late for their rective team to make a difference Sources Greg Sandoval socker taughed aftexpartner wet com December 2016 metre.com Guardian 14 November 2013 Greg Slook back why Blecterely failed and why the Forester 2 25 Apr 2016's content chief something white or that should investors at the 2017 www.me Hits Record High Is Now Wore More Than Disney Forbe 10 or 2030 Questions le which were starting to Impact Blockbuster's rental business before it went bankrupt. 2 Marks