Advertisement

Entertainment on Demand: The Case of Netflix

  • Kai-Ingo Voigt
  • Oana Buliga
  • Kathrin Michl
Chapter
Part of the Management for Professionals book series (MANAGPROF)

Abstract

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.

Keywords

Business Model Streaming Service Franchise System Business Prospect Video Rental 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Afanasyev, M. (2008). Essays on time-sensitive markets. PhD dissertation, Graduate School of Business, Stanford University. Ann Arbor, MI: ProQuest.Google Scholar
  2. Afuah, A. (2014). Business model innovation: Concepts, analysis, and cases. New York: Routledge.Google Scholar
  3. Alexa. (2014). Ranking der Top 5 Länder weltweit mit dem größten Anteil an allen Nutzern von Netflix.com im Oktober 2014. Retrieved July 22, 2015, from http://de.statista.com/statistik/daten/studie/295249/umfrage/laender-mit-dem-groessten-anteil-an-allen-nutzern-von-netflix/.
  4. Amazon Web Services. (2015). AWS case study: Netflix. Retrieved August 17, 2015, from https://aws.amazon.com/de/solutions/case-studies/netflix/.
  5. Barlow, J. (2011). Alumni entrepreneurs share advice with students. Retrieved January 20, 2015, from http://www.hamilton.edu/news/story/alumni-entrepreneurs-share-advice-with-students-in-panel.
  6. Bell, J. (2010). Why Hollywood Video failed. Retrieved January 21, 2015, from http://www.oregonbusiness.com/articles/84-may-2010/3354-the-final-cut.
  7. Buck, J., Hendricks, J., Jones, R., Kelly, R., Pasha, A., Wolfe, M., & Chapman, R. (2009). Blockbuster, Inc.: A giant at the crossroads. In M. Hitt, R. Hoskisson, & R. D. Ireland (Eds.), Understanding business strategy: Concepts and cases (pp. c-29–c-40). Mason, OH: South-Western Cengage Learning.Google Scholar
  8. Buttle, F., & Maklan, S. (2015). Customer relationship management: Concepts and technologies (3rd ed.). New York: Routledge.Google Scholar
  9. Campanelli, M. (2007). Open an online business in 10 days. Irvine, CA: Entrepreneur Media.Google Scholar
  10. Chao, C., & Zhao, S. (2013). Emergence of movie stream challenges traditional DVD movie rental—An empirical study with a user focus. International Journal of Business Administration, 4(3), 22–29.CrossRefGoogle Scholar
  11. Chock, C., Ganguly, T., Greeno, C., Harutunian, S., Knakal, J., & Knakal, T. (2014). Netflix: Changing the rules of the game. In A. Afuah (Ed.), Business model innovation: Concepts, analysis, and cases (pp. 251–269). New York: Routledge.Google Scholar
  12. Culp, C., Friedman, M., Lincoln, G., Reeve, Q., & Zepernick, M. (2014). Netflix: Past, present and future innovation. Entrepreneurship & Innovation Strategy: Section 2. Google Scholar
  13. Darbyshire, P. (2014). Netflix competitor shomi launches in Canada. Retrieved January 3, 2015, from http://www.theprovince.com/entertainment/Netflix+competitor+shomi+launches+Canada/10356426/story.html.
  14. Davenport, T. H., & Harris, J. G. (2007). Competing on analytics: The new science of winning. Boston: Harvard Business School.Google Scholar
  15. Debruyne, M. (2014). Customer innovation: Customer-centric strategy for enduring growth. London: Kogan Page.Google Scholar
  16. Entrepreneur Magazine. (2012). eBusiness: Entrepreneur’s step by step startup guide (2nd ed.). Irvine, CA: Entrepreneur Press.Google Scholar
  17. Epstein, E. J. (2010). Is Netflix streaming its way towards disaster? Retrieved December 27, 2014, from http://www.thewrap.com/movies/blog-post/netflix-streaming-its-way-towards-disaster-23019/.
  18. Falter, A., & Thompson, S. (2009). Netflix. In M. Hitt, D. R. Ireland, & R. Hoskisson (Eds.), Strategic management: Competitiveness and globalization, cases (8th ed., pp. 275–288). Mason, OH: South-Western Cengage Learning.Google Scholar
  19. Fox, J. (2015, April 17). Netflix wags its short tail. BloombergView. Retrieved August 15, 2015, from http://www.bloombergview.com/articles/2015-04-17/former-long-tail-exemplar-netflix-goes-hollywood.
  20. Gallaugher, J. (2012). Getting the most out of information systems. Retrieved December 27, 2014, from http://2012books.lardbucket.org/books/getting-the-most-out-of-information-systems-v2.0/.
  21. Giesen, E., Riddleberger, E., Christner, R., & Bell, R. (2010). When and how to innovate your business model. Strategy & Leadership, 38(4), 17–26.CrossRefGoogle Scholar
  22. Greenberg, J. (2008). From Betamax to Blockbuster: Video stores and the invention of movies on video. Cambridge, MA: MIT Press.Google Scholar
  23. Griffin, R. (2012). Management (11th ed.). Mason, OH: Cengage Learning.Google Scholar
  24. Griffin, R., & Moorhead, G. (2011). Organizational behavior (10th ed.). Mason, OH: Cengage Learning.Google Scholar
  25. Griffin, R., & Moorhead, G. (2014). Organizational behavior (11th ed.). Mason, OH: Cengage Learning.Google Scholar
  26. Hill, M., Ireland, D. R., & Hoskisson, R. (2013). Strategic management: Concepts and cases: Competitiveness and globalization (11th ed.). Stanford, CA: Cengage Learning.Google Scholar
  27. Hill, C., & Jones, G. (2010). Strategic management: An integrated approach (10th ed.). Mason, OH: Cengage Learning.Google Scholar
  28. Jones, G. R. (2008). Blockbuster’s challenges in the video rental industry. In C. Hill & G. R. Jones (Eds.), Essentials of strategic management (pp. C-44–C-59). Mason, OH: Cengage Learning.Google Scholar
  29. Kaplan, S. (2012). The business model innovation factory: How to stay relevant when the world is changing. Hoboken, NJ: Wiley.CrossRefGoogle Scholar
  30. Keating, G. (2012). Netflixed: The epic battle for America’s eyeballs. New York: Penguin.Google Scholar
  31. Komiya, M., & Litman, B. (1990). The economic of the prerecorded videocassette industry. In J. R. Dobrow (Ed.), Social and cultural aspects of VCR use (pp. 25–44). Hillsdale, NJ: Lawrence Erlbaum.Google Scholar
  32. Lucas, H. C. (2012). The search for survival: Lessons from disruptive technologies. Santa Barbara, CA: Praeger.Google Scholar
  33. Lusted, M. A. (2012). Netflix—The company and its founder. Minneapolis, MN: ABDO.Google Scholar
  34. MarketsandMarkets. (2015). Video on demand (VOD) market worth $61.40 billion by 2019. Retrieved August 18, 2015, from http://www.marketsandmarkets.com/PressReleases/audio-video-on-demand-avod.asp.
  35. Mason, S. (2002). Movies on demand. IIE Solutions, 34(10), 25–31.Google Scholar
  36. Maxdome. (2015). So einfach funktioniert maxdome. Retrieved August 18, 2015, from http://www.maxdome.de/so-gehts.
  37. Mikhalkina, T. (2014). Netflix business model. London: Cass Business School.Google Scholar
  38. Movie Gallery. (n.d.). Corporate profile. Retrieved December 29, 2014, from http://phx.corporate-ir.net/phoenix.zhtml?c=85959&p=irol-homeProfile&t=&id=&.
  39. Netflix. (2014a). Form 10-K. Retrieved December 27, 2014, from http://ir.netflix.com/secfiling.cfm?filingID=1065280-14-6&CIK=1065280.
  40. Netflix. (2014b). A brief history of the company that revolutionized watching of movies and TV shows. Retrieved December 27, 2014, from https://pr.netflix.com/WebClient/loginPageSalesNetWorksAction.do?contentGroupId=10477&contentGroup=Company+Timeline.
  41. Netflix. (2014c). Netflix long term view. Retrieved December 27, 2014, from http://ir.netflix.com/long-term-view.cfm.
  42. Netflix. (2015b). USA ISP speed index. Retrieved August 17, 2015, from http://ispspeedindex.netflix.com/usa.
  43. Netflix. (n.d.). Hilfe-Center. Retrieved August 18, 2015, from https://help.netflix.com/help.
  44. Niccolai, J. (2014). Behind the curtain: How Netflix streams movies to your TV. Retrieved July 22, 2015, from http://www.techhive.com/article/2158040/how-netflix-streams-movies-to-your-tv.html.
  45. Niederhoff, J. (n.d.). Video rental developments and the supply chain: Netflix, Inc. Retrieved August 14, 2015, from http://apps.olin.wustl.edu/workingpapers/pdf/2004-03-225.pdf.
  46. Ojer, T., & Capapé, E. (2013). Netflix: A new business model in the distribution of audiovisual content. Journalism and Mass Communication, 3(9), 575–584.Google Scholar
  47. Olanoff, D. (2013). Netflix signs multi-year licensing agreement with turner broadcasting and Warner Bros. Television. Retrieved August 17, 2015, from http://techcrunch.com/2013/01/14/netflix-signs-multi-year-licensing-agreement-with-turner-broadcasting-and-warner-bros-television/.
  48. Osterwalder, A., & Pigneur, Y. (2010). Business model generation—A handbook of visionaries, game changers and challengers. Hoboken, NJ: Wiley.Google Scholar
  49. Pride, W., & Ferrell, O. C. (2010). Marketing (2010th ed.). Mason, OH: South-Western Cengage Learning.Google Scholar
  50. Pride, W., & Ferrell, O. C. (2014). Marketing (18th ed.). Boston: Cengage Learning.Google Scholar
  51. Pride, W., Hughes, R., & Kapoor, J. (2008). Business (9th ed.). Boston: Cengage Learning.Google Scholar
  52. Rauta, A. (2014). The Netflix Saga, part 1: Understanding the business model. Retrieved August 17, 2015, from http://investazor.com/2013/11/15/netflix-saga-part-1-understanding-business-model/.
  53. Rentz, J. (2014). Netflix- so wirbt der Streamingdienst in Deutschland. Retrieved August 18, 2015, from http://www.horizont.net/medien/nachrichten/Spot-Premiere-So-wirbt-Netflix-in-Deutschland-130421.
  54. Roettgers, J. (2014). Netflix may ditch DVDs sooner rather than later. Retrieved August 17, 2015, from http://www.bloomberg.com/bw/articles/2013-10-21/netflix-may-ditch-dvds-sooner-rather-than-later.
  55. Schorn, D. (2006). The brain behind Netflix. Retrieved October 18, 2014, from http://www.cbsnews.com/news/the-brain-behind-netflix/.
  56. Spencer, B. (2013). Business model design and learning: A strategic guide. New York: Business Expert Press.Google Scholar
  57. Statista. (2014). Netflix—Statista Dossier. Retrieved January 19, 2015, from http://www.statista.com/study/15313/netflix-statista-dossier/.
  58. Steel, E. (2015, July 26). Netflix refines its DVD business, even as streaming unit booms. The New York Times. Retrieved August 17, 2015, from http://www.nytimes.com/2015/07/27/business/while-its-streaming-service-booms-netflix-streamlines-old-business.html.
  59. Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43, 172–194.CrossRefGoogle Scholar
  60. Tidd, J. (2014). Conjoint innovation: Building a bridge between innovation and entrepreneurship. International Journal of Innovation Management, 18(1), 1450001-1–1450001-20.CrossRefGoogle Scholar
  61. Trotzer, D. (2008). Product and service innovation. In D. Pantaleo & N. Pal (Eds.), From strategy to execution—Turning accelerated global change into opportunity (pp. 107–132). Berlin: Springer.Google Scholar
  62. Tryon, C. (2013). On-demand culture: Digital delivery and the future of movies. New Brunswick, NJ: Rutgers University Press.Google Scholar
  63. Videobuster. (2015). Über uns. Retrieved August 18, 2015, from https://www.videobuster.de/ueber_uns.php.
  64. Watchever. (n.d.). So funktioniert’s. Retrieved August 18, 2015, from http://www.watchever.de/servicecenter/so-funktionierts.
  65. Zeidler, S. (2012). Netflix to get Disney films in TV distribution deal. Retrieved August 17, 2015, from http://www.reuters.com/article/2012/12/05/entertainment-us-netflix-disney-paytv-idUSBRE8B312Q20121205.

Copyright information

© Springer International Publishing Switzerland 2017

Authors and Affiliations

  • Kai-Ingo Voigt
    • 1
  • Oana Buliga
    • 1
  • Kathrin Michl
    • 1
  1. 1.Chair of Industrial ManagementFriedrich-Alexander University Erlangen-NürnbergNürnbergGermany

Personalised recommendations