Netflix
Read this case study about Netflix and disruption. How would you answer the three questions at the end?
Netflix's Disruption
Netflix, founded in 1997 in California, disrupted video rental stores such as Blockbuster with its subscription service, which mailed DVDs directly to customers' homes. The rental stores, whose business model was predicated on revenue from late fees, could not compete with the ease and convenience of home delivery coupled with lower costs than the per-tape rental fees. But as streaming video content directly to televisions or over-the-top devices disrupted Netflix's original DVD-by-mail model, Netflix moved to offer a streaming service in addition to the DVD by mail model. In both instances, Netflix's prevailing model was predicated on serving as a distribution outlet for content created by other businesses. Netflix in recent years has begun not only distributing others' content but creating its own TV and movie content as well. (Orange Is the New Black and The Unbreakable Kimmy Schmidt are both original Netflix series; The Irishman is an original Netflix film.) Now content creators such as Disney and Marvel are creating their own streaming distribution platforms to exclusively deliver their own content, eventually pulling those shows from Netflix.
- What should Netflix do to counter this threat to the third iteration of its business model?
- What threats does the end of net neutrality pose to Netflix's business model?
- If you were in charge at Netflix, would you pay more to Internet providers to gain faster delivery of your content on the Internet? Why or why not?
Source: OpenStax, https://openstax.org/books/entrepreneurship/pages/11-1-avoiding-the-field-of-dreams-approach
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