REACTION PAPER ON CASE 2: NETFLIX: RESPONDING TO BLOCKBUSTER, AGAIN

Netflix has been in the forefront of innovation in the video rental industry despite the fact that it came about 20 years after the opening of the first brick and mortar video rental store (The Video Station) and 12 years after the opening of Blockbuster (its most prominent competitor). Netflix’ mail service came in at the right time when the DVD-format was still new making the company’s business model even more relevant. The change in format (VHS to DVD) was just the first of the many changes that happened in the industry but Netflix seemed to have the right formula to make its business relevant to the business landscape at for its strategies to work for their growth. …show more content…
In 2007 when online streaming is already gaining popularity, thereby posing threat to Netlfix and all the other players in the movie rental industry, Netflix launched WatchNow – the same year where movies started to be delivered directly through their cable television provider or over their computer and piracy was becoming prevalent. Despite these challenges, Netflix fearlessly launched the platform (WatchNow).

E. Competition with Blockbuster

Blockbuster was merely reacting to the changes in the environment, even copying Netflix’s business model and strategies at times. On the other hand, Netlfix was at the forefront of innovation in the movie rental industry – either responding quickly to changes in the environment or introducing something new to the market even outdating its old practices and strategies.

STRATEGY FOR NETLFIX TO REMAIN AT THE FOREFRONT OF THE MOVIE RENTAL INDUSTRY

Table 1 shows that from 2002 to 2006, subscriber acquisition cost has continued to increase probably because of increase in prices or this might be brought by steeper competition. The continued increase in investments to acquire new subscribers proved worthy since gross subscriber additions and the total number of subscribers increased over the period of six years (2002 to 2007).

Table 1. Netflix’s subscriber-related