468 Retail and Channel Management Blog

Friday, February 13, 2015

Netlfix- Tearing down the traditional retail model

Over the past decade, the movie industry has changed dramatically. It wasn’t too long ago that we were all flocking to our local Blockbuster in order to rent a movie. However, that has all changed in recent years. Netflix has emerged as the dominant form of watching movies and has lead to the demise of massive movie rental stores such as Blockbuster and Rogers. But how has Netflix managed to do this? How have they become so popular that they can drive a multi billion dollar company into the ground? The simple answer is convenience. Like any great idea, Netflix has successfully managed to make our lives easier. Before Netflix, the only way people could watch movies without buying them was to rent them from a brick and mortar store such as Blockbuster. While it was a better option than buying a movie from HMV, it was still a rather large hastle. You had to leave your house, go to a store, rent a movie, and then return it on time or face additional late charges. I know that’s not the most difficult process ever, but with the emergence of the internet, people were wondering why there wasn’t an easier way. Enter Netflix. Netflix has thousands of movies stored in a large database that people can access in a matter of seconds. With a monthly subscription of less than $10, people could now had access to thousands of different movies at their fingertips. Not only do people get more selection but they get it at a much cheaper price as well. Blockbuster went under because this was a clear case of a company not seeing the technological trends that overhauled its industry. In fact in 2005, Blockbuster had a chance to buy Netflix for a measly (relative to massive corporations of course) $50 million. Blockbuster thought that Netflix wouldn’t catch on and they were already committed to their DVD by mail program where people would get movies mailed to them rather than having to go to the actual stores. As we all know, the mailing service never really caught on and allowed Netflix to run away from Blockbuster causing a dramatic shift in power from Blockbuster to Netflix. People love Netflix because it offers choice. It doesn't even have to be undiluted good choice. Half the pleasure of Netflix is surfing through the sea of oddball videos you otherwise would have never crossed paths with. Netflix focused on offering a service first and content second and it’s paid major dividends for them. Originally Netflix had older, less known movies and TV shows. But their convenience has lead to them increasing in popularity which has given them the ability to access newer and better movies as well as make their own movies and shows such as House of Cards which is widely believed as one of the better TV shows around. Netflix has used subscriptions to tear down the traditional retail model and run rental stores out of business.

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