How Netflix Changed the Game
By: Faiyaz Hasan
A few years ago everybody relied on the blockbuster down the lane for their move rentals. Everybody had a Blockbuster card in their wallet and a certain day of the week that they would dedicate to renting a movie. With over 7,000 stores and more than 6,000 public DVD vending machines it was simple to understand why Blockbuster was considered the center of the movie rental industry. They had a 500 million annual cash flow and the company was valued at over 8 billion dollars.
During the same time the postal service was being used by Netflix to distribute DVD’s. Netflix was founded in 1977 and its stock was considered “a worthless piece of crap.” by Wall Street analyst. So how did Netflix become the head of the movie rental entertainment business?
Down to the fundamental aspect of it, the company understood the trend of wanting things instantly, people don’t send letters the send emails, people don’t leave their houses to shop they would rather shop online with a few clicks of a button, the game was changing and people either had to adapt or sink. Netflix developed a strategy of online streaming and easy to use customer system. When news of faster broad brand and better video compression abilities around the corner they knew it was time to capitalize on this change.
Without the burden of retail outlets and operating online Netflix truly created a distribution company on the web. The company realized that streaming videos were the business was moving. Blockbuster was charging 5$ a movie with late fees, so Netflix decided t implement a monthly subscription with no late fees to focus on the customer instead of the money.
At this point Netflix had set a new standard for the market, this stunning success propelled Hastings, who was the mastermind behind Netflix’s business strategies straight to the top of Fortune’s “2010 Businessperson of the Year” award.
So how does this all relate to economics? This shows just how important it is to capitalize on new technology advances that are always emerging, and how much technology can transform a business or industry, Netflix new that it would be very possible to stream movies soon, but they also realized how important the timing of implementing this had to be. Making a change too early could be drastic for the company and could allow bigger companies to capitalize on their ideas.
Fun facts about Netflix:
- Netflix is watched more than any TV network in the U.S.]
- It is estimated that the average user watches around 87 minutes in a day
- Blockbuster turned down many offers to buy Netflix even for as low as 50 million dollars. Netflix is now worth at around 20 billion dollars
- Netflix’s “Instant Streaming” is the single largest contributor to internet traffic accounting for about 1/3 it
- “Breaking Bad” is the most watched show on Netflix (2014)
Sources:
http://www.trefis.com/stock/nflx/articles/146469/the-u-s-netflix-story-evolving-competition-threatens-growth/2012-10-16
http://www.google.com/url?sa=i&rct=j&q=netflix+vs+blockbuster&source=images&cd=&cad=rja&docid=vV9KXbIJjxHLGM&tbnid=BLuQYWsHEODuPM:&ved=0CAUQjRw&url=http%3A%2F%2Fwww.trefis.com%2Fstock%2Fnflx%2Farticles%2F146469%2Fthe-u-s-netflix-story-evolving-competition-threatens-growth%2F2012-10-16&ei=oqMDU_nhGeO0yAHCl4CQDg&bvm=bv.61535280,d.b2I&psig=AFQjCNHFZg8KnobXd1wIahE3wl9LvDsOgQ&ust=1392833820278653
This is interesting! I never realized that Netflix has been around for that long. It is interesting to see their growth through the years compared to blockbusters. It really does show that you need to keep with the times or be one step ahead. Especially today the economy and more specifically technology is all about bigger and better things. I watch netflix all of the time and it is weird to think about a world without it now because there are other things like Hulu Plus and so many other instant streaming websites.
ReplyDeleteI think you did a really nice job explaining the entire switch from blockbuster to netflix! The most important thing in my opinion that you had in your post that explained why people chose netflix over blockbuster was the fact that they "focus on the customer instead of the money" by "implementing a monthly fee". Naturally anyone would chose the easier and cheaper way to rent a movie and you clearly stated how much of a better choice netflix is over blockbuster. Also I liked how you added other examples of how things have changed in the world. For example the switch from email to mail, I though you had good connections and strong support to back up your thoughts.
ReplyDeleteI never knew that Netflix's was that old I thought they were a new thing ng that just came out a few years ago. I found it funny how wall street called them a worth piece of crap and then they go run blockbuster out of biasness. It also goes to show that when running a biasness it is always best to put your customers first instead of money.
ReplyDeleteI too, did not know that Netflix was that old. This really shows how advancements in the internet has changed how we do things as a society. Netflix managed to increase their popularity by giving into what the consumer wants which allows them to keep their prices low and their opportunity costs high.
ReplyDeleteBeing a major user of instant Netflix, I was really able to connect to this. It is amazing that Hastings saw the demands that people had -- wanting to be able to watch movies instantly -- and made an incredibly successful business from that. Blockbuster's opportunity cost was owning this success, yet they made the decision to keep their own company instead. Talk about a trade-off. Although Netflix isn't a purely public good, Hastings still made it so that anyone who is willing and able to pay for it, can. I can see how he became the top businessman of 2010, and he probably remains near the top.
ReplyDeleteI never really thought of the impact Netlfix left on other movie rental companies. When you are driving down the road you rarely see any blockbusters or hollywood videos anymore because of how much they are struggling due to Netflix. Also besides Netflix, I believe Redbox has a huge impact. Redbox a lot of the times have really good movies for only about a dollar for every 24 hour rental which is a good price especially for how they are located. People are relying more and more on technology, making Netflix a company with tons of growing space and a company that will most likely never die or fade away like your blockbusters and hollywood videos.
ReplyDeleteGood Job Faiyaz, great choice for your topic!
This is a super cool topic. It is crazy to me that one day there were Hollywood Videos and Blockbusters everywhere and the next day they were just gone. I didn't realize Netflix was founded that long ago, it was definitely a risk for them to begin Netflix but it was worth the initial struggle. It's all about opportunity costs actually, there was an opportunity cost to physically going to the store to get a movie, it might be a lower cost but instant streaming for a little more money has less of an opportunity cost, that is why the company is booming. People value convenience.
ReplyDeleteI used to love going to Blockbuster and pick up my favorite movies. I still have a Blockbuster card in my wallet. It is a shame that Netflix had to run Blockbuster out of business. It just has to do with supply and demand for newer was to buy or get stuff.
ReplyDeleteI really loved the topic you choose. I remember the Hollywood Video we had here on captial drive and it was the coolest thing ever; you could find any movie you wanted there. I thought this topic was interesting because I feel that people don't think of Netflix this was but it really is this big of a company. I really enjoyed the fun facts that you put at the bottom of the article and found the part about blockbuster getting the opportunity to buy netflix and declining it was really interesting. Clearly, the Netflix creator had to keep faith in his company and saw in the future that the marginal benefit would be much greater than the cost because like you said in your article it is a monthly subscription which is actually a low cost for numerous amounts of shows and movies, and is watched even more than TV which clearly shows this is used alot. Great job overall on the piece.
ReplyDeleteSeeing the success of Netflix shows how over the past decade the demand for instant entertainment has become a prime aspect of American culture. Rather than wanting to take the time to travel to the movie theater or down the road to the nearest block buster, consumers want to be able to enjoy a movie in the comfort of their home without having to leave. I can see how Hastings was a top business person of the year, as he saw a growing demand without any supply and decided to fulfill this want of many Americans. In addition, he was able to increase the marginal benefit for the consumer by decreasing the unnecessary costs of damaged disks or late fees—overall producing a more desired product than that of the local block buster.
ReplyDeleteYour topic was very interesting to read about. A lot of people have come such a long way from getting to watch a movie on rental for a few days to having the same movie, online, for forever. It was surprising to find out how long ago Netflix was founded, and to have the faith and hope to keep it going all these years, to now where it is a big hit. I think it will stay around for so long because of the selection they have and for less than $10 a month. I liked your "fun facts" at the bottom of the article, great job!
ReplyDeleteI would of never known that Netflix is worth that much. With a small monthly fee to watch as many tv shows, movies, or documentary, this was a great thing for the people. It shows great competition between blockbuster and Netfliex and I bet that most people would pick Netflix because its now the popular thing and and so quick to do. They're so many positive goods that Netflix has which it's so popular. With increasing the marginal benefit by the watchers of course people are going to take this route instead of worrying about late fees and all of that other nonsense.
ReplyDeleteIt would make sense that this would happen. Technology was taking over and blockbusters and places like this were not moving with it. While I don't personally use netflix, I can see the benefits of it. I had it for a little and it was nice being able to just stream something straight to my phone rather than having to drive to the nearest movie shop and pay there fees and such. The same thing is also happening with book stores and such places, they are slowing burning out while electronic books and things like the Kindle are taking over the industry.
ReplyDeleteI never knew that Netflix was even around until a couple years ago, when they started promoting it more and more on TV. It totally makes sense that Netflix would take over the movie rental industry. Being able to click on a movie title and within seconds have the movie streaming on a laptop, phone, tv or gaming system is amazing and appeals to people today who love the easy access.
ReplyDeleteI remember going to Blockbuster when I was a little kid. It was always a treat to go there because we wouldn’t go there very often. I remember the excitement that I felt when we went there and got something. But Netflix is slowly but surely taking over the business and Blockbuster is going to go out of business soon because of Netflix’s momentum. I never knew how much the business has changed technology wise, and now I love using Netflix because of how many shows and movies are there.
ReplyDeleteI had no idea that Netflix was created in 1977 but has only recently become popular. I bet Blockbuster now wishes they would have bought Netflix. This was very interesting because I am a religious Netflix watcher. They were smart to go with the trend of the US by going online, I enjoy the monthly fee versus the cost per movie rental. Easy access is key in starting new businesses and Netflix hit it right on the head.
ReplyDeleteWhat amazes me the most about this article is Blockbuster's overconfidence and missed opportunity to purchase this gargantuan company. Netflix is following the modern trend. Blockbuster couldn't adapt to the exponentially growing internet usage across the world and is now a failing business because of it. The most innovative companies are going to outlive those who stick to their outdated strategies and we're seeing that happen right now.
ReplyDeleteNetflix succeeded because they were able to adapt over the years to the rising economic changes. With their promotional commercials, new ways to use the product such as on the internet, TV, Xbox, and much more it is no wonder they passed up blockbuster. A company that allowed you to watch whatever you wanted wherever you wanted for a low monthly price caught the eyes of many Americans (mostly because we are lazy). Netflix is surprisingly keeping up with the supply and demand factor but this is interesting due to the fact that as a movie/show company with a bunch of competitors, it seems that Netflix stands out above everyone else. With all the things Americans want such as easy access, large supply of recent movies and shows, and the low fee, Netflix has found a way to be a powerhouse in the economic business game.
ReplyDeleteI didn't know that Netflix began in 1977, I thought that the recent Netflix streaming was brand new to the market. It's amazing that in the course of less than a decade Netflix surpassed the revenues of Blockbuster by millions of dollars. The economy has changed so drastically and so quickly from Netflix and we didn't even realize it. Only a few years ago, the way we got movies was driving over to Blockbuster and Hollywood Video to rent out a DVD or even VHS, and today, all we do is sit on the couch and press a button. Advancing technology has an impact on the nation's lifestyle, on the success of businesses, and on the economy as a whole.
ReplyDeleteWho know that Netflix was made so long ago. I thought Netflix was only recently developed in this last decade. Its crazy to think that blockbuster made so much and now its all gone due to Netflix. If I can't get a movie on Netflix, I go to mega media exchange and try to find it for cheap or I use Redbox quite often. I remember being about 7/8 and going to blockbuster every other weekend when I was with my dad and getting multiple movies and now we can just turn on his Wii and just get to Netflix with a few clicks and have thousands of movies/tv shows at the click of a remote.
ReplyDeleteNetflix is the source for an increasing shift of consumer from watching tv shows on their tv through their cable or dish provider, to watching over the internet, whether it be on netflix, hulu plus or other cable station websites. The idea of getting television shows and movies without scrolling through your DVR and fast-forwarding through commercials has become very popular. Now with Netflix producing shows that are released instantly, people don't have to wait a year or two after it airs on tv to watch it, soon, Netflix and hulu plus will take over cable.
ReplyDeleteI agree that Netflix has become a huge sensation in our country! However, I am aware that Netflix also has a large amount of free riders. Although they're making a plethora of money off of subscriptions already, I know of several people who will live in separate households who will use a friend's paid email and password to access Netflix's movie, TV and documentary streams for free. While this shouldn't make Netflix a public good, Netflix should take more action into tracking the location of their services on a single account across the globe to eliminate free riders and maximize profit.
ReplyDeleteIt is incredible how the internet has changed so many things in the world as far as economics go, and Netflix is just one example of a company that got a glimpse of the future and capitalized on it. You’ll find today that almost all trades that used to primarily take place in a physical market place can now exist on a monitor within your own home. And just think about how much money these companies make off of this virtual store front. The cost of in store workers is completely cut, being replaced by tech support and web coders. Needless to say, Netflix is lucky to exist in a world where many people are going digital.
ReplyDeleteSomewhere in America, that Wall Street analyst is eating his words. When Netflix comes to mind; “worthless piece of crap” does not follow. I don’t even think most people remember Blockbuster. Now, going to a movie store to rent a movie seems like what cavemen use to do. In 2009, Netflix began to up it’s game on Blockbuster and three years later, Netflix hit Blockbuster out of the park. If only Blockbuster adapted to the changes in technology, then they wouldn’t have sunk so low and lost their business. Every businessman knows that they must always do what interest the consumer and Blockbuster just wasn’t getting it.
ReplyDeleteThis is a very interesting topic to me. Netflix really has made everything easier when it comes to accessing TV shows and movies. Block buster has almost completely fell off the map and all I see around here now is redbox kiosks and netflix. I think it is cool how the internet is changing so many things, but when you think about it, it is kind of scary how much people now rely on the internet to access things. It was a very good topic to pick because everyone can relate to it and it really makes you think.
ReplyDeleteI never had any idea that Netflix has been around for so long, or that is was originally similar to Blockbuster, just not as popular. I'm sure Blockbuster now regrets not taking advantage of the opportunity to buy Netflix, but at least now we're able to watch movies and TV easier. I really like the graph you included that shows the increase in demand for Blockbuster then Netflix over the years where you can see where Netflix starts to become popular.
ReplyDeleteI found this very interesting, as i used to be someone who rented movies from blockbuster, but later switched over to netflix. I think it was obvious that blockbuster was going away because all you see now is netflix and red boxes. I think that the most important aspect in todays economy is whatever is easiest to access, and i think that these two movie providers are what met this need. I find it interesting how fast the economy could change even in a technology way.
ReplyDeleteThis topic can relate to a lot of high school student because many of them use Netflix on a regular basis. I always think it's interesting how things can change over time. I remember always going to Blockbuster, or in Pewaukee it was Hollywood Video, and renting several movies to watch in a weekend. I also remember when Netflix used to only mail movies to houses, but I didn't know that it is over 30 years old. Movie rental companies such as Blockbuster just couldn't compare or keep up with what Netflix was offering for consumers so it's obvious that the company skyrocketed.
ReplyDeleteI never really thought about it till now how Netflix took over, it seemed almost instant. Netflix in and Blockbuster out. Considering it is everything movie now. Blockbuster even had to chance to buy it but didn't. I guess back then, the idea of movies in the mail must not have been thought of as a great one.
ReplyDeleteIt was really awesome reading your blog article, because I think we all can agree that we remember Blockbuster as being a huge part of our childhood, and as we grew up we watched business slowly dwindle. The reason why Netflix has become so popular is mostly because they don't always deliver movies through the mail system anymore. Now you just pay a monthly fee, and you can download the app to your phone, ipad, etc. The problem with blockbuster is they never used a online system and people were too lazy to get up and go out to rent a movie. Netflix has made it so easy for us to just log on, and watch the shows we want to see. It also saves our shows on the top, so if we are watching multiple shows we can easily go from one to another and it saves where we left off. I really liked reading your article. Nice job!
ReplyDeleteThe first that really stuck out to me was actually more toward the end when you talked about how timing is extremely important. Most people would think pulling out all the stops right away as soon as they have a great idea is the best way to do it, but that's not at all true. It's important to be creative with it, sneak in to it, and once it's developed enough to where no one can come back and beat it out, then it's the right time to throw it all out there and claim everything. Netflix played each card in their hand very successfully and rather quickly put Blockbuster out of business. Netflix did it right also in producing something more for the people and just figured if enough people used it, they would be fine in making enough money. This is a perfect example of why working JUST to make money is the wrong way to do it. You have to do what you love but make something that others love, give it to them for a good price, treat them nicely, and they'll be happy to buy your products. At that point, you've hooked on tons of people that are all happy with their service.
ReplyDeleteThe fact that Netflix was founded in 1977 and was thought to be a worthless stock that no one would invest in, just shows that anything can happen. The creation of netflix proved to be the end of companies like Hollywood video and blockbuster because unlike those companies, netflix allows people to stream unlimited amounts of movies for only $8 a month
ReplyDeleteI was surprised to discover that Netflix was founded so many years ago - I thought it had been recently established as Blockbuster began to fade from the world. I enjoyed reading your post, although I was confused by some of your grammar in certain spots. I must agree with Bridget that Blockbuster was a big factor in my childhood, and I - like most families - had a special day where the family would rent a movie and order food. It's sad to see memories dissolve with the world's continuous progress in technology, but at least there are still options for movie/TV lovers. I personally don't have Netflix, but it would be a very nice thing to have so I could watch my favorite TV series when I want. Good job on the post!
ReplyDeleteI thought Netflix was a company that appeared within the last decade, not almost four decades ago! Blockbuster did play a large part in my childhood, like Bridget and Haley. Our family had specific dates we picked out and each of us kids got to pick movies or video games. I also remember that around the age of ten my stepsister started talking about Netflix and I remember her telling me that they used to mail the DVD's, so I can definitely see how the company has adapted to the technological economy. It's really incredible how the company was valued so insignificantly when it was founded, but now it's booming in profits. Talk about the underdog! Also, make sure to review for grammar and spelling as I found a few technical errors in this post, but otherwise, I really loved learning about this topic!
ReplyDeleteMe being a crazy Netflix addict, I find it amazing how popular Netflix has become recently. I don't ever watch TV anymore, unless there is a sports game on or something, other than that, Netflix is the only thing I will have on. I have watched so many shows I can't even count them. The money that Netflix makes every month is ridiculous and it was a fantastically strategic move to apply a monthly payment with no late fees which really drew in a lot of movie watchers to become addicted.
ReplyDeleteThat's crazy on how much I learned about this topic I would of never guessed or knew that netflix would become so big when I was little they didn't really make it a big deal but the older i got the more interest I put into it. I watch netflix at least 3 or 4 times a week and haven't even realized on how big of an impact it has made. I thought it was really intersting reading about your fun facts I sure know more then i ever did before about netflix and to learn how Netflix is watched more than any TV network in the U.S that's impressive. I believe as though if they keep up Netflix it will continue to grow just as shown on the grafts.
ReplyDeleteI was always wondering what happened to Blockbuster. I use to see them everywhere, and i was one of those people who would go to Blockbuster and rent a movie. However, i didn't get a Netflix until this year. It was probably the best decision i have made because they have a great selection, everything is organized and easy to use or follow, its fast and they also have all of the best or classic TV shows on there, that they don't show on TV anymore. It was interesting to see in the graph how far behind Netflix was and then to see that in just a few years how it completely passed up blockbuster and became the next new thing.
ReplyDeleteI've heard that now that Netflix has been introducing its own original programming, it's losing money (as it currently doesn't charge customers enough to earn a profit in comparison to the relatively high budgets they spend on their original TV shows). With all of the new streaming services being introduced (and at varying prices and quality levels), I wonder if Netflix is going to be able to sustain itself, or for how long?
ReplyDeleteI personally think the biggest way Netflix changed the game was with sheer convenience. Why would I get a coat and keys and drive somewhere to pick up a movie rental, and pay for gas on the way, when I could just press a few buttons to have a movie now, and pay just 15 dollars a month no matter how many movies I watch? Blockbuster was obsolete the moment streaming video was pioneered, it just took a while for that to become completely apparent. This was a very well written article, by the way; the title reminded me of something I'd read on Cnet or something.
ReplyDeleteNetflix is the perfect example of an innovation that changes the way in which people see certain aspects of their daily life. I'm somewhat behind the times in that I don't personally use Netflix, but it's easily apparent that it is the new norm. That Netflix takes up one third of North American bandwidth is incredible. Now, we're all wondering what the next big thing will be.
ReplyDeleteNetflix was actually founded in 1997, not 1977...I figure it's just a typo, but it's incorrect nonetheless
ReplyDeleteNetflix was actually founded in 1997, not 1977...I figure it's just a typo, but it's incorrect nonetheless
ReplyDelete