Netflix is the world's largest online movie rental service, providing more than three million subscribers access to over 50,000 DVD titles. Under the company’s most popular program, for $17.99 a month, Netflix subscribers rent as many DVDs as they want and keep them as long as they want, with three movies out at a time. There are no due dates, no late fees and no shipping fees. DVDs are delivered for free by the USPS from regional shipping centers located throughout the United States. Netflix can reach more than 90 percent of its subscribers with generally one business-day delivery. Netflix offers personalized movie recommendations to its members and has more than 500 million movie ratings. Netflix also allows members to share and recommend movies to one another through its Friends™ feature. Source: Netflix, October 2005
Questions to consider:
* What is the Netflix business model? How does the service work?
* What are the advantages and disadvantages to potential customers of Netflix?
* How does Netflix incorporate a recommender system into its service, and to what advantage?
* How does Netflix change the video distribution industry?
* What is the key for Netflix to succeed in the face of direct competition from established distributors such as the nationwide chain, Blockbuster Video?
Challenge to model:
Netflix: Postal Service Inspector General Proposes Applying Surchage To DVD Mailers — The U.S. Postal Service Office of the Inspector General has proposed tacking a 17-cent surcharge on the processing of DVD mailers, potentially playing havoc with the Netflix (NFLX) economic model.
Sources of more info:
*Netflix annual report http://ir.netflix.com/annuals.cfm
*Netflix financial releases: http://ir.netflix.com/releases.cfm
*article: "Netflix Script Spells Disruption" http://hbswk.hbs.edu/archive/4004.html
*http://www.fastcompany.com/magazine/99/open_customer-netflix.html
*http://www.fool.com/news/commentary/2005/commentary05020204.htm
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