Netflix Strategy: How Netflix Beat Blockbuster and Remains Dominant in Online Video Streaming

This paper discusses the strategy that helped Netflix beat Blockbuster and remain the dominant provider of online video streaming. It covers the use of technology, online operations, pricing strategies, and innovation to succeed. It also includes a brief history of Blockbuster and Netflix, and the demise of Qwikster.

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Introduction
Strategic management is necessary for a company to accomplish the intended long-term
production goals. Grant (2016) states that the strategies executed by the management are
required to consider the changes in the external business environment for a smooth flow of
business operations. A suitable strategy is supposed to be widely accepted by the various
stakeholders in the industry towards a successful flow of business operation. The top
management is tasked with developing an appropriate strategy that will maximize the
productivity of the business (Ehsanifar & Rasi 2017). A company is a highly productive hen
there is the use of proper strategy to control the various business operations and processes in the
market. Regardless of the size of the business, it is a necessity for the management to focus on
developing a proper plan that will manage the long run operations in the market. The strategy is
used in identifying the opportunities and threats in the market for a steady flow of the company.
Netflix is a film industry which is focused on developing strategy that will increase the
competitive advantage in the industry. It is necessary for a company dealing with services to
consider developing differentiated services that will meet the needs of the market (Hoberg &
Phillips 2016). Netflix strategy was able to handle the competition in the entertainment industry
towards a sustainable flow of revenue and profit margin. Netflix was able to overtake
Blockbuster as the leading video streaming company through the implementation of
differentiation strategy where the services are unique. The uniqueness of the market is used in
developing a smooth flow of business operations in the market for high productivity in the
market segment (Hernandez-Perlines et al. 2016). The use of technological innovation was an
important aspect that increased the customer base of Netflix globally. The quality streaming

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services by Netflix were used in beating Blockbuster as the leading company in the
entertainment industry.
Institutional Background
A brief history of Blockbuster
Blockbuster was established its first store in 1985 and was founded by David Cook
(Funding Universe, 2018). The company's primary focus was providing consumers with the
DVD of the latest videos and movies. The evaluation of consumer needs helped the company to
develop strategic stores all over the US. The first store was in Dallas which was headquarters of
the company. Blockbuster as able to enter the London and Canada entertainment industry in
1989 through the acquisition of various entertainment stores in the region (Funding Universe,
2018). Blockbuster had over 2,800 stores worldwide in 1992 due to the high acceptance in the
entertainment industry. Viacom later bought Blockbuster in 1994 for $8.4 billion with the aim of
extending operations of the company in the global market (Phillips & Ferdman, 2013). In 1999
Viacom provided an initial public offering for Blockbuster to acquire the needed cash to expand
the business. The stiff competition by Netflix at the time led to a reduced number of people
willing to use the DVD services offered by Blockbuster. Blockbuster as able to have over 9,000
stores worldwide which offered videos and movies on the DVD through the video rental service.
According to Phillips and Ferdman (2013) in September 2010 was declared bankrupt after the
company s unable to settle debts amounting to $1 billion. By 2013 Blockbuster had closed the
various stores in the US and all over the world due to reduced income from the stores.
A brief history of Netflix

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Netflix launched the first DVD rental and sales site in 1998 by Reed Hastings and Marc
Randolph with the meant to increase the number of people using the services (Netflix, 2018).
The online operations assisted the company to capture a large number of people in the US and
globally. In 1999 the company developed a subscription service that allowed a customer to view
unlimited DVD rentals monthly (Netflix, 2018). The subscription services greatly enhanced the
productivity of the company with many people willing to use the service. In 2002 the company
was able to have over 700,000 members in the US which rose to 3.6 million in 2005 due to the
high demand of DVD rental services (Bbc.co.uk, 2018). The continuous increase in the number
of Netflix members ensured that the company overtakes Blockbuster as the leading DVD rental
company in the US. According to Netflix (2018) in 2007 the company introduced the streaming
services to allow individuals acquire instant movies, TV shores, and latest videos. The company
later partnered with Xbox 360, Blu-ray disc players and several TV set-top boxes companies.
Netflix later partnered with PS3; internet connected TVs, Apple Company to expand operations
of the company in the video streaming industry. Netflix was able to launch operations in Latin
America and the Caribbean in 2011 whereby 2016 the company had expanded globally.
How Netflix beat Blockbuster
Changing technology
The ability to adapt to the changing technology assists the company to acquire the desired
production level in the market. Netflix was able to beat Blockbuster through the continuous use
of advanced technology in offering the video streaming services. Blockbuster offered rented
films, games and TV box sets to the consumers to acquire the required income in the
entertainment industry (Bbc.co.uk, 2018). The services of Blockbuster were not differentiated

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using the advanced technology in the entertainment industry making it hard to deal with the
competition in the market. According to Johnson et al. (2017), the management is required to
develop strategies based on the dynamic technology towards a sustainable performance in the
specific industry. The introduction of online streaming in 2007 made Blockbuster consumers
prefer Netflix as it was a convenient service in the entertainment market (Netflix, 2018). The
evaluation of consumer needs is necessary for developing products that will aid in achieving the
intended income from production.
Netflix continued to partner with technology companies to effectively deal with the
competition in the video and film rental market. Blockbuster was reluctant in using advanced
technology focusing on the DVD mail renting to acquire the desired customer base in the
entertainment market. The partnership with electronic and internet companies was a marketing
strategy that allowed individuals to easily access Netflix in the various electronic devices in the
market. The company use technology in the entertainment industry has made it possible to
acquire 125 million members in over 190 countries. The TV series, films and documentary
provided by Netflix are aimed at ensuring that there is an enhanced profit margin through a boost
in sales volume. Technology is used in providing products that are accepted by various people in
the market for sustainable performance in the market (Law, Buhalis & Cobanoglu 2014). The
production and service delivery process is made effective through the application of advanced
technology.
Retail outlets versus operating online
The online operations are highly effective compared to the retail outlets due to the ability
to capture a large number of consumers. Netflix was able to acquire a large market share

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compared to Blockbuster by investing in online operations. According to Gollenia (2016), the
online operations are used to acquire a high number of people at the same period making it likely
to deal with the issues in the market. The customers are expected to wait in the retail stores to be
served while in the online operation people can acquire the services without visiting the stores.
Kim and Min (2015) indicate that online operations are cost and time saving making it likely for
a company to accomplish the long-term production goals in the market. Operating in the online
entertainments market assisted Netflix in acquiring a high number of subscribers at the same
time. The customer service in the online operation is able to engage some clients at the same
time while working at a retail outlet the customer service representative is required to serve one
customer at a time.
Netflix was able to identify a market gap between using the internet to distribute the
latest films and documentaries to the costumers. The subscription services used by Netflix made
online operations effective as people were able to view unlimited content monthly. It is possible
for the customer service representative to discover the need for changes in the services by
evaluating the feedback from the online clients (Kerzner & Kerzner 2017). It is necessary for a
company operating online to focus on a positive online review for sustainable performance in the
industry. Netflix was able to overtake Blockbuster through the focus on the online operations
through the streaming services. The streaming service is highly accessible making it possible for
the Netflix to acquire subscribers globally. Blockbuster depended on the 9,000 outlet stores to
compete with Netflix which had online operations accessible globally (Phillips & Ferdman,
2013). The retail outlet technique implemented by Blockbuster was ineffective due to inability to
meet the needs of consumers in a large market segment.
Pricing strategies

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The pricing strategy implemented by a business determines the success of the business in
the specific industry. It is essential for the management to focus on ensuring that their prices
implemented to add value to the consumers (Johnston & Marshall 2016). The perception of value
is evaluated by the consumers in maximizing the productivity of the business. Prices
implemented in the business are required to have a high perception of value to the prospects with
the aim of enhancing the acquisition of clients (Babin & Zikmund 2015). Netflix implemented a
pricing strategy that was slightly lower than of Blockbuster to capture a large number of
consumers. The evaluation of competitors pricing strategy is necessary for developing a price
that will appear to provide more value to the consumers. The company which offers more value
to the consumers is able to acquire the intended production goals in the market. According to
Poyar (2018), Netflix offers different pricing options to customers with the basic entry being
$7.99 per month.
The low prices are used by a company to have a successful business entry in a specific
industry. According to Pelts (2016), Netflix pricing strategy considers the amount of money used
to acquire the content and expected a return from business operation. Netflix service prices were
highly affordable to the people in the US where the company started with the aim of beating the
competition of Blockbuster. The Blockbuster management was unwilling to reduce the prices
despite the competition from the Netflix. The unwillingness to reduce the prices led to
Blockbuster losing a large number of customers to Netflix as the prices were highly affordable.
The subscription services as introduced by the Netflix Company to ensure that there is a
sustainable performance in the film and online video streaming industry where customers were
offered unlimited access to the services after subscribing. The pricing strategy has made it
possible for Netflix to acquire a 10% increase in income from $154 million in 2016 to $245 in

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2017 (Poyar, 2018). The growth of the business has been greatly contributed by the ability to add
value to the consumers’ subscriptions through unlimited video streaming.
Netflix’s innovations
Netflix management is focused on developing an innovative organizational culture in the
company. The leaders are required to focus on innovative culture to attain the intended market
share in the industry. Organizational culture directly impacts the performance of the business as
it influences the motivation of employees (Prabhakar et al. 2018). The staffing policies
implemented are required to focus on enhanced morale for a sustainable flow of business
operations in the market. Netflix was able to beat blockbuster through the use of talented team
that offered quality services to the consumers. According to Chhabria (2017) when Netflix
started, it did not have retail outlets as it focused on online operations and delivering the DVDs
to the customer doorsteps. The DVD were ordered online and later delivered to the consumers
without having to visit retail outlets. The technique assisted the company in dealing with fines
that are charged when a customer purchases a product and it is not delivered in time.
Netflix discovered the subscription services that reduced the doorstep delivery of the
latest movies, videos, and documentaries. The subscription services were highly accepted by a
large number of consumers in the market as it was fast. The customers were able to view the
videos the moment they made payment for the monthly subscription. Johnson et al. (2017)
explain that innovative companies are able to acquire a large global market share successfully.
Netflix has developed an innovative culture in the company to accomplish a continuous increase
in the number of consumers globally. The development of Netflix application is used to make the
services easily accessible to the consumers (Netflix 2018). The company staffs are required to

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have skills and knowledge to ensure that Netflix becomes a strong online brand in the global
entertainment industry.
Will Netflix remain the dominant provider of online video streaming?
Netflix stumbles: The demise of Qwikster
Qwikster was a plan which separated DVD renting and online video streaming which
posed a threat to the performance of Netflix (Brody, 2018). The Qwikster scheme led to a decline
in the number of people willing to use Netflix services in the entertainment industry. The
Qwikster was developed in 2011 with the aim of modifying the prices charged to the consumers
(Poyar, 2018). The technique was aimed at increasing the income acquired from the similar
services offered by the company. Many people were against Qwikster as it complicated the DVD
renting and streaming services. It did not add value to the consumers making many people
unsubscribe from the Netflix monthly services. The splitting of DVD and streaming services
using different domains would require a consumer to use different accounts for the services.
According to Sandoval (2012), Qwikster required subscribers to purchase on-demand streaming
or DVD rentals at $7.99 or both services at $15.98 which is a 60% increase of process from the
unlimited monthly subscription of both services at $10. The pricing made it hard for the
company to achieve the desired production level due to the reduced number of subscribers
willing to pay the new rates. Qwikster led to a reduction of stock prices by 77% and lost over
800,000 customers during the period of 12 July 2011 to 21 October 2011 (Rodriguez, 2018).
Reed Hastings for the Qwikster and the process were restored to normalcy to ensure a smooth
flow of operations.
Netflix rebuilds: The rise of original content

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The company is focused on sustaining the competitive advantage in the entertainment
industry through the focus on original content. Netflix management aims at ensuring that there is
an increase in the originality of videos streamed by the customers. The use of advanced
technology and innovation has assisted the company in discovering a technique to increase the
originality of the content (Johnston & Marshall 2016). Pricing strategy implemented by Netflix
focuses on ensuring that there is an enhanced value to the consumers towards the
accomplishment of the desired production level in the market. According to Netflix (2017), the
company intends to invest over $1.75bn in acquiring 400 employees that will be used in
providing original content in the European market. The increased workforce is an initiative that
is used by the company in boosting the level of original content in the video and TV series
offered to consumers.
Netflix is focused on investing in programming systems to enhance the originality of the
content provided to the subscribers. It is necessary for the company to retain the 125 million
subscribers through original content through the on-demand streaming. According to Walters
(2018), Netflix intends to use $8 million on content to enhance the acceptance in the
entertainment industry. The increased number of entry companies in the on-demand video
streaming industry requires Netflix to focus on enhancing the originality of the content. Netflix
standard, basic and premium users are provided with quality services to boost the revenue
(Monica, 2017). Netflix will achieve long-term objectives through the focus on quality content to
the subscribers.
The future of Netflix

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The company has focused on partnership with electronic and internet companies to make
Netflix services widely accessible in the global market. The partnership and acquisition is a
proper technique for ensuring that there is a steady flow of business operations in the industry
(Shen et al. 2016). It is vital for a company to focus on developing a plan that will maximize the
income level from production. The entertainment industry is highly changing, and the
partnership assists Netflix to deal with the risks in the market. It is necessary for a business to
focus on acquisition and partnership as it provides mutual benefits to the companies involved in
the deal (Reijonen et al. 2015). Netflix is now accessible in many electronic devices which have
greatly contributed to the increase in the number of subscribers. In future, Netflix will renew the
partnerships with the electronic and internet companies for proper distribution of services. The
Netflix workforce is provided with flexible work policies to motivate them to acquire the desired
production level (Gilley et al. 2015). Netflix employees are able to take vacations severally as
motivation through the ability of HRM to have a work-life balance in the company. The focus on
technology and innovation will assist Netflix to establish a long-term competitive edge in the
global entertainment industry (Johnson et al., 2017). The business strategies implemented by
Netflix are aimed at assuring the shareholders and customers of long-term productivity in the
entertainment industry.
Conclusion
Netflix was able to acquire a high number of consumers in the entertainment industry by
applying proper strategies. Blockbuster was the company with the competitive advantage in the
global entertainment industry by offering DVD rentals to consumers. Netflix identified that the
use of advanced technology and innovation would assist the company to beat the competition in
the market. The online operations by Netflix were able to beat Blockbuster retail outlet in

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offering the latest films to the consumers. Netflix focused on customer retention through online
ordering and delivering the DVD on the doorstep. The company later invented the subscription
service that allowed consumers to stream for unlimited videos. The subscription services have
made it possible for the company to acquire an increased consumer base in the targeted market.

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