Netflix's Business Evolution: From DVD Rentals to Streaming Giant

The digital streaming landscape has been significantly influenced by Netflix’s market strategies. This assignment explores how Netflix transitioned from a DVD rental service to a global leader in video streaming. Students will investigate the company's strategic use of technology for personalized recommendations, its pivot towards original content production, and aggressive international expansion. By examining these elements, students will assess Netflix's ability to anticipate consumer trends and leverage data analytics to maintain competitive advantage over traditional media companies such as Blockbuster. Through case studies and market analysis, this assignment encourages a deep dive into the business decisions that transformed Netflix from an online rental service to a major player in content creation and distribution.

Running head: BUSINESS ANALYSIS OF NETFLIX AND BLOCKBUSTER
Business analysis of Netflix and Blockbuster
Name of the student:
Name of the university:
Author note:

1BUSINESS ANALYSIS OF NETFLIX AND BLOCKBUSTER
Table of Contents
1. Introduction: 2
2. Institutional Background: 3
2.1. The background of Blockbuster LLC: 3
2.2. A brief journey of the Netflix: 4
3. How Netflix beat Blockbuster: 5
3.1. New technology by Netflix: 5
3.2 Retail outlets versus operating online: 6
3.3. Pricing strategy and Netflix innovations: 7
4. Will Netflix remain the dominate provider of online video streaming: 9
4.1 Netflix stumbles: The demise of Qwikster: 9
4.2 Netflix rebuilds: The rise of original content: 10
4.3. The future of Netflix: 10
5. Conclusion: 11
6. References: 12

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1. Introduction:
In the present day corporate rat race, finding leisure has become a herculean task. The only
retrieve from the cut- throat corporate world for the individuals has become the little
entertainment that the virtue of television can provide to the individuals. It has to be understood
that the past couple of decades has brought forward a wave of digital revolution, and the concept
of movie rental services has been a revolutionary change in the lives of the tech savvy
generations. It has to be understood that the lack of time is one of the most important fact
associated with the steady rise of the movie rental companies. On a more elaborative note, it has
to be understood, the movie rental services provide the viewers with the opportunity to choose
any of the movies they want to watch in the comfort of their homes and along with that the
movie rental services also allows the customers to pay the bare minimal for a few hours of
uninterrupted entertainment (Phillips 2015).
Along with that, it has to be mentioned that with the very recent addition of the different
television series has definitely helped in the rise of the movie rental services. And in the period
of the rise of these services, the corporate entity that enjoyed the most spectacular and
noteworthy journey to the pinnacle of success has to be Netflix; a very common name that
almost all age groups among the present day generations are familiar with. However, in journey
to its success Netflix had to encounter competition from many alike services, and Blockbuster
LLC can be considered one such competitor (Walker et al. 2017). This assignment will attempt
to analysis the rise of Netflix as the market dominator in the entertainment industry and its
journey comparing it to that of Blockbuster LLC.

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2. Institutional Background:
2.1. The background of Blockbuster LLC:
Blockbuster LLC can be considered as one of pioneers of the home movie and video game
providers on rent, and it was initially established by the name of Blockbuster entertainment, Inc.
in the America in the mid 1980s when the concept of video renting was gaining slow but steady
pace of popularity in the western hemisphere. Especially in America, the concept of video and
movie renting services had gained rapid popularity as a form of easy and cost effective mode of
in house entertainment, and soon this concept was a raging trend in the young generation. The
international popularity tat Blockbuster managed to gain was in through the 1990s and the
company reached its performance and productive peak in the year of 2004, characterized by
them employing close to 85000 employees worldwide. The main attractive feature launched by
this company that had worked as the unique selling point for the company had been the pay per
view system launched by them in the early 2000s, that had grown into a market frenzy very soon;
providing blockbuster LLC with the competitive advantage for quite a few years
(Blockbuster.com. 2018).
The peak in its success had been by the able hands of John Antioco, who managed the
operation and business process activities for the company from the late 1990s through the first
decade of 2000s. Along this period blockbuster managed to open more than 9000 stores across
United States and managed to either acquire or partner with many film companies And
production houses to offer the customers with exclusive access. The concept of subscription
membership, which a raging trend in the rental entertainment industry in the present age has been
pioneered by Blockbuster as well, however along the late 2000s, the entry of its most notorious

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competitor, Netflix, the eventual demise of Blockbuster began its course. The liquidation of the
company shares and store closing began in the 2010 and in the following years, the popularity of
blockbuster continued to decline. The year 2010 witnessed the company filing for bankruptcy
protection and in the following year, the company was forced to shut down its existing stores. In
the following couple of years the company had its 1700 stores being bought by the Dish
Network, which altered the operations by which continued to provide Blockbuster@home
services to the Dish subscribers. However, it has to be mentioned that even after the demise of
the main brand, the acquiring company Dish networks continues to retain a few of the
Blockbuster franchise agreements, keeping the brand name alive (Blockbuster.com. 2018).
2.2. A brief journey of the Netflix:
Netflix had been founded Reed Hastings and Marc Randolph in the year of 1997 in
California. The company had been initially founded for the purpose of providing access to the
online streaming of the media files and video on demand services of initially DVD and then later
on, in another format. In the beginning phase the business model that Netflix entertained had
been based on renting out and selling DVDs, however very soon the Hastings modified the
businesses on the basis renting out the DVDs by mail services along with introducing the online
media streaming services in the year of 2007. The concept of online media streaming soon
gained immense popularity and the company started branching out internationally in the year of
2010. The growth curve of the company started out by the year of 2010, and the success story of
the company started out along that period, after which the company has successfully enjoyed a
steady growth pattern till the present date and operates efficiently in more than 190 countries
(Netflix.com. 2018).

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According to a recent statistics, the company proudly hosts more than 75 million subscribers
over in 190 countries and along with that; the company also entertains 125 million hours of
viewing per day. One of the key features that has helped the company gain immense popularity
is the cost effective no-commitment monthly rental services for the company and the
personalized monitoring services provided to the viewers based on their own recommendations.
According to the most of the authors, Netflix had a very exciting rise to the top and had been
enjoying the monopoly over the entertainment and media industry significantly. However there
have been many minute changes that the company has brought forward that has helped them to
achieve (Netflix.com. 2018).
3. How Netflix beat Blockbuster:
3.1. New technology by Netflix:
Success that any business corporation games depends on the operational management and
the strategies that the company invest in order to attain that success. In the industry of
entertainment streaming, Netflix can be considered a significant name that other companies can
look up to when considering getting drastic success graph. However, it has to be mentioned that
blockbuster had been crucial competitive sector that Netflix had to be in order to gain the
monopoly that it now enjoy over the entertainment and online streaming industry. It has to be
mentioned that Netflix started its journey in the late 1919 with renting out and selling films in the
form of DVDs, and it has to be mentioned that the company provided a Convenience the the
customers that they desperately needed. In addition, it has to be mentioned that the convenience
that the customers could get from this online video streaming website did not take much time for
the audience and their rapt attention to be won over (Vander Schee et al. 2012).

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Along with that, it has to be mentioned that with the involvement of the TV series into
the mix of the scenario, the entertainment and media business has conveniently won over the
most of the target group belonging to all possible age groups. The online streaming technology
that the company had set a trend in the entertainment and media industry in the early 2000s has
changed drastically from the past few years and the changes and transitions in the technologies
has only given good days for the Netflix to follow.
Now considering the recent technological developments that the company has
incorporated in the company as well like the brand new bandwidth reducing technology, which
has taken the entire online entertainment industry by the storm. According to the authors the
most important contributing factor behind the massive success that the company has attained in
this industry has been majorly due to the rapid product and service innovation and integration of
up and coming technologies. And the new bandwidth technology and uninterrupted
advertisement free streaming services have been two hi-tech strategic innovations that have
provide the company with a direct path to the pinnacle of success in the entertainment media
industry (Halal 2015).
3.2 Retail outlets versus operating online:
One of the most important innovations that the company has depended on for the immense
success that it has attained on the market has been due to the revolutionary advantage of the
convenience provided to the audience at the co fort of their home. The concept of the video
renting has been popular on before Netflix was established and the video rental services were
undoubtedly pioneered by the Blockbuster LLC, however it has to be mentioned that the
advantage of doorstep delivery and then online hassle free operation had been a competitive
advantage that blockbuster LLC could not beat by a long shot. It has to be mentioned in this

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context that the present generation has a life style where time has become the most expensive
commodity and the online or internet based mode of operation is a convenient luxury provided to
the customer base, which is enough to grip the attention of the target market effectively. Along
with the fact that the online operation mode has hooked the attention of millions of customers of
Netflix, operating online has a number of other benefits for the business process management
perspective as well. First and foremost, it has to be mentioned that the cost effectiveness of
online operation of a business is optimal over the manufacturing packaging and delivery costs of
any retail store. For example, the packaging and delivery costs of blockbuster LLC were avoided
very smartly by the Netflix, which not only provided them with a huge financial advantage, it
offered them an element of surprise for the customers and helped them expand their customer
base drastically (McCord 2014). Now coming to the marketing competitive advantage, it has to
be mentioned that Netflix began their online streaming services to their select loyal subscribers
when no other competitor was focusing on the advantage of online streaming. It has to be
mentioned that the CEO of the company Reed Hastings visited the CEO of Blockbuster in the
year of 2007, fo a strategic alliance which could have benefitted both the companies by the virtue
of the innovative strategies of Netflix and the former target market base of Blockbusters, which
had been denied by the former CEO of blockbuster. However, soon enough the competitive
advantage of online operations won over the retail operational modes and the eventual demise of
the Blockbuster LLC is a conspicuous proof of it.
3.3. Pricing strategy and Netflix innovations:
In order to win over any competitive target market it is very important for a company to have
a highly efficient and effective pricing strategy. It has to be mentioned in this account that among
all the different kinds of pricing strategies, the most effective and efficient pricing strategy in

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case of as competitive a corporate industry as the entertainment and media one, the premium and
economic pricing based on the nations it operates in has to be the most effective strategy. It has
to be mentioned in this context, that for Netflix their pricing strategies are a mixture of both
premium and economic strategies. It has to be mentioned in this context that Netflix is a
company that operates almost all over the globe, and by the virtue of its complete and absolute
online operational modes, this entertain industry giant Netflix operates both in developing and
developed nations. Hence, in order to maintain its monopoly on the entertainment and online
media marketing, the need for this company to have a mixed pricing strategy had been crucial
(Jenner 2016).
There are various plans for the subscribers to choose from, starting from premium plans for
the elite customers to the most cost effective basic plans for the middle to lower socio-economic
backgrounds of the different developing nations. However, the marketing advantage of the
pricing strategies by the company is the fact that each of the different plans by the company
caters to different groups of customers and provides a differential patterns of benefits and access
to the content. The most important benefits of this pricing strategy is the fact that in this method
the company can entertain a vast group of online target market and able to cater to a far larger
target market than the competitors. This marketing strategy innovation not only helps the
company to expand effectively but will also help in enhancing the global popularity of the
company (Gomez-Uribe and Hunt 2016).

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4. Will Netflix remain the dominate provider of online video streaming:
4.1 Netflix stumbles: The demise of Qwikster:
After entertaining a massive success in over more than 190 nations, the company stumbled
upon the first roadblock in the form of the Qwikster program. On a more elaborative note, it has
to be mentioned that the subscriber base of the company has increased effectively since the last
few couple of decades. And it has now become a brand that is recognized on a global level, not
just in terms of quality of the service provided, but also for the reliability and convenience
provided to its customers. The company however took a detour planning when it comes to the
marketing and decided to separate their online streaming and DVD services; whereas the Netflix
brand name decided to focus on only the online streaming business, the DVD services were
decided to be handled by the re-branded division named Quikster. The primary motive behind
the change of plans had been to separate both of the audiences and giving the customers the
liberty to choose the kind of services they wanted to take and pay for only their choice of
services. This marketing propaganda failed miserably in a matter of a few months; facilitating a
considerable roadblock in the path of success of the globally renowned brand Netflix (Adhikari
et al. 2012).
The only drawback in the strategy implemented by the company had been the fact that
rebranding of the DVD service providing division of Netflix resulted in two different websites.
Now for the customers, the idea of paying two separate bills for two different websites suddenly
had not been appreciated and the soon it was reflected by the whirlwind demise of Qwikster.
According o the authors the most crucial contributing factor behind the failure that Netflix
encountered with Quikster was with the sudden rebranding, website split and the idea of two
separate billing system and credit card chargers. The most prized possession for the company has

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to be the brand value and recognition, which was threatened by the rebranding, however the
company was quick to recover with the rapid turnaround with their expensive and popular
content licensing and most importantly with their original contents (Guo 2013).
4.2 Netflix rebuilds: The rise of original content:
The best and most effective competitive strategy that saved the company from having the
same fate as its competitor like the Blockbuster is their heightened focus on the original content.
There are various original contents that the company has invested in which has been the success
recipe for the company effectively, starting from House of cards to stranger things, or The crown
to Narcos, the original content fight has been the most beneficial step for the company to take,
which has helped it recover from even the Qwikster disaster. However, the marketing world
concern over the steady rise of original content is the fact that producing original content is far
more expensive than content licensing, and despite the unmatched competitive advantage
provided by the original content the costing is definitely a huge concern for even Netflix.
However, the online entertainment streaming industry giant has been strategizing spending even
more on the original content rather than the content licensing. The primary focus behind the
strategy of the company to outspend its rivals is to retain customer loyalty as much as possible,
and it has been a successful strategy which has helped the company recover completely after the
demise of the Qwikster (Newman 2010).
4.3. The future of Netflix:
The future of Netflix is undoubtedly bright, with their magnanimous spending on original
content production; they have managed to keep their customers hooked and loyal. According to
the recent statistics, the company has announced to spend close to 8 billion dollars only on
production of the original content and the outspending attempted by the company is set to

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provide just as magnificent success in terms of profit and popularity. The company already has
more than 100 million subscribers worldwide and that is only expected to grow with the efficient
and effective market strategies that the company is consistently employing. However, albeit the
subtlety, the price- hike in each of their plans by one dollar is surely going to affect their regular
customers. With the market competition rising rapidly, and the possible threat posed by services
like Amazon prime, which is providing a much cheaper services to the customers; the company
has to reconsider their pricing strategy in order to retain customer loyalty (Jenner 2016).
5. Conclusion:
On a concluding note, it has to be mentioned that the online streaming industry has taken the
present generation by the storm. Almost all of the different age groups in the present day are
completely and irrevocably enthralled by the convenience provided by the online entertainment
streaming industry by the company. It has to be understood that the pioneer in the home based
entertainment services has to be the Blockbuster LLC, which had started out as a retail store for
renting out DVDs for the customers to enjoy in the comfort of their home. However soon the
concept of home based entertainment was a hit and Blockbuster became a renowned brand.
Netflix arose when the home based entertainment industry was soaring and Blockbuster was
enjoying a complete autonomy over it. However, the most spectacular fact about the success
story for Netflix has to be the technological innovation and convenience provided by the Netflix
by the form of online streaming, which helped Netflix to take over the entertainment industry
completely. And today the Netflix is a multibillion dollar enterprise which is can be a benchmark
for the success technological innovation and prompt strategic leadership can provide.