How Netflix Started and their New Threats

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Recommended: Analysis on the history of Netflix

Netflix offers streaming entertainment content to its customer as well as DVDs and Blu-Ray Disc content by mail. Netflix now, has 29.2 million people in the US subscribed to its $8-a-month streaming plan, which is, for the first time, greater than HBO’s domestic subscription base of 28.7 million. The cable TV industry’s stagnation has had its own trouble signing up new subscribers. (Outside the US, the situation is much different: HBO has a huge lead over Netflix. Offering VOD through online streaming Netflix was the first to enter the market giving them a competitive advantage over HBO in international markets. Netflix entry into the VOD market strategy was to offer specialize product that catered to the consumer preference and economies of scale and cost advantage.

Threats of New Entrants

When Netflix first began, in 1997, they quickly branded themselves as a DVD by mail Service Company. Netflix set this platform, and the barriers to enter this industry were high. The industry wasn’t saturated and had room to make profit; many companies began to emerge (Newman, Rick). Nonetheless, there’s not a lot of infrastructure to building a video on demand business, the barrier to entry was low. The threats to new entrants would face is the actual business model itself with R&D, patents, and cost being a factor. Also, the capital that is required to attain a license to a movie is considerably high. The threat of new entrants includes HBO GO, Amazon Prime and On Demand TV, and most of the companies’ desire to venture into the movie rental business, and it has proven to be successful (Kopytoff, Verne). The industry is still young, and many of the businesses are still experimenting with their business models.

As a result of rapidly chang...

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...ting & Cable. 1/6/2014, Vol. 144 Issue 1, p16-16. 1p.

Mueller, Jim. “5 Threats That Could Kill Netflix”. The Motley Fool. 29 April 2011.

http://www.fool.com/investing/general/2011/04/29/5-threats-that-could-kill-netflix.aspx

Newman, Rick. “How Netflix (and Blockbuster) Killed Blockbuster”. 23 September 2010.

http://money.usnews.com/money/blogs/flowchart/2010/09/23/how-netflix-and-blockbuster-killed-blockbuster

Hargreaves, S. (2013, 09 13). 15% of Americans lives in poverty. Retrieved from http://money.cnn.com/2013/09/17/news/economy/poverty-income/

Netflix, Inc. (2013), Form 10-K 2013. Retrieved March 19, 2014 from http://ir.netflix.com/sec.cfm

Ramachandran, Shalini. 2014, February 23. Netflix to Pay Comcast for Smoother Streaming. Wall Street Journal.

Netflix. (2013, April 23). Financial Times (London, England). Tuesday USA Edition 2, LEX Column, p. 10

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