What Is Netflix's Flaws In The Traditional Video Rental Business

Netflix was able to exploit a couple of flaws in the traditional video rental business. The company launched with the idea of DVD-by-mail, which was convenient. Netflix allowed customers to rent or return movies from the comfort of their own home (Hemachandran, 2014). People did not need to drive or stand in line at the movie store. Moreover, the company used the concept of queueing movies, focused on personalization and user choice (Hemachandran, 2014). Once a customer rented a movie, Netflix provided movie recommendations based on customer preferences, so customers were not forced to only watch new films. As for Blockbuster, their stores supplied new movies and ignored older ones (Hemachandran, 2014). Furthermore, revenues for the traditional home video industry was reliant on late fees (Hemachandran, 2014). Americans faced large late fees from stores that were often higher than the cost of the rental. Thus, Netflix introduced the monthly membership fee model, letting people keep videos as long as they liked. This strategy benefited Netflix because they had recurring income every month from

So, the company entered the studio business to create Netflix originals. Their first popular series was House of Cards (Shaw, 2014). In the first quarter of 2014, the strategy of Netflix originals added 4 million new paying subscribers, 34.38 million of them in the United States (Shaw, 2014). This strategy differentiated them from others. In 2017, Netflix expects to spend over $6 billion on a P&L basis on content for members and $1 billion on marketing new content (Netflix's View: Internet TV is replacing linear TV, 2017). Currently, original content is their number one strategy and they are pleased with the progress. Plus, it is believed that their focus on launching a series or a film gives them a major advantage over linear competitors. Original content is able to reach audiences all over the