Reed Hastings founded Netflix after paying a $40 late fee for an overdue rental copy of Apollo 13. His vision was to provide a home movie service that would do better job satisfying customers than the traditional rental retail model. Founded in 1997 during the emergent days of the Internet retailing, Netflix offered a web portal driven home delivery service of DVDs through the mail.
The company made then a strategy shift to a prepaid subscription model.
The reader is presented with the emergence of the Video-On-Demand VOD. Many industry observers believed that VOD posed a disruptive threat to Netflix’s core
DVD rental business.
Suggested Questions:
1. Would you buy Blockbuster stock or short it at the time of the case? How about Netflix?
2. Did Netflix do the same jobs for consumer than Blockbuster did? How did this evolve over time ?
3. Compare Blockbuster’s and Netflix’s profit models. How might the differences affect the respective company’s strategies?
4. As you examine each major shift in Netflix’s strategy, what might have been an assumptions checklist that they might have used at each stage? What assumptions checklist might you use for Video-On-Demand VOD?