They assumed that unlimited streaming service had more demand than DVD service. Before Netflix changed its pricing structure, the customers paid $7.99 per month for unlimited online streaming plan, or an additional $2 per month for the DVD-by-mail service. So the total cost for the user who wish to use both service unlimited online streaming and the DVD-by-email was $9.99 per month. However, this pricing was not financially sensible for the company because of the misconception of the demand of DVD rental service. Therefore, Netflix set the price $7.99 for both service unlimited online movies and unlimited mail-order DVDs respectively.
For years Netflix has been entering into deals with electronics manufacturers such as Song and Samsung to include the Netflix software with their devices, allowing the end-users to access the Netflix streaming service. Netflix needs to foster the creation of technologies that allow fast and easy access to the Netflix streaming service, while providing high quality content. The second major challenge is the growth in competition in the video streaming market, Netflix is competing against Hulu, Amazons subscription service, HBO Now, Google Inc. and others to dominate the video streaming market, and, at the time of this case study, was winning the battle against the newcomers, but this lead would surely decrease as other streaming services entered into agreement with movie and television studios. The third challenge that Netflix is facing is getting involved in original programming, creating their own series and movies. Netflix has had quite a bit of success here with shows such as ‘House of Cards’ and ‘Marvel’s Daredevil’, but other video streaming suppliers have started to create and release unique content as well, and some of the major media companies are pushing back against the unique content on streaming services by removing their own content from those streaming services.
d. Fees that studios charge Netflix for access to the studios’ content. From these four challenges I think that the Netflix‘s development of original programming is the most difficult to address need a lot of effort and a major investment in a completely different direction from sharing video either through DVD rental or online streaming. I think the easiest one would be dealing with the fees because the raising fee can involve an increase in Netflix’s own price structure, which could bring an effect on demand for its distribution services. 2. Each of the four major challenges faced by Netflix relate to the genetic managerial challenges of dealing with globalization, diversity, and ethics, they all link of the challenges that confront Netflix, some of the link are more clear than others.
As is stated in the article, the company used to have a major competitive advantage in terms of movie selection, where, “…customers could browse through thousands of titles…” (Hitt 106). Now, the entire scope of the market has changed and Blockbuster was much too slow to respond. The recent moves that it has made will surely generate profits, but not enough to sustain the company in the long run, seeing as there is nothing that differentiates Blockbuster’s services from that of its competitors. In order to fully gain lost market share back, the company would have to create some sort of highly innovative way of viewing or renting movies that none of its competitors has already thought of; It would have to be something that is rare, difficult to imitate, not easily substituted, and able to generate above-average returns. Unfortunately, at this point it looks as if none of this will come into fruition because Blockbuster has essentially decided to latch on to other companies, creating a sort of symbiotic relationship where the company feeds off of the success of its competitors.
MGMT 211 – Management Foundations Case Analysis #1 Netflix Los Gatos, California CEO Reed Hastings started Netflix in 1997 after becoming angry about paying Blockbuster Video $40 for a late return of Apollo 13. Hastings and Netflix struck back with flat monthly fees for unlimited DVDs rentals, easy home delivery and returns via prepaid postage envelopes, and no late fees, which let customers keep DVDs as long as they wanted. Blockbuster, which earned up to $800 million annually from late returns, was slow to respond and lost customers in droves. When Blockbuster, Amazon, and Walmart started their own mail-delivery video rentals, Hastings recognized that Netflix was in competition with “the biggest rental company, the biggest e-commerce company, and the biggest company, period.” With investors expecting it to fail, Netflix’s stock price dropped precipitously to $2.50 a share. But with an average subscriber cost of just $4 a month compared to an average subscriber fee of $15, Netflix, unlike its competitors, made money from each customer.
Overall Wall-Mart is still expanding outside the United States, Particularly in market where it entered by acquiring a strong retailer. Still given Wal-Mart formidable record at home, the company’s recent setbacks have exposed a rare vulnerability oversea. Wal-Mart's ability to replenish their shelves four times faster than its competition is just another advantage they have over competition. Wal-Mart leverages its buying power through purchasing in bulks and distributing the goods on it' own. Wal-Mart guarantees everyday low prices and
Video and Digital Rental Industry Though video rental companies such as Blockbuster and Hollywood video have been around for generations, the digital age has caught up with the standard rental companies. Digital rentals and online streaming has cut down profits for these types of companies to the point of sending them into bankruptcy and buyouts. With easy access of online content, consumers have chosen to place their entertainment funds into digital rental over the cost of renting films via traditional physical stores. The effects of digital content on the industry have completely changed business models all around. In the past visiting a video rental store and spending time browsing the categories and titles was the norm and almost ritual for some households.
* Viacom owns Paramount Pictures and MTV Films with library of over 3,500 films Weaknesses * Declining profitability- due to the decline in the economy * Paramount subsidiary of Viacom, Inc. not making as strong showings in the box office or low numbers for DVD sales, show that the consumers choices have shifted. * Piracy and online watching of movies- due to watching movies online, purchasing illegal cable or purchasing illegal copies of movies, the incoming revenue for Viacom has decreased * Trouble with debt * The
The photographic paper market similarly declined from a peak in 2003 to about 60% of the size by 2011 (4). In short Kodak lost ground in its shrinking primary market which had been a much better revenue generator than digital proved to be (5). Kodak belatedly declared a digital strategy in 2004; eight years after its revenues had peaked. This strategy was still based on photographic prints as an end point for consumers, which proved flawed. Kodak both invented and successfully marketed professional and consumer digital cameras.
At the beginning it was just an online bookstore. Six years later, Amazon used their own inventory management, distribution infrastructure, fulfillment, and customer service model to become the one of the biggest online-shopping company. By 2000, over 75 percent of U.S. consumers recognized the Amazon.com brand, and the Interbrand ranked the company as the 48th most valuable brand worldwide. The number of customers increased from 14 million in 1999 to over 20 million in 2000. However, a successful company like Amazon.com also has its own actual problems.