Netflix Porter's 5 Forces

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Date Submitted: 01/30/2011 04:29 PM

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➢ Founded in 1997,( went public in 2002)

➢ Found by hasting an entrepreneur who already had found and sold a software company in 1997.

➢ The idea came from a late fee for rental of Apollo 13.

➢ Flat rate rental to customers in U.S only

➢ Largest online DVD rentals

➢ 100, 000 titles/ 800 million subscribers

Pestel: (macro environmental trends)

➢ Political:

➢ Economical:

- Increasing number of internet users

- high cost of content/ delivery

➢ Social:

- People appreciate the no-late fee idea

- More convenient

➢ Technological:

-Recommendation System offered by Netflix


- Blue-Ray

-Video Streaming

➢ Environmental:

- Less/ eventually none DVDs( less waste)

- No traveling to Rental stores( less pollution, less energy consumption)

➢ Legal:

- License agreements ( is that the same as their profit sharing agreement)

- Lawsuit ( False advertising in 2005, patent infrigment with Blockbuster)

Porter’s 5 Forces:

1. Threat of Entry: High( examples: Vongo( Discontinued on Sep 30th 2008), Moviebeam( failed because the networks assumed the watchers will watch what the networks thought they’d like, so no system like Netflix)

- Block buster,,movie gallery…

- Pretty easy to enter,

- Barrier of entry is limited


2. Suppliers: Moderate ( based on Independent Movie Studio)

-Delivery systems( UPS)

-Movie Ditributers

-Movie studios( Independent)

3. Buyers : high bargaining power for the buyers due to various home video providers and various means of delivery( online or by mail), many choices

- Subscribers,

4. Substitutes : Relatively...