Netflix's Business Model and Strategy

1. Netflix had emerged as the world’s largest subscription service for sending DVDs by mail and streaming movies and TV episodes over the Internet. According to the case study, Netflix was shipping abut 2 million DVDs on average daily to subscribers and 61 percent of the company ‘s subscribers were now watching movies and TV episodes streamed from Netflix over the Internet. With the increase of Internet subscription, Netflix’s revenues grew from $500 million in 2004 to 1.7 billion in 2009 and were expected to surpass $2.1 billion in 2010. From that, we can see the Internet already became a big thing in this industry. Increasing numbers of devices were appearing in stores that enabled TVs to be connected to the Internet and receive streamed movies from online providers with no hassle.

Reed Hastings, founder and CEO of Netflix, had personally engineered the company's creative but simple subscription-based business model. From the website of Netflix, they show us the subscription-based business model at the very first glance, which is a $7.99 per month plan that entailed unlimited DVDs each month. (Netflix, 2012) Their plans begin at $4.99 per month, with no due dates, late fees, or shipping fees. People can choose the one that most satisfy their needs. Also, they have a choice of watch on PS3, Wii, Mac, iPad, Apple TV, and more, as the high quality video instantly streamed over the Internet. This internet-based subscription service offers over 100,000 titles, including those not traditionally available in video stores. Netflix’s subscription-based business model focuses on three elements, including convenience, the wide selection, an economical monthly price. Netflix, as an Internet movie provider, provides a cheaper alternative to paying monthly cable fees for premium movie channels.

The case study shows that Netflix has been growing continually year upon year in both total subscribers and revenues. From chapter 1, there are two dependable strategic approaches...