How Netflix Changd the Game of Movie Rentals

How Netflix Changed the Movie Rental Marketplace

Think back about ten to twelve years ago; if you wanted to rent a movie, where would you most likely go?

Blockbuster.

Every night used to be a great night to “make it a Blockbuster night” (a popular slogan for Blockbuster). Blockbuster was in control of the movie rental marketplace in the early 2000’s. There was at least one or two blockbusters in every city. On August 29, 1997 Netflix was founded by Reed Hastings. Reed Hasting got the idea of creating Netflix because he got fed up with the 40 dollar late fee blockbuster charged him for returning Apollo 13 late (Netflix, Inc. History).

Netflix uses a click only business strategy. Click only companies can often compete more effectively on price since they do not need to support the physical aspects of the brick-and-mortar strategies (Valacich and Schneider 148). Netflix came about to provide users with the ease and convenience of shopping at home, and delivering the movies to your home through the postal service. They also had no late fee, meaning that people could hang on to the movie for as long as they liked. The first few years for Netflix was not spectacular, but they were moving in a positive direction.

Netflix may have got a little lucky because they got into the click only business at the right time. Being a click only company means that Netflix lives off of electronic commerce. Electronic commerce is the exchange of goods, services, and money among firms, between firms and their customers, and between customers, supported by communication technologies and, in particular the Internet (Valacich and Schneider 142). Also technology was advancing quickly through that time period. VHS players were getting replaced by DVD players. Printing movies on a 5 inch disc was much easier than on a roll of tape.

By the year 2004 two-thirds of Americans owned a DVD player. The number was rapidly climbing, and the growth in DVD players led to an increase in DVD...