Netflix Case

Netflix is operating the world’s largest online movie rental company, by offering movie rentals by mail and online streaming. A customer can simply log on into their online account, choose a movie and in a couple of days it is shipped to their home. Or you can long on to an online account to browse and stream movies. The growth of Netflix has made a significant threat to rival companies in the movie rental industry like Blockbuster. As DVD rental stores like Blockbuster and Movie Gallery continue to struggle, Netflix is flourishing. Blockbuster is a well known movie rental company that has many stores throughout the world. This can be one of its disadvantages compared to Netflix. Netflix does not have to spend costs like rent and utilities to run physical stores. These costs can be used in better ways to help the company expand. Instead of opening video stores Netflix invested in more distribution centers. This allows Netflix to supply more customers and cut down on delivery time of movie rentals.

Currently in the video renting market, buying power is high. There are many stores to choose from as well as online locations to choose where to rent videos from. Online markets are perceived as a high threat to many video retailers. Many consumers hate waiting in line or have had a negative experience in purchasing in store so they go online to rent their movies. This video on demand industry requires a great amount of money, so potential entrants face the large sunk costs of obtaining licenses to the movies they want to provide. The technology to offer high-quality downloads is also a barrier to entry, but this barrier is small because such technology is available for licensing from third parties. In this market, product differentiation takes the form of varying quality in the downloaded movies. This is an industry where entry is difficult for all but the most experienced firms with the already established online movie rental and sale experience....