4: Chapter Netflix
Introduction
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CEO of Netflix would change on strategic decision, delay the firm's Initial Public Stock Offering (IPO); "going public" the first time a firm sells stock to the public Once Netflix went public, companies like Blockbuster and WalMart started to offer the same deals, and unlike Netflix they already had a big customer base Netflix was an internet pure play; a firm that focuses on a specific product, service, pr business model; an internet pure play is a firm that only operates through the internet Netflix got great reviews from customers and were able to beat out Blockbuster and WalMart and become a leader in this industry Tech and Timing: Creating Killer Assets For Netflix, technology drives the company, it allows for customers to get what they want, when they want it, and for everything to be delivered when it is needed Netflix doesn't have huge warehouses or many different stores, they have few locations where the movies are shipped from Netflix, unlike Blockbuster, has 70% of their movies from the backcatalog, meaning they aren't new releases and older movies Long tail refers to an extremely large selection of content or products The long tail is a phenomenon whereby firms can make money by offering a near limitless selection Collaborative filtering is a classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience Churn rate is the rate at which customers leave a product or service The warehouses of Netflix also use tech a lot Dvd's come in from USPS and are scanned and sorted An email is sent to the customer to confirm returning the dvd The dvd's are sorted as to whether they will be shipped out again to another customer or put back on the shelf From Atoms to Bits: Opportunity of Threat?
Atoms to bits the idea that many media products are sold in containers for bits. As the internet offers fast wireless delivery to devices, the "atoms" of the container aren't necessary. Physical inventory is eliminated, offering great cost savings Atoms, buying the physical DVD's Bits: use the of technology Anything that can be digititalized, it Windowing an industry practice whereby content is available to a given distribution channel for a specified time period or "window" usually under a different revenue model How does it get to the TV? Disintermediation removing an organization from a firm's distribution channel; collapses the path between supplier and customer Coopetition is when firms find themselves in situations where they are both competitors and collaborators
21:05 Churn rate: amount of customers dropping Netflix Netflix big on Atoms to bits API 1. How does the Netflix business model work? Netflix was an internet pure play; a firm that focuses on a specific product, service, pr business model; an internet pure play is a firm that only operates through the internet Master of Crowd Sourcing Different subscriptions 2. Why did WalMart and Blockbuster managers, as well as Wall Street analysts, underestimated Netflix? The CEO felt they should have waited to go public to gain more profits Didn't think the small company could compete with walmart or blockbuster It was just another .com company 3. What are Netflix sources of competitive advantage? Netflix has used both timing and technology to gain a big competitive advantage over many other firms Longtail Customer satisfaction and loyalty, no late fees or shipping costs Data collection First pure play on market 4. What is the `long tail'? How long is the Netflix tail compared to traditional video stores? Long tail refers to an extremely large selection of content or products The long tail is a phenomenon whereby firms can make money by offering a near limitless selection
21:05 5. What do you believe are the most significant longterm threats to Netflix? How is Netflix trying to address these threats? What obstacles does the firm face in dealing with these threats? The competition right now, from walmart, redbox 6. Netflix uses technology to coordinate the process of sorting and dropping off DVDs for the US Postal Service. This application of technology speeds delivery. What other advantages does it give the firm?
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