In the late 1990s, with the booming in number of Internet users (dot-com boom), investors was encouraged to invest in Internet to get in on the very profitable market that was available at that time. Netflix was one of the first Internet companies, which took that advantage by getting into Internet video market. By the late 2000s, home video rental business (Blockbuster, Hollywood video, etc.) took place in the market, however it didn’t take too long for Netflix to beat that market and in mid 2009 increase its stock prices to $39 when its best competitor Blockbuster’s was less than $1.
Although Netflix was taking power over the video industry, companies such as Apple, Amazon studios and Hulu began to threat Netflix’s share in the market but Netflix could respond to those threats by investing in research and development and bring up new models such as video on demand model. Today Netflix is world’s leading Internet TV and movie provider and has over 40 million members in most developed countries.
Netflix is still working hard to meet unending challenges while controlling its core business and it is not very easy to manage an organization as Netflix since there are always issues and problems due to competitors’ challenges in this competitive industry but it is possible for Netflix to manage these competitions by doing research and development to come up with new models and trends.
The video industry started in the 1970s in the United States and it was mostly focused on VCR technology. With the decrease in movie theatres, the industry concerned about loosing the control over selling their movies and was looking a better way to extend the distribution network, which was only by movie theatre at that time. By the 1990s, they came up with the idea home rental videos since they saw the opportunity of video rental business which could not only be an alternative of going to movie theatre, but also great chance of selling or renting the movies that performed bad in movie theatres.
The market has changed in 2000s when DVD technologies, which had special features such as, extra scenes and extended versions took place in the market until 2010 when the Blu-ray came up since there was a demand for viewing of high definition movies but it didn’t take place very well in the market and then DVD maintained its position again.
However, there was a change in buyer behavior as Internet technologies have improved. Buyers started not to go to video rental store just like they didn’t want to go to a computer store to buy a computer. Internet sales took control over almost every industry.
Even grocery shopping could be done online. Hence, digital distribution of TV shows and movies via Internet streaming wasn’t a big surprise for the industry. Since all these was threatening physical video rental business, Netflix offered its customers to watch a movie immediately when purchased without worrying about turning it back or even late fees. The organization turned into a win-win situation because of the fact it included customers, producers, TV and cable providers, distributers, movie theatres and even video stores into its value chain.