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Netflix: Disintermediator or Disintermediated? Essay

1. As completely as possible, sketch the value chain for Netflix from the production of content to viewer. Netflix is a company that allows consumers to sign up for a membership that sends shows and movies on DVD, in the mail. Members can order them and return them at their convenience. Once you return a disc, Netflix will send a new one to you that same day. The monthly fee depends on how many discs you plan to receive at a time, such as one, two, or three. Part of a Netflix membership includes watching movies on your computer using the Netflix movie viewer. To enhance your viewing experience, you can optimize your Internet connection to improve the quality of the movie viewer.

2. How does horizontal and vertical conflict impact Netflix? In marketing, vertical conflict is conflict that occurs between organizations that work together to provide the same product to the consumer. For example, a business selling potatoes might have a conflict with a supermarket that sells the potatoes. A horizontal conflict is one that occurs between two enterprises that might work together, either directly or indirectly. For example, a bookstore might have a coffee shop owned by a different business operating in the bookstore.

3. How does Netflix add value for customers through distribution functions? Netflix has another competitor to watch out for. Movie Gallery’s principal activity is to provide retail home video in rural and secondary markets. They offer a wide selection of movies and video games for rent and sale. Movie Gallery has developed and implemented a flexible and disciplined business strategy that centers on driving revenue growth, maximizing store level productivity and profitability and minimizing operating costs.

The stores offer from 4,000 to 15,000 movies and from 200 to 1,000 video games for use with most video game platforms. Although Movie Gallery, Inc. has not executed any online rental services; the merger between the nation’s second and third video rental companies along with the expansion of stores demographically has gained attention of competitors and customers.

Movies on Demand – Walt Disney’sThe Walt Disney Corporation and media giant News Corporation has come together to launch a new video on demand service to customers in the US. Movies.com will provide films made by Disney, Miramax and 20th Century Fox to viewers both on cable and using the Internet. Movies.com will show new releases from the two film studios on an exclusive basis before they are released on traditional pay-per-view channels. There is a built-in audience of 10 million people who the companies say will have access to the service via on-demand cable television services or broadband Internet access

4. What threats does Netflix face in the future?
Netflix expects its DVD-by-mail business to peak in 2013, at which point its Watch Instantly streaming service will drive growth in the company. That’s the gist of a slideshow posted on the company’s jobs site detailing its plans and the competitive outlook for its streaming business.

Netflix expects its DVD-by-mail business to peak in 2013, at which point it believes its Watch Instantly streaming service will be driving its growth. That’s the gist of a slideshow posted on the company’s jobs site that details its plans to transform itself into the leading streaming subscription service for TV shows and movies.

5. Will Netflix be successful in the long term? Why or why not? Netflix’s new deal with Warner Bros., in which it agreed to a 28 day “DVD window” for new releases, in exchange for greater access to WB’s films for its Watch Instantly streaming feature and reduced pricing on its own DVD purchases, is further proof that Netflix is squarely focused on the long-term. That’s not only smart for Netflix, it’s also a win for Hollywood studios and also for consumers.

With 11 million subscribers and growing, Netflix has emerged as one of Hollywood’s most important home video customers. This dynamic has only increased recently due to slowing sales of DVDs (down another 13% in 2009) and Netflix’s dominance in DVD rentals. Yet Netflix is viewed warily by Hollywood, primarily due to concerns that in the digital age, Netflix could gain too much power over Hollywood’s fate. This concern was reinforced by Netflix’s deal with premium cable channel Starz, a de facto end-run around Hollywood in which Netflix got streaming access to certain Disney, Sony and Lionsgate films.


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