Economic Battle | Netflix vs Blockbuster
Today we all have a Netflix account, well I use that of a friend, Netflix was not made overnight but its story is exciting as a simple idea it became one of the most important companies in the world, it had to fight an economic battle against Blockbuster and this is the story.
Blockbuster had the market in their hands for years, but when Netflix came up with its rental and streaming service everything changed, blockbuster tried to upgrade with blockbusteronline but had no results and in 2010 it filed for bankruptcy.
It all started in 1997 when Reed Hastings, a computer expert, forgot to return a movie in blockbuster, for which he was penalized with $ 40. That fact made his join Marc Randolph and they both founded a movie rental store without a physical store, orders were made online and the movies arrived in the mail, so Netflix was born.
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At that time, the founders had an incredible business vision, since they opted for the DVD format that at that time was only available to 1% of the population in the United States, which limited customers at the beginning, their first offer was 7 days the movie for $ 4 and $ 2 shipping, added to this they created a suggestion algorithm for customers based on the movies that customers rented.
What Netflix did to change the industry was introduce the subscription concept, for $ 15 you could have all the DVDs you wanted without actually having 4 at a time and with no delivery deadline. With all this, Netflix's capital rose to $ 5 million and its founders turned to the giant Blockbuster, which at that time had a capital of 4.5 billion dollars, 60,000 employees and more than 8,000 stores.
So Netflix proposed to Blockbuster to be its digital arm, but Blockbuster did not agree with the subscription concept, it seemed crazy to give customers an unlimited amount of movies apart from eliminating the fine concept, so there was no agreement and Netflix followed in its own thing did not generate profits, but everything change in 2001 when the price of the DVD player low.
In 2003 Netflix began to make profits and Blockbuster tried to enter the market but it was too late, in 2007 Netflix bet again on the novelty and introduced Streaming giving its business the concept of immediacy, customers could see what they wanted whenever they wanted , but it was not easy at first Netflix did not have an attractive catalog but for 20 million dollars it signed a contract with Disney that gave it many of its films, then it signed with other producers. In 2011 Netflix announced its first original series, that is how it began to produce its own original content and today it has a fairly extensive catalog, which is why it has more than 148 million subscribers today.
We can learn from this case these lessons:
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Netflix knew how to see a rising market trend with the DVD, which blockbuster did not.
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Netflix's constant innovation went from shipping DVDs to the subscription concept and from there to streaming.
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Devising a strategy that makes it difficult for competitors to enter, Netflix with its original content does so.
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