Netflix Who?

All Quiet on the Western Front, Gone with the Wind, Casablanca, Ben-Hur, Patton, The Godfather II, Rocky, Amadeus, Unforgiven, Gladiator, and Chicago are all Best Pictures according to the Academy Awards. The Best Picture winners have always been favorites among movie renters. These titles not only given some of the best acting, but also some of the best cinematography, best scores, and best directing one will find. These titles and a lot more can be had from Netflix, an online movie rental company. Since Netflix began their service, they have provided consumers a broad selection of titles, fast shipping, short waits on new releases, and an easy to use, user friendly website.

Netflix was started in the summer of 1999 by Reed Hastings, the current Chief Executive Officer of the company. He had previously founded and was CEO of a computer software company called Pure Software which was one of the fifty biggest software companies in the world when he sold it in 1997. Like many Americans, being a very busy man of corporate America, Reed didn't have much time to get to his local brick and mortar rental stores and when he did, he was often late getting the movies back. This caused him to get slammed with astronomical late fees which he wasn't too keen on. This is when the idea came to start Netflix, where he could offer people the chance to get movies online and ship them back to him at their convenience. This proved widely popular. According to Anderson (2005), "Netflix struck a chord with its next-day home delivery service, which allows consumers to rent up to three DVDs at a time for a single monthly payment with no late fees." (p. 42). This largely came in part to a hire that actually happened in 2000 for the company in Leslie Kilgore. Kilgore brought great customer loyalty experience with her from P&G and Amazon.com. In 2001, the company introduced online advertising finding this the most effective means to sign up new customers. "Research showed that people who spend a lot of time online usually own DVDs" (Anderson, 2005, p. 42). They had found a new marketing scheme to work with and during this time period also introduced their new, signature red envelope. This has set the tone for the company over the last five years.

Today, Netflix is much the same company as it started out to be. They are very customer focused and driven by what their customers want and ask for. Much like it has for Amazon.com, it has been a very effective way of driving the business and the company's income shows this. In an article found in the Wall Street Journal, Wingfield (2005) says the company "reported net income of $4.8 million, compared with net income of $2.3 million, in the year earlier period" (pg. B4). The company has also been able to push its number of subscribers up to over three million, and believes it will be at four million by years end. But now Netflix is not the only player in the game. Last year, both Wal-Mart and Blockbuster also entered the online DVD rental market. Since this time, Blockbuster has provided the fiercest competition, even to the point of creating problems within their own organization to try and take away the market share that Netflix currently owns. I recently read where Blockbuster had to make a lot of layoffs at their corporate headquarters in Dallas because of spending so much on their online business. Blockbuster currently has an advantage in price, but as the old saying goes, only the strong will survive.

When Netflix opened in 1999, they saw the same thing that Amazon.com did. They quickly realized that they could offer customers so much more because they weren't limited by a true brick and mortar store. A retail store can only be so big which means the merchandise you carry is limited to how much physical space you actually have. There subscriber base has continued to grow because of their aggressive marketing strategy and huge offering of titles. The company has expanded in my two years as a subscriber from 15,000 titles to nearly 40,000 titles. Currently there are about 43,000 titles on DVD, which means Netflix offers almost every title currently available on the DVD format. In comparison, Blockbuster has never stated how many titles exactly they offer, just that they have a wide selection for their customers. I cannot imagine any strategy around this other than they must not offer as many titles currently as Netflix and therefore do not want to sell themselves short.

Carrying the right titles and being able to deliver them in a timely manner are two huge factors which will win customers over, but a company has to have enough inventory to suit customer demands. While I am not, nor have ever been, a Blockbuster Online subscriber, I have friends who are and they enjoy the service. I sit back and relish in the fact that I have all the newest titles while they sit and look on their screen at their list of "Long Wait" titles. Blockbuster does not look to have the currently inventory levels they need, at least in my region, to meet the customer demands. They might not have found an easy outlet yet to get rid of their extra quantity of titles and as such, not wanted to order more than they will need later on. But if they can't meet the demands of their customers, they can't continue to stay in business for long.

While I don't know the current Netflix strategy on ordering just enough titles to meet customer demand, in the past they have used any outlet available to them such as Amazon.com, eBay, and Half.com to dispose of extra inventory that they might have once a new release's popularity dies down. Whatever strategy they have to ensure they have plenty of each title in stock, it keeps me happy.

Netflix can reach 90% of the country in one day compared to Blockbuster's 60%. This is because