Netflix is an online subscription-based DVD rental service that promises to connect their customers to the movies and television shows they love through means of sending discs through the mail or streaming them directly via the internet. For only $7.99 per month, Netflix offers their customers unlimited access to their massive video library (>70, 000 headings as of year-end 2006) and it is able to deliver DVD’s by mail to 90% with their nearly 7 million members in only just one business day.
There are plenty of factors that go into just how Netflix is able to generate profit with this business model. First and foremost, Netflix utilizes a subscription-based earnings model. This came about following adopting a more emergent organization strategy to better adapt to feedback being given by its consumers.
Netflix in the beginning used a revenue version similar to regarding the local video rental stores with the thought that the convenience factor of having discs mailed directly to your house would surpass the trouble of having to wait the extra time it took to ship the discs. In 1999, Netflix altered to the, even more simplified, subscription-based model which usually, in turn, improved the value proposition that Netflix was able to give its clients. Another large consideration in generating earnings is their partnerships with nearly all of the main movie broadcasters that allows those to purchase DVD’s at a lower up-front price in return for fees based on how generally those dvds are rented in a given time period.
This kind of, in conjunction with a good recommendation program that brings older headings to the front of customer’s minds as well as the Netflix subsidiary company, Red Envelope Entertainment allows Netflix to house a more substantial library of titles for a lower cost than its competition whilst satisfying the sizable niche market of individuals who have are interested in letting titles they may have missed or perhaps re-renting games they’ve currently seen that most video stores could not.