Netflix in Two Acts The Making of an E commerce Giant and the Uncertain Future of Atoms to Bits 11 29 2012 Initial public stock offering first sale of a company s stock to the public With the release of stock Netflix had to release information about their system They financial disclosure rules forced Netflix to reveal how profitable it was which caused many companies to get into the business pure play a company that focuses on a specific product service or business model Internet pure play no physical store but has an overall customer base Netflix raised prices because they were exceeding in the niche market At first they were doing well until people started breaking into the market with substitutes and they were forced to cut prices However these other markets did not last Walmart blockbuster while Netflix held customers and grew bigger How netflix works Pay for a monthly fee for DVD by mail service No late fees prepaid postage Netflix gives studios a percentage of the subscription revenue each time their movie is rented netflix doesn t spend as much money because doesn t have stores only one two large warehouses which they ship everything out of each quarter roughly 95 of their titles are viewed long tail firms can make money by selling a near limitless selection of less popular products tail demand for less popular items that aren t offered by traditional brick and mortar shops this works for netflix because it is the same amount of money to ship popular movies as foreign weird ones o studios earn a percentage of subscription revenue o Netflixs gets DVDs at a very low cost o Studios do not spend on additional marketing collaborative filtering a classification of software that monitors trends among customers and uses this data to personalize an individual customer s experience Ex bestseller list Netflix in Two Acts The Making of an E commerce Giant and the Uncertain Future of Atoms to Bits 11 29 2012 Webblogs Facebook likes Top 40 music list Netflix uses Cinematch their own program Monitors trends among customers Uses data to personalize an individual customer s experience Can be mimicked by competitors o Netflix sends each customer a survey after they rent the movie to see what they liked and what they didn t so they can recommend future movies Churn rate the rate at which customers leave a product or service netflix takes about 1 day to deliver the movies and sends an email to the customer saying when they ve received their old one service every warehouse worker gets a netflix subscription to understand how the company works blockbuster has lost money consistently since netflix opened for business in april 2011 they were forced to declare bankruptcy Netflix is going to start streaming bits to eliminate the cost of postage o However the First Sale Doctrine prevents Netflix from offering unlimited streaming without getting a separate license o Many firms do not want to give rights to Netflix to stream because they have their own personal streaming system Windowing products are offered for a specified time window only and then switched to other kind of product ex movie to DVD Netflix offers apps on ipads and tvs to allow customers to stream movies Facebook has begun to experiment with video streaming working with Warner Brothers to stream The Dark Knight for a fee of thirty Facebook credits And the networks and content providers also have their own offerings many stream content on their own Web sites Comcast and Verizon have apps that stream content to phones PCs and tablets and Hulu is a joint venture backed by NBC Fox and other networks Netflix in Two Acts The Making of an E commerce Giant and the Uncertain Future of Atoms to Bits 11 29 2012 Bandwith caps put a limit on customer s monthly consumption of internet use
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