CASE STUDY ON NETFLIX
Netflix was founded on August 29, 1997, in Scotts Valley, California when their founders Marc
Randolph and Reed Hastings came up with the idea of starting the service of offering online movie
rentals. The company began its operations of rental stores with only 30 employees and 925 titles
available, which was almost the entire catalogue of DVDs in print at the time, through the pay-perrent model with rates and due dates. Rentals were around $4 plus a $2 postage charge. After
significant growth, Netflix decided to switch to a subscriber-based model.
In 2000, Netflix introduced a personalized movie recommendation system. In this system, a userbased rating helps to accurately predict choices for Netflix members. By 2005, the number of
Netflix subscribers rose to 4.2 million. On October 1, 2006, Netflix offered a $1,000,000 prize to
the first developer of a video-recommendation algorithm that could beat its existing algorithm Cine
match, at predicting customer ratings by more than 10%.
By 2007 the company decided to move away from its original core business model of DVDs by
introducing video on demand via the internet. As a part of the internet streaming strategy, they
decided to stream their content on Xbox 360, Blu-Ray disc players and TV set-top boxes. The
ventures also partnered with these companies to online streaming their content. With the
introduction of the services in Canada in 2010, Netflix also made their services available on the
range of Apple products, Nintendo Wii and other internet-connected devices.
In 2013, Netflix won three Primetime Emmy Awards for its series “House of Cards. By 2014,
Netflix made itself available into 6 countries in Europe and won 7 creative Emmy Awards for
“House of Cards” and “Orange Is the New Black”. With blooming streaming services, Netflix
gathered over 50 million members globally. By 2016, Netflix was accessible worldwide, and the
company has continued to create more original content while pressing to grow its membership.
From this point, Netflix was unstoppable and today it has a worldwide presence in the video-ondemand industry.
Questions to answer:
1. According to the text, based on the characteristics we discussed what exactly is the market
structure of this firm?
2. How has Netflix grown its business?
3. What does it tell us about the e-commerce generally?
4. Are there any barriers to enter in this market? Or they are creating barriers to be a
monopolist?
5. Learning outcome from the Netflix way of doing business?