Evolution Of Netflix

Presented by
M Srimanvitha
19831A05C9
III CSE C
Blockbuster Video

• Back then, Blockbuster video was an American-based company which

provide movie rental services and had several physical stores across US
• It was a billion Dollar Company with more than 6000 stores in US
• It had a revenue of 3.91 billion dollars
• Interestingly 16% of revenue came from Late fees
• One of the customers late fee was $40 and this has led to start a
company of his own
Netflix
• In the year 1997, Reed Hastings laid a
foundation to establish Netflix.
• Netflix started as a subscription based DVD in-
mail service.
• One just need to pay the monthly subscription
fee.
• While the blockbuster made millions of dollars
in terms of late fees, Netflix used this same
undesirable attribute to build a million dollar
company
• By 2004, Netflix had a revenue of 500M dollars
Competition
• In 2004,blockbuster realized the success of Netflix and
started their own DVD mail service.
• And it has added more than 2.1 million subscribers in
the 1st year.
• Since 90% of customers were at accessible distance
from a blockbuster store, they could have delivered
DVD’s within 2 hours while the same would take 2-3
days for Netflix but Blockbuster didn’t use it supply
chain well.
• By the year 2007 Netflix lost 55,000 subscribers
compared to previous quarter,while blockbuster’s
subscriber base continued its growth.
 Dip in Market price
• In 2007,Jp Morgan analyst Barton Corckett put out a statement saying
Netflix with more than 6.8 million subscribers, faces competition from
Blockbuster that is much tougher than originally expected.
• After this, the shares of Netflix dropped more than 5%.

Threat Analysis
• 2 Major Threats
• Blockbuster entered the DVD mail Service
• Identified a hidden competitor who is eating away profits of Netflix and
Blockbuster
Loss Leader Pricing Model
• Sell low cost-low margin product at a low
price to bait the customers to buy high cost-
high margin products.
• Walmart is giving away the DVD’s at a very
low price to entice the customers to come to
Walmart store and exposing them to buy
expensive products like play stations.
• So, Netflix’s core business was Walmart’s
bait.
Reactive Strategy by Netflix
• In 2007, Netflix ventured in online
streaming.
• Invested heavily into Data Analytics to build
a formidable personal recommendation
algorithm and used internet to distribute
content instantly and cost effectively.
• And blockbuster filed bankruptcy(200M +
200M dollars loss).
From 2007-2018 (gave out a return
of more than 10,000%)
 Present competitors for Netflix
• Again after 14 years, Netflix is facing huge competitions.
• Disney and HBO
• Netflix doesn’t want to rely only on the others content, so back in 2011 it
entered its third orbit.
• Netflix created its own web series named “House of Cards”.
• The only income source for Netflix is its customer’s subscription fees.
• Amazon Prime
• Loss leader pricing model.
THANK YOU