Americans love the movies. All over the country people go to the opening night of big box-office hits; such as Spiderman, War of the Worlds, X-Men and Superman. These movies gross so much money, but what happens to those people that do not want to go to the crowded theaters? That is where Netflix comes in. Instead of going to the local movie theater or movie rental store, a person can now at the push of a button select a movie they want to watch and it will be delivered right to their front door. How convenient.
Netflix was started in 1998 by Reed Hastings after accruing a $40 fine in late fees from Blockbuster. “He began wondering why video stores don’t offer members unlimited access for a flat fee, like a health club” (Breslau and McGinn, 2005, p. 131). Initially, Reed was going to use VHS’s as the mailed product but then he switched to DVDs because it was the most current technology for movies. For a monthly fee around $17.99, consumers would be delivered an unlimited number of rented DVDs. Hastings, currently receives 100,000 new movies each day from studios to provide to the 3.2 million members. Altogether members can choose from 42 million discs.
With such a great idea, other companies have followed Hastings’s concept. Both Blockbuster and Wal-Mart decided they wanted a piece of the $5.7 million in profits that Netflix earned in 2005. Blockbuster and Wal-Mart executives have both started their own version of the DVD-mailing system because they could not compete with Hastings successful service. All of this competition between these large companies is due to what the authors call a battle between the “Forces of Control” and the “Forces of Freedom”. The Forces of Control are, “the cable and satellite companies, which offer 50 to 500 channels of content that’s chosen by network programmers” (Breslau and McGinn, 2005, p. 131). The Forces of Freedom are, “companies that include Netflix, TiVo, Apple, AOL and Yahoo. Together the freedom fighters offer something like 5 million channels via the Internet, giving consumers the ability to watch just about anything they’d like, whenever they’d like” (Breslau and McGinn, 2005, p. 131).
The problem for Netflix specifically, is the advances with the Internet. People can now at the push of a button, download an entire movie. Now, that’s speed. Hastings sees downloadable movies as a long-term threat and is starting to slowly move the company in that new direction. Currently, Hastings is trying to transform his company into an Internet content provider as opposed to a mail-order retailer. Regardless of the Internet changes he predicts that, “his snail-mail model will be around another 20 to 30 years, both because DVDs are very portable and convenient to customers and because movie studios want DVDs to last a long time because it’s such a revenue and profit driver” (Breslau and McGinn, 2005, p. 132).
Regardless of Hastings positive outlook, other professionals are skeptical of Netflix’s domination. Forrester Researcher analyst Ted Schadler believes that Netflix will not last five years, with the growing changes of the Internet. “Digital music sharing has driven worldwide music sales down 13 percent in the past six years, and video downloads could do the same to mail-order movies” (Breslau and McGinn, 2005, p. 132).
I personally have been a Netflix customer. At first the thrill of receiving as many DVDs as you could think of, was amazing. My sister and I would choose our top favorites and watch them. However, over time the excitement was lost. After awhile, the cost per month seemed expensive and we did not want to watch DVDs as often. I mean really how many movies on the weekend can you watch? We ended up stopping our service with Netflix after about 8 months, but it was fun while it lasted. With the possibilities of downloading a movie right at our fingertips, this does seem to raise awareness that Netflix will lose customers if they do not change with the times. According to the authors, Netflix is being proactive and thinking ahead. Netflix is working out a deal with TiVo, for personal movie recording.
It seems according to current news, that Netflix is losing customers in this ongoing battle to stay afloat. Michel Marriott of the New York Times, believes that Netflix is trying to keep customers by offering streaming video with a subscription. “This year, the DVD rental company Netflix began to take advantage of click-and-view streaming of full-length films and television episodes with a subscription service. “Push a tab ‘Watch Now’ and more than 3,000 television episodes and movies come up in 30 seconds or less,” said Steve Swasey, a Netflix spokesman. ‘There’s no downloading’” (Marriott, 2007, p.1).
However, although Netflix is constantly trying to keep up with tech-savvy consumers, they still are having difficulty staying on top. According to the Associated Press from the New York Times, Netflix is not having such a positive outlook for the future. Its stock plunged $2.36, or 12 percent on July 24, 2007. Netflix hoping to retain more of its current customers while enticing new subscribers, lowered monthly fees by $1 on its two most popular plans to match Blockbuster’s prices for comparable Internet-only services (Associated Press, 2007, p.1). Apparently the discounts were driven by Netflix’s trouble in signing new subscribers since last year. Despite profit decreases Hastings remains optimistic, “We are in a very competitive, large battle,” said Hastings. “But we feel like we are still in a great position” (Associated Press, 2007, p.1). As for now, Netflix is still a service that many subscribe to. However, Hastings needs to either make changes or embrace reality—for it seems that Blockbuster is taking back the lead.