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    Netflix - S Channel Innovation

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    Doan Pham
    This document summarizes Netflix's innovative approach to digital distribution and how it has evolved over time. It discusses how Netflix disrupted Blockbuster's dominance with its DVD-by-mail service, then its launch of digital streaming. While Netflix's abrupt split of DVD and streaming services upset customers, the company recovered and continues innovating through expanding device availability and original content production to stay ahead of growing competition in video distribution. The future will rely more on content and Netflix currently leads but must keep innovating to maintain its edge.

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    © All Rights Reserved
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    Netflix - S Channel Innovation

    Uploaded by

    Doan Pham
    36 views2 pages
    This document summarizes Netflix's innovative approach to digital distribution and how it has evolved over time. It discusses how Netflix disrupted Blockbuster's dominance with its DVD-by-mail service, then its launch of digital streaming. While Netflix's abrupt split of DVD and streaming services upset customers, the company recovered and continues innovating through expanding device availability and original content production to stay ahead of growing competition in video distribution. The future will rely more on content and Netflix currently leads but must keep innovating to maintain its edge.

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    This is a PDF file about Netflix case, in Principle of Marketing course

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    Netflix_s Channel Innovation

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    This document summarizes Netflix's innovative approach to digital distribution and how it has evolved over time. It discusses how Netflix disrupted Blockbuster's dominance with its DVD-by-mail service, then its launch of digital streaming. While Netflix's abrupt split of DVD and streaming services upset customers, the company recovered and continues innovating through expanding device availability and original content production to stay ahead of growing competition in video distribution. The future will rely more on content and Netflix currently leads but must keep innovating to maintain its edge.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views2 pages

    Netflix - S Channel Innovation

    Uploaded by

    Doan Pham
    This document summarizes Netflix's innovative approach to digital distribution and how it has evolved over time. It discusses how Netflix disrupted Blockbuster's dominance with its DVD-by-mail service, then its launch of digital streaming. While Netflix's abrupt split of DVD and streaming services upset customers, the company recovered and continues innovating through expanding device availability and original content production to stay ahead of growing competition in video distribution. The future will rely more on content and Netflix currently leads but must keep innovating to maintain its edge.

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    You are on page 1of 2

    Part 1: Defining Marketing and the Marketing Process (Chapters 1–2)

    Part 2: Understanding the Marketplace and Consumers (Chapters 3–6)


    Part 3: Designing a Customer-Driven Strategy and Mix (Chapters 7–17)
    Part 4: Extending Marketing (Chapters 18–20)

    Marketing Channels
    12 Delivering Customer Value

    We now arrive at the third logistics—an area that is growing dramatically in importance and
    Chapter Preview marketing mix tool—distribution. sophistication. In the next chapter, we’ll look more closely at two
    Companies rarely work alone in creating value for customers and major channel intermediaries: retailers and wholesalers.
    building profitable customer relationships. Instead, most are only a We start by looking at Netflix. Though innovative distribution,
    single link in a larger supply chain and marketing channel. As such, Netflix has become the world’s largest video subscription service.
    a firm’s success depends not only on how well it performs but also But as baseball great Yogi Berra, known more for his mangled
    on how well its entire marketing channel competes with competi- phrasing than for his baseball prowess, once said, “The future
    tors’ channels. The first part of this chapter explores the nature of ain’t what it used to be.” To stay atop the churning video distribu-
    marketing channels and the marketer’s channel design and man- tion industry, Netflix must continue to innovate at a break-neck
    agement decisions. We then examine physical distribution—or pace or risk being pushed aside.

    Netflix’s Channel Innovation: Finding the Future by Abandoning the Past


    ime and again, Netflix has innovated its way to the top video distribution business. In only the past few years, a growing

    T in the distribution of video entertainment. In the early


    2000s, Netflix’s revolutionary DVD-by-mail service
    put all but the most powerful movie-rental stores out
    of business. In 2007, Netflix’s then ground-breaking move into
    digital streaming once again revolutionized how people accessed
    glut of video access options has materialized. At the same time that
    Netflix ascended and Blockbuster plunged, Coinstar’s Redbox
    came out of nowhere to build a novel national network of $1-a-day
    DVD-rental kiosks. Then high-tech start-ups such as Hulu—with
    its high-quality, ad-supported free access to movies and current
    movies and other video content. Now, with Netflix leading the TV shows—began pushing digital streaming via the Internet.
    pack, video distribution has become a boiling, roiling pot of All along the way, Netflix has acted boldly to stay ahead
    emerging technologies and high-tech competitors, one that offers of the competition. For example, in 2007 rather than sitting on
    both mind-bending opportunities and stomach-churning risks. the success of its still-hot DVD-by-mail business, Netflix and its
    Just ask Blockbuster. Only a few years ago, the giant brick- CEO, Reed Hastings, set their sights on a then-revolutionary
    and-mortar movie-rental chain flat-out owned the industry. Then new video distribution model: Deliver the Netflix service to
    along came Netflix, the fledgling DVD-by-mail service. First every Internet-connected screen, from laptops to Internet-ready
    thousands then millions of subscribers were drawn to Netflix’s TVs to mobile phones and other Wi-Fi-enabled devices. Netflix
    innovative distribution model—no more trips to the video
    store, no more late fees, and a selection of more
    than 100,000 titles that dwarfed anything
    Blockbuster could offer. Even better, Time and again, Netflix has innovated
    Netflix’s $5-a-month subscription its way to the top in the distribution
    rate cost little more than renting a of video entertainment. But to stay atop its boiling,
    single video from Blockbuster. In
    2010, as Netflix surged, once-mighty
    roiling industry, Netflix must keep the innovation
    Blockbuster fell into bankruptcy. pedal to the metal.
    The Blockbuster riches-to-rags story
    underscores the turmoil that typifies today’s
    Chapter 12 | Marketing Channels: Delivering Customer Value 361

    began by launching its Watch In


    stantly service, which let Netfl ix
    members stream movies instantly
    to their computers as part of their
    monthly membership fee, even if it
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    booming DVD business.
    Although Netfl ix didn’t pio
    neer digital streaming, it poured
    resources into improving the tech
    nology and building the largest
    streaming library. It built a customer
    base of nearly 25 million subscrib
    ers, and sales and profi ts soared.
    With its massive physical DVD li
    brary and a streaming library of
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    movies accessible via 200 different
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    that nothing could stop Netfl ix.
    But Netflix’s stunning success
    drew a slew of resourceful competitors. In 2010, video giants such Prime members at no additional Netfl ix’s innovative
    as Google’s YouTube and Apple’s iTunes began renting movie cost. Google recently moved be distribution strategy:
    EPXOMPBETBOE)VMVJOUSPEVDFETVCTDSJQUJPOCBTFE)VMV1MVT yond its YouTube rental service Netfl ix and its CEO,
    5PTUBZBIFBE FWFOUPTVSWJWF /FUáJYOFFEFEUPLFFQUIFJOOP XJUI (PPHMF 1MBZ  BO BMMNFEJB Reed Hastings, are bent
    vation pedal to the metal. So in the summer of 2011, in an ambi entertainment portal for movies, on speeding up the
    UJPVTCVUSJTLZNPWF $&0)BTUJOHTNBEFBOBMMJOCFUPOEJHJUBM NVTJD FCPPLT BOEBQQT$PNDBTU company’s leap from
    TUSFBNJOH)FTQMJUPGG/FUáJYTTUJMMUISJWJOH%7%CZNBJMTFS has joined forces with Verizon to success in DVD rentals
    WJDFJOUPBTFQBSBUFCVTJOFTTOBNFE2XJLTUFSBOESFRVJSFETFQB launch Xfi nity Streampix, which to success in digital
    rate subscriptions for DVD rentals and streaming (at a startling offers subscribers streaming ac streaming. What’s next?
    60 percent price increase for customers using both). The Netflix cess to older movies and television REUTERS/Mike Cassese
    name would now stand for nothing but digital streaming, which programs via their TVs or mobile
    would be the primary focus of the company’s future growth. devices. Apple and Samsung are creating smoother integration
    Although perhaps visionary, Netfl ix’s abrupt changes with streaming content via smart TVs. And Hulu is considering
    EJEOUTJUXFMMXJUIDVTUPNFST5FOTPGUIPVTBOETTQPLFPVUBO the launch of a virtual cable service, which would offer online
    HSJMZPO8FCTJUFTBOETPDJBMOFUXPSLT BOETPNF TVC BDDFTT UP QBDLBHFT PG 57 DIBOOFMT TJNJMBS UP UIPTF GSPN DBCMF
    TDSJCFST ESPQQFE UIF TFSWJDF /FUáJYT TUPDL QSJDF QMVNNFUFE operators but at a lower price.
    CZ BMNPTU UXPUIJSET 5P SFQBJS UIF EBNBHF  /FUáJY RVJDLMZ Moving ahead, as the industry settles into streaming as the
    admitted its blunder and reversed its decision to set up a sepa NBJOEFMJWFSZNPEFM DPOUFOU‡OPUKVTUEFMJWFSZ‡XJMMCFBLFZUP
    SBUF 2XJLTUFS PQFSBUJPO i5IFSF JT B EJGGFSFODF CFUXFFO NPW EJTUBODJOH/FUáJYGSPNUIFSFTUPGQBDL(JWFOJUTIFBETUBSU /FU
    JOHRVJDLMZ‡XIJDI/FUáJYIBTEPOFWFSZXFMMGPSZFBST‡BOE flix remains well ahead in the content race. Amazon and Hulu
    moving too fast, which is what we did in this case,” Hastings Plus currently have only a fraction of Netflix’s offerings, and
    DPOGFTTFE )PXFWFS  EFTQJUF UIF TFUCBDL  /FUáJY SFUBJOFE JUT Netflix captures 10 times the total viewing hours of either com
    separate, higher pricing for DVDs by mail. QFUJUPS#VUBTDPOUFOUMJDFOTJOHEFBMTXJUINPWJFBOEUFMFWJTJPO
    *O UIF BGUFSNBUI PG UIF 2XJLTUFS CMVOEFS  /FUáJY TPPO studios become harder to get, in yet another innovative video
    replaced almost all of its lost subscribers. What’s more, with a distribution twist, Netflix and its competitors are now starting to
    60 percent higher price on roughly the same number of custom develop their own original programming. For example, Netflix
    ers, revenues jumped a whopping 47 percent year over year. SFDFOUMZTIPDLFEUIFNFEJBJOEVTUSZCZDPNNJUUJOHNJMMJPO
    Given Netfl ix’s fast recovery, now more than ever, Hastings for exclusive rights to air House of Cards, a brand new series pro
    seems bent on speeding up the company’s leap from success duced by Hollywood bigwigs David Fincher and Kevin Spacey.
    in DVDs to success in streaming. “I’m moving ahead step by Thus, from DVDs by mail, to Watch Instantly, to video
    step, despite the foot with the bullet hole,” he says. Although streaming on almost any device, to developing original content,
    DVTUPNFSTDBOTUJMMBDDFTT/FUáJYTXPSMETCJHHFTU%7%MJCSBSZ  /FUáJYIBTTUBZFEBIFBEPGUIFIPXMJOHQBDLCZEPJOHXIBUJU
    the company’s promotions and Web site barely mention that op does best—innovate and revolutionize distribution. What’s next?
    tion. The focus is now squarely on streaming video. /P POF SFBMMZ LOPXT #VU POF UIJOH TFFNT DFSUBJO 8IBUFWFST
    %FTQJUF JUT DPOUJOVJOH TVDDFTT  /FUáJY LOPXT UIBU JU DBOU DPNJOH JG/FUáJYEPFTOUMFBEUIFDIBOHF JUSJTLTCFJOHMFGUCF
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    at a blurring rate. For example, Amazon has begun its own grow old in a hurry. To stay ahead, as one headline suggests,
    TUSFBNJOHWJEFP TVCTDSJQUJPO TFSWJDF  BWBJMBCMF UP "NB[PO Netflix must “find its future by abandoning its past.”1

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