Remember when people used to make it a Blockbuster night, and the lines at your local video store snaked all the way back through the foreign film section? Chances are, if you’ve visited a video store lately, it’s been a lot less populated. In fact, according to a recent Knowledge@Wharton article, Blockbuster plans to close 40 percent of its stores over the next two years to focus on its digital rental service.
The culprit behind Blockbuster’s woes, not to mention the closing of many a beloved mom-and-pop video store, is Netflix, the subscription-based DVD rental service that delivers movies to our mailboxes in ubiquitous red envelopes. In “Netflix: One Eye on the Present and Another on the Future,” the Wharton community weighs in on the company’s past and present successes and the challenges it faces from competitors such as iTunes and digital streaming channels like Hulu.
No matter how Netflix fares in the future, the article points to a few keys to its successes so far that are worth studying, no matter what line of business you’re in.
- 1. Don’t rest on present success: Though Netflix built its empire on physical DVD delivery, it has begun promoting titles subscribers can watch instantly from their computers or through devices like the Xbox video game console. According to Kendall Whitehouse, director of new media at Wharton, “Netflix is positioned nicely for when the digital transition comes. It can exploit the current model [distributing physical discs] now and hedge against future technology changes with its Watch Instantly service.”
- 2. Stay ahead of the curve: According to Wharton marketing professor Jehoshua Eliashberg, “Netflix should be commended for moving fast to seize opportunities and technological trends.”
- 3. Build a community out of customers and give them benefits: The subscription model has helped Netflix build a steady base of customers, and Netflix has made sure to keep its community happy by offering around 100,000 movie titles and services such as movie recommendations based on a user’s rental history.
- 4. Hold promotions. Big ones: Netflix gained a deal of good publicity with its $1 million contest asking participants to improve the accuracy of its recommendation system. When a team took that prize in September, Netflix launched another $1 million contest to better predict movie enjoyment by users who rarely rate what they have watched. An added bonus to the publicity: it shows users Netflix’s commitment to serving its community.
Image courtesy of Netflix, Inc.
