Home | Business News | Browse by Publication | V | VMS3.info

Netflix Analysis via the Value Framework(tm).

Article Excerpt
Excerpted from the May 2002 issue of VMS3.info (http://vms3.info)

Summary

Netflix, a pioneer in Internet DVD rentals, used a clearly defined strategy to achieve its goal to be the largest DVD rental company in the U.S.A. This was accomplished with three key initiatives:

1. Building a robust Web architecture that supported the ideal selection and fulfillment experience of discerning Internet patrons

2. Developing key business alliances with content providers in film and television sectors, and with merchandisers of DVD hardware

3. Leveraging best practice skills in direct and database marketing, and creating a fluid means to blend discovery processes with transaction models into transparent cross-sell and up-sale strategies

Netflix began its quest by blending the consumer's desire to gain access to first run movie content without the traditional 9 to 12 month delay into traditional rental sectors, specifically by building alliances with major film producers. Netflix would offer its subscribers access to first run movies in 90 days, edging out traditional rental brands, and Blockbuster in particular. Using the same strategy, Netflix cut a key deal with HBO to merchandize the most popular seasonal entertainment in DVD format, splitting the additional revenues with producers. Both these deals extended the participant chain in the PTP value framework from original producer to end user, capturing the purchase interest while the affinity for the entertainment was the highest.

Another significant move was to strategically time the extension of its brand from film to precut CD-ROM and DVD-ROM music, blending a Napster-like discovery of music content with high fidelity and legal ownership. Even more significant was Netflix timing its alliance with broadband provider AOL-Time Warner to integrate its own customer base with other users of hybrid digital and DVD formats that were being targeted by AOL. This deal leveraged the Netflix expertise for proprietary predictive data mining technologies in entertainment. Extending movie and music labels into the household through hybrid physical and digital media caused explosive growth in profits by extending revenues into value added archival media.

Not surprisingly, Netflix recognized the opportunity of smaller artists to self-publish in DVDR format, leveraging the heuristic search engine technology that recognized musical patterns in database formats. Netflix extended their competency one last step by creating a publishing format for "books on disk" using natural text to speech technology. More critical was their ability to condense full length news print material to snippets using RDF technology, delivering business and technology news content in condensed formats, again not only through its weekly subscription model, but also in hybrid digital / DVD delivery format.

The process of building brand, technology, and user base was carefully if not cautiously timed, as the lessons of over zealous Internet mergers, such as, Excite@home and AT&T, were rushed well ahead of user awareness and market development. Netflix became recognized as a leader in pioneering personalized content delivery by building on household brand recognition and trust. This was the...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!