netflix pricing decision 2011 case study

But as it encountered challenges it underwent several major strategy shifts, ultimately developing a business model and an operational strategy that were highly disruptive to retail video rental chains. Reed Hastings founded Netflix to provide a home movie service that would do a better job satisfying customers than the traditional retail rental model.

Hastings' efforts to separate the activity into two separate companies met with strong pushback from consumers and the press. But a new challenge was on the horizon - the rapid growth of the company's online streaming service, which had a very different business model. Aggressive pricing pulled in subscribers, but at a price to both it and Netflix. Blockbuster, the nation's largest retail video rental firm, was initially slow to respond, but ultimately rolled out a hybrid retail/online response in the form of Blockbuster Online. The combination of a large national inventory, a recommendation system that drove viewership across a broad catalog, and a large customer base made Netflix a force to be reckoned with, especially as a distribution channel for lower-profile and independent films.

Netflix pricing decision 2011 case study