Netflix 's Plan for Online Rentals

Netflix is a video rental company whose primary business model is that of a subscription content service. Customers rent DVDs via the Internet delivered by mail or download movies directly from the Internet via streaming to their home PCs ("Media Center," n.d.). Customers select from several Netflix subscription plans offering varying numbers of DVDs/downloads per month and then choose the DVDs they want to watch next from an online database. The company's revenue model is that customers pay for subscriptions in order to obtain viewing privileges of a certain number of DVDs per month. Netflix is part of the video rental industry, which has changed substantially in recent years, in large part due to the advent of Netflix. Netflix's policy of not charging late fees was eventually adopted by Blockbuster as a move to regain competitive advantage. In addition, the contents of Blockbuster stores are changing because the bulk of their business is no longer selling DVD rentals, "Your average Blockbuster store...is becoming less of a movie rental venue these days. The store walls are covered in new releases by the bucketful, and the floor space in between holds about twenty chest-height display racks" with half of the space taken up by "video games, snack foods, and used discs for sale" (Bylund, 2006). Moreover, Blockbuster now offers an online video rental subscription service virtually identical to that of Netflix. Netflix has changed the face of the industry.

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er being shipped (Wilson, n.d.). The value proposition is that customers can create a list of DVDs online that they want to watch, have them delivered free virtually overnight, keep them as long as they want with no late fees, and return a movie to get a new movie from their list ("How It Works," n.d.). As the leader in its industry, Netflix is most certainly the industry's online bellwether. It has changed the industry and the way business is transacted in the industry by offering customers a better deal than they had before, thus forcing its competitors to do likewise, adding free delivery and a "no fees" rule. An industry that was largely physical store-based before has now become an online industry as well. In some cases, as with Blockbuster, it is both online and in-store. The Netflix model has never failed. Although Netflix has experimented briefly with additions to its model and abandoned them quickly, it never deviated from its basic model except to stop selling DVDs in addition to renting them, and this model has worked consistently. The potential risks and challenges that Netflix faces now concern competition from similar companies such as Blockbuster and the problems of a lagging economy. Blockb

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