Carlos A Martinez
Jan 08, 2013
Inside the large video entertainment industry is Netflix Inc., which was founded in 1997. In 2008 the video rental and retail combined to make up $26.7 billion of Netflix’s market (Schneider, 2010). This market can be separated into a number of different groups DVD vending kiosk, online rental and sales, mail delivery services, and video demand services accessible through numerous devices (Schneider, 2010). Thanks to the advancements in technology the rental portion is dwindling down from physical DVDs to digital downloads. It is simply more convenient to use a video game console, DVD player, or Blu Ray Player to ...view middle of the document...
For example, in 2011 Netflix raised the price of DVD rentals by sixty percent (Stelter, 2011).
Netflix Inc. is can be clearly viewed as the primary leader in an oligopoly market. It differentiates itself from other markets since it is one of the only leaders in an industry that does not have much competition. Two of Netflix’s major competitors are Blockbuster and Comcast (Schneider, 2010). Due to the limited number of competitors, it can be easily determined that they are in an oligopoly market ("Oligopoly", 2013). Even though the competition is scarce and extremely limited, there is still competition, keeping it from being a sole monopoly ("Monopoly", 2013). Unlike a monopolistic competition market not all companies are profit maximizers ("Monopolistic Competition", 2013). It is undeniably not a perfect competition for its lack of competitors and lack of ability of being able to join the industry with ease.
Netflix took an advantage one of the major complaints of many consumers in the video industry. They realized how much revenue was being made by the charging of late fees. With the introduction of a simple monthly membership fee, it eliminated the charge of late fees ("How A Competitive Advantage Led Netflix To Dominate Their Market", 2012). This became a quick competitive edge over the rentals of DVDs. Another competitive decision was to take advantage of is the busy schedule of the average consumer. Next competitive edge is establishing convenience, which was done by beginning the mailing of DVDs straight to the consumer’s home ("How A Competitive Advantage Led Netflix To Dominate Their Market", 2012). Another leading jump could be in exclusive contracts. Receiving exclusive contracts with major companies can provide an edge the competitors can’t keep up with. For example they are currently taking the Disney contract from Starz ("Netflix, Disney Contract: Service Outbids Pay Tv For Rights To Stream New Films", 2012). With deals that are exclusive it provides a service and product that can only be found with their company.
Questioning the effectiveness of these strategies always comes into determining if these were sound decisions. The first strategy of taking advantage of the millions of upset consumers, who were angry over the billions spent on late fees. Establishing a monthly membership fee is a good way to get customers to be ecstatic about avoiding any late fees or day rental restrictions. In accordance with this membership, it provides an added convenience. No more worries about reaching the video store in time. No more worrying about how long a movie has been in possession. The proof of these successful strategies can be viewed on streets all over the nation. There used to be numerous video rental companies all over the nations, who have promptly been put out of...