In an article titled “Netflic Profit Surprises as Firm Gains Wider Audience”, author Claire Hoffman explores some reasons behind the TV-streaming comapany’s extraordinary success against competing companies, such as the now-declining Blockbuster.
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“Blockbuster entered the online DVD rental market last year with an aggressive marketing campaign. Online powerhouse Amazon.com Inc. has launched a similar service in England, which some analysts believe will lead to the launch of a similar U.S. operation. Netflix announced in May that it would take over the online rental operation of retailer Wal-Mart Stores Inc. after it was unable to make a significant dent in Netflix's business. Despite increased competition from Blockbuster, Netflix spent less than expected fending off the competition, which boosted earnings.”
This quote notes the aggressive competition that has arose in opposition to Netflix’s online domination. Both Blockbuster and Amazon.com have started offering similar services as Netflix, along with “aggressive marketing campaigns.” Despite this increase in the level of competition, Netflix has responded by simply continuing to provide the quality services that they do along with minimal reciprocation, allowing them to save money by not retaliating expensively against the two new competitors. Ironically, the seemingly threatening rise of Blockbuster and Amazon may have actually caused Netflix to become even more successful.
By the end of the year, he said, Netflix hopes to begin offering downloadable movies. In an effort to counter Blockbuster's campaign for a larger share of the market, Netflix reduced its subscription price. It also offered a new cut-rate program for $9.99 a month.
"It looks like the threat from Blockbuster is much more diminished than before," said Safa Rashtchy, a senior analyst at Piper Jaffray & Co. "Online retailers in general are more agile and in the long term can generally win against the offline companies."
This excerpt from the article highlights the main tactics Netflix is using to keep the upper hand over rising competition, like Blockbuster. By decreasing its subscription price and offering new, cheaper programs, Netflix is encouraging current subscribers to stay loyal as well as attracting new customers who are interested in the lower prices. Another interesting angle brought up in this article is one I had guessed to be a factor in my first blog post: the fact that Netflix is online in a fast-paced, technological world. Although Blockbuster had recently started offering online services, it had already been fatally branded as an exclusively mail-service company. Netflix, on the other hand, has become infamous for being the most popular online TV streaming service available, becoming nearly synonymous with the word “procrastination”. In today’s society dominated by technology and the constant need for convenience, any company without a strong foothold online is unlikely to survive.
I really liked the topic of this article because it is a topic I find interesting and relevant. I did notice that the Blockbuster near my town went out of business right around when Netflix started to become popular. I learned about a lot of tactics that Netflix is using to get ahead of Blockbuster, even though it doesn't seem to need to try that hard. I really agree with the idea that Netflix being online is a huge advantage to them. Most of my friends watch Netflix on their laptops, that is a convenience Blockbuster either doesn't offer or a convenience people don't realize Blockbuster offers. The layout of this article was easy to follow and easy to understand.
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