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Lecture 18

SMG SI 422 Lecture Notes - Lecture 18: Video On Demand, Netflix, Late Fee

Strategy & Innovation
Course Code
SMG SI 422
John Kirks

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Carmen Zheng
Prof. Kirks
Class 18 - Netflix
1. Why you have been long or short Blockbuster stock at the time of the case? Why? What about
Netflix? Why?
I would short Blockbuster stock at the time of the case because of how Blockbuster ignored the threat of
Netfli ad did’t akoledge the util the grew much bigger. Then, they had to race and launch a
business model similar to Netflix. I would long Netflix because Netflix entered the market when the
Internet emerged. They started anticipated what the customers would want instead of what they
needed now. They had already been developing VOD technology when other companies started using
2. Did Netflix do the same jobs for consumers that Blockbuster did? How did this evolve over
Although they both provided movies and shows for consumers to watch, they did it very differently.
Blockbuster had retails locations where consumers would be able to come and rent out popular movies
whereas in Netflix, you had a subscription that would mail DVDs to your home and you were able hold
up to three movies at a time.
Netflix had initially did pricing the same way traditional video stores did, $4 per movie plus a $2 shipping
harge ad the had a due date ad if it as’t retur  that tie, they would incur a late fee. Netflix
later offered unlimited movies, holding up to 4 at a time, for a lower price. They achieved that by buying
older movies that were cheaper and created a recommended system that recommended those old
Blockbuster went online as well but a couple years later. They tried to match what Netflix did and better
ut it ade the suffer through huge operatig osts ad it as’t ade up i reeue. Netfli said if
they came 4 years early, Netflix might not have survived
3. As ou eaie eah ajor shift i Netfli’s strateg, hat ight hae ee a assuptios
checklist that they might have used at each stage? What assumptions checklist might you use
for Video on Demand?
An assumption checklist they might have done at each stage would be to determine that they were a
type of disruptive technology. They were anticipating what the customer needed as opposed to wanted.
They increased their targeted characteristics of convenience, value, and selection. I would use the same
checklist for Video on Demand.
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