MIS 301 Chapter Notes - Chapter 4: Walmart, Collaborative Filtering, Netflix

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Chapter 4: “Netflix: The Making of an E-Commerce Giant and the Uncertain Future of Atoms to Bits”
Atoms to bits: the idea that many media products are sold in containers for bits and as the Internet offers fast,
wireless delivery to TVs, music players, book readers, and other devices, the atoms of the containers are
no longer necessary
Physical inventory can be eliminated
Churn rate: the rate at which customers leave a product or service
When Wal Mart and Blockbuster launched its version of Netflix, churn rates were lower than 4%
(more than ever)
Cinematch: used to match content with customers
Asks subscribers to rate the movie, which is used to steer you towards titles preferred by people with
tastes that are most like yours
Uses collaborative filtering: a classification of software that monitors trends among customers and
uses the data to personalize an individual’s customer experience
Crowdsourcing: the act of taking a job traditionally performed by an employee to an undefined large group of
people, like an open call
Economies of scale: Netflix has scale advantages
Infrastructure = $300 million
More profitable with more customers
Internet companies are more scalable generally
Initial public stock offering (IPO): also known as going public; the first time a firm sells stock to the public
CEO his one strategic plan would be to stay private for 2-4 more years so that competitors would be
less quick to imitate the business model
Long tail: when a firm can make money by offering a near-limitless selection of less popular items
The “tail” refer to the demand for less popular items not offered by traditional stores
Pure play: a firm that focuses on a specific product, service or business model
Internet pure play: firm that only operates through the Internet
Example: Netflix is pure play with no store front
Software platform: Netflix built a software platform and makes it available to firms seeking to build Netflix
access into their devices (TVs, DVD players, and video game consoles)
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