Netflix's Competition, Then and Now
When it comes to Netflix, the story of market competition has an interesting twist. In the beginning, the company's primary competition was Blockbuster. In the 1990s, Blockbuster was the largest name in home video rental service in the U.S., with thousands of stores nationwide. By 2004, though, the Netflix brand was gaining popularity as DVD renters developed a growing interest in its rent-by-mail service. That year, Blockbuster launched its own rent-by-mail service called Total Access to complement its in-store service and hold on to the customers that Netflix had appealed to [sources: History.com, SeekingAlpha].
In the first quarter of 2007, Netflix reported that Blockbuster's new program had caused its growth to slow. However, some analysts suggested that Blockbuster's focus on following Netflix's rent-by-mail model would be its undoing. Those predictions proved correct. By 2009, Blockbuster had closed about half of its stores nationwide, with hundreds more to follow. Then, in 2010, Blockbuster filed for Chapter 11 bankruptcy protection [sources: SeekingAlpha, AP, McCarty, Sandler, and Kary].
Around the same time, another video rental model presented competition to both Netflix and Blockbuster. Redbox is a video rental service operated by Coinstar, a company known for its coin-counting vending machines often found in grocery stores. Like Coinstar, the Redbox service is provided through an automatic vending machine. Redbox launched its services nationwide in 2002, and by late 2011 it had more than 27,800 kiosks in grocery stores, drug stores and other retail establishments across the U.S. [sources: AP, Redbox, Redbox].
So, what's the twist in Netflix competition? With the introduction of online streaming content, that competition shifted dramatically. No longer were Blockbuster and Redbox the only threats, especially since Netflix was well-established as the market leader in the disc rental market. Potential threats to their market share also came in the form of online streaming services like Hulu.
When Netflix launched unlimited streaming in 2008, Hulu had nearly a year of experience in that market. The two companies had notably different markets, though: At the time, Netflix focused on movies by subscription only, and Hulu focused on television with both free and subscription-only content. Gradually, their content selections have overlapped, with many TV shows on DVD available commercial-free through Netflix. Also, other streaming services from Amazon and Time Warner have kept Netflix on alert for possible threats in the future [sources: Netflix, Hulu, Carr].
Throughout this article, we've looked at how Netflix recommendations work and how you can enjoy Netflix both through the mail and online. We've also examined some of Netflix's competition and how that's changed over its first 14 years. For even more information about Netflix, flick over to the next page.
- How DVDs Work
- How Blu-ray Discs Work
- How Hulu Works
- How the PlayStation Network Works
- How the Wii Works
- How Xbox Live Works
- How the U.S. Postal Service Works
- Top 5 Ways to Watch TV Online (Legally)
- 5 Technologies That Customize TV Viewing
- 10 Mobile Apps for Film Buffs
- 10 TV Technologies Making Movie Theaters Obsolete
More Great Links
- Agassi, Shai et al. "Methods and Systems for Providing Contextual Content." U.S. Patent 7127473.
- Associated Press. "Frequent Netflix Renters Sent to the Back of the Line." Via MSNBC. 2/10/2006 (4/30/2007) http://www.msnbc.msn.com/id/11262292/
- Netflix. "Consumer Press Kit." http://cdn-0.nflximg.com/us/pdf/Consumer_Press_Kit.pdf
- Better Business Bureau: Silicon Valley. "Netflix." http://www.bbbsilicon.org/commonreport.html?bid=206533&securitycode=
- Bylund, Anders. "Fool on Call: Netflix Punished for Planning Ahead." The Motley Fool. 4/23/2007 (4/30/2007) http://www.fool.com/investing/general/2007/04/23/ fool-on-call-netflix-punished-for-planning-ahead.aspx
- Calonje, Ligia S. et al. "Mailing and Response Envelope." U.S. Patent 6966484.
- Cohen, Allen. "Netflix: DVDs At Your Door." PC Magazine. 2/03 (4/30/2007) http://findarticles.com/p/articles/mi_zdpcm/is_200302/ai_ziff37297
- Cruise, Patrick. "Blockbuster's Online Focus is Killing its Competitive Advantage." SeekingAlpha. 4/17/2007 (4/30/2007) http://media.seekingalpha.com/article/32374
- Hastings, W. Reed et al. "Approach for Renting Items to Customers." U.S. Patent 7024381.
- Hastings, W. Reed et al. "Method and Apparatus for Renting Items" U.S. Patent 6584450.
- Hastings, Reed. "The Real Stars." Forbes. 5/7/2007 (4/30/2007) http://www.forbes.com/free_forbes/2007/0507/130.html? partner=yahoomag
- Leonhardt, David. "What Netflix Could Teach Hollywood." New York Times. 6/7/2006 (4/30/2007) http://www.nytimes.com/2006/06/07/technology/07leonhardt.html? ex=1307332800&en=f5560e6361bf4018&ei=5090
- McGregor, Jena. "High-tech Achiever: Netflix." FastCompany. 10/2007 (4/30/2007) http://www.fastcompany.com/magazine/99/open_customer-netflix.html
- Motley Fool. "What is Netflix's Greatest Threat?" 2/2/2005 (4/30/2007). http://www.fool.com/investing/high-growth/ 2005/02/02/what-is-netflixs-greatest-threat.aspx
- Mullaney, Timothy J. "Netflix: The Mail-order Movie House that Clobbered Blockbuster." BusinessWeek. 5/25/2006 (4/30/2007). http://www.businessweek.com/smallbiz/content/ may2006/sb20060525_268860.htm
- Netflix Shareholder Press Kit http://files.shareholder.com/downloads/NFLX/120021947x0x24776/ 1F1055CB-DCBB-475A-87CD-03F6091D4901/factsheet.pdf
- News8. "News8 Exclusive: Business Guards its Secrets of Success." 2/8/2006 (4/30/2007) http://www.cbs8.com/features/special_assignment/story.php?id=38163
- O'Brien, Jeffrey M. "The Netflix Effect." Wired. 12/2002 (4/30/2007) http://www.wired.com/wired/archive/10.12/netflix.html? pg=1&topic=&topic_set=
- Porter, Joshua. "The Freedom of Fast Iterations: How Netflix Designs a Winning Web Site." User Interface Engineering. 11/14/2006 (4/30/2007) http://www.uie.com/articles/fast_iterations/
- Wolff, Eric. "A Stranger in your Queue." New York Magazine. 2/20/2006 (4/30/2007) http://nymag.com/news/intelligencer/15961/