Exam 4: Netflix in Two Acts: the Making of an E-Commerce Giant and the Uncertain Future of Atoms to Bits

While it may be possible for rivals to match technology, the true exploitable resource created and leveraged through collaborative filtering technology is the data asset.

Why are streaming services considered more appealing to creative content creators than traditional TV? For producers, writers, and directors, the creative side feels less constrained. Netflix execs state, "If you give people a more creative format, then they can tell their stories better." With streaming, there's no need to plan cliff-hangers at the end of a program or even write for the standard time lengths, like the 22-minute standard for commercial sitcom television. "In the world of weekly serialized television you get fifty minutes of joy watching a show and then 10,000 minutes of waiting for the next one." With binge watching, users can keep track of more complex plot lines and series with many characters. It also removes standard episode length (like 22 minutes for commercial broadcast sitcoms). The kind of artistic creativity offered by streaming makes Netflix, as stated by the Hollywood Reporter, "one of the most attractive buyers of original programming in town."

Collaborative filtering is a classification of software that:

Netflix uses data to create tailored audience promotions.

One of the benefits of Netflix moving internationally is that any title licensed from the United States also comes with the right to stream the title worldwide, regardless of customer geography.

The high degree of customer satisfaction that Netflix enjoyed is tightly linked with the firm's sized-based advantages.

Relate your understanding of Netflix dominance in the DVD-by-mail business to what you learned in the Strategy and Technology chapter: what three resources for competitive advantage did Netflix create in this market that rivals Blockbuster and Walmart couldn't match?

How is scale important to Netflix streaming business?

Within the DVD-by-mail segment, Netflix remained bigger than both Wal-Mart and Blockbuster.

In context to Netflix, what are the scale advantages associated with streaming?

By going public, Netflix encountered competition from the large, established firms Wal-Mart and Blockbuster. What aspect of Netflix going public lured these firms into the market?

What solution has Netflix come up with to address the need to deliver content to customers' televisions?

_____ is a situation where two or more firms are both competitors and collaborators, or "frenemies."

Describe Netflix's streaming video business model.

Walmart and Blockbuster were well-known firms. Why weren't they able to leverage their brands to compete against Netflix?

Netflix competitors in streaming are small and mostly unprofitable.

Netflix offered its subscribers a selection of over one hundred thousand DVD-by-mail titles, while other video rental firms can only offer as much as three thousand. This presents a significant _____ for Netflix over its rivals.

Netflix's decision to unbundle the single fee for its $10 base service into two separate $8 plans for DVD-by-mail and streaming over the Internet proved to be a welcome surprise to most customers.

In exchange for a percentage of the DVD-by-mail subscription revenue for every disk sent out by Netflix, movie studios offer Netflix:

Even though Netflix is now mainly focused on digital distribution, it continues to offer the DVD-by-mail service in its base-price product.