Netflix Business Model Analysis Essay

Netflix is an online subscription-based DVD rental service that promises to connect their customers to the movies and television shows they have intercourse through means of sending discs through the mail or streaming them directly via the internet. For only $7.99 per month, Netflix offers their customers limitless access to their massive video program library (70,000 titles as of year-end 2006) and is able to deliver DVDs by mail to over 90% of their almost 7 million subscribers in only a single blood line day.There be many factors that go into how Netflix is able to generate profit with this business model. First and foremost, Netflix uses a subscription-based revenue model. This came about after adopting a more emergent business system to better adapt to feedback being provided by its customers. Netflix initially used a revenue model akin to that of the brick and mortar video rental stores with the thought that the convenience factor of having discs mailed directly to your home would exceed the inconvenience of having to wait the extra time it took to ship the discs. In 1999, Netflix shifted to the, more simplified, subscription-based model which, in turn, change magnitude the value proposition that Netflix was able to offer its customers.Another large consideration in generating profit is their partnerships with nearly all of the major movie studios that allows them to purchase DVDs at a reduced up-front price in return for a fee based on how often those discs are rented in a given time period. This, in conjunction with a good recommendation system that brings older titles to the principal of customers minds and the Netflix subsidiary company, Red Envelope Entertainment allows Netflix to house a larger library of titles for a lower cost than its competition while satisfying the sizable niche market of individuals who are interested in renting titles that they have missed or re-renting titles theyve already seen that most video stores could not.