Netflix has been able to enjoy a performance that is counter to the trend of markets overall. The company’s stock is trading near a 12-month high, and business is good at Netflix with more than 10,000,000 subscribers. Its mail order DVD rental business changed behavior for consuming home entertainment. Now, Netflix is looking to innovate further as video streaming capabilities via the Internet improve.
Netflix plans to offer a monthly rate for customers who download movies exclusively and do not use the mail order service. The plan, to be launched in 2010, builds on a behavior shift of many Netflix users who are downloading movies already. The streaming-only plan is also an acknowledgment that mail order DVD is a business model that will become obsolete at some point. By being at the forefront of video download services, Netflix is striving to insure it is a player in that market.
Netflix CEO Reed Hastings compares the situation with what AOL has encountered in recent years. AOL dominated the dial-up Internet Service Provider market, but when broadband connections became available to a majority of the population it was irrelevant as an ISP. AOL has fought to survive by reinventing itself as a content provider, not a connection point. Netflix has learned from AOL’s downfall, and it is a lesson that all businesses should heed. Change will come, maybe it is driven by technology, maybe it is driven by the economy, or perhaps it is driven by customers. But, change will come. Innovating to anticipate future market demands is a must, just ask AOL.
Link: Bloomberg.com – “Netflix Chief Sees Streaming-Only Pricing by 2010”
