Netflix case answers

1. Would you buy Blockbuster stock or short it at the time of the case? How about Netflix? Why?

我們認為應該持有的是Netflix的股票，除了Netflix的股價優於Blockbuster之外，Netflix對於潛在競爭與挑戰也懂得防患於未然，對於線上下載影片以及VOD都有他們的規劃和籌備，而Blockbuster晚了許多年才進入線上租賃DVD的市場，用了大量的成本在廣告以及降低費用來吸引消費者，但它的資料庫卻始終比不上Netflix的完整，加上尚有龐大的店面以及人事費用，使得Blockbuster仍處於虧損的狀態，他們所推出的策略是total access，想要朝多方發展，這樣可能導致成本過高並且無法專注在自己的強項上，而Netflix本身就是從網路上起家，因此對於通訊這部份的掌握有比較大的優勢，他們隨著趨勢修正自己的方向，在自己熟悉的領域發展，而非在每個方式都想要分一杯羹。

2. Did Netflix offer same value for consumer that Blockbuster did? How did this evolve over time?

In the beginning, Netflix did offer the same value for customers as Blockbuster did. For example, both of their pricing strategies were counted based on per DVD a customer rented and they both asked customers to pay the "late fee". Furthermore, both of them provided excellent acquisition way for customers such as Blockbuster management proclaimed many times “70% of the U.S. population lives within a 10 minute drive of a Blockbuster,” or the convenience for customers ordering movies from internet and getting the movies within one day by Netflix.
These two factors were the same before the DVD market had changed. Netflix started to modify its strategies. First, it changed its paying approach by “all you can eat” way in order to control the inventory volume and cancel the “late fee” to attract more consumers. Second, it set up a online movie library which has many functions such as customers can get some recommendations of other movies from other customers whose favor for movies are similar, or customer can build up their own movie queue(it means when a customer finished one movie, Netflix will send the next to him or her immediately.).

3. Compare Blockbuster’s and Netflix’s profit models. How might the differences affect the respective company’s stratefies?

Netflix's profit model is like "all you can eat" way without “late fee”, you can prepay for renting DVDs and hold 3 titles for a month, and when you want to rent another one just send them back to Netflix in change of another 3 titles. As to Blockbuster, its profit model is based on units that customers rent but later it changed its pricing approach similar to Netflix with a differenct policy that if a customers doesn't returne DVDs on time it would think he or she purchases DVDs.

On the aspect of Netflix, it have control their inventory system to meet both the consumers’ need and the purchasing budget, it also set up a recommendation network which will recommend customers movies in stock, and Netflix promote less-famous movie in order to attract the “tail.”

As to Blockbuster, it have to expand their branches in order to lift their market share and with “late fee” to make customers return DVDs more quickly. By the time Blockbuster realized the power of internet, it was a little bit late for them because after they found an online movie renting platform, they can’t beat Netflix due to the special service Netflix provided. Blockbuster suffered a huge loss but they can’t neither close their branches nor close the online platform.

4. n s you examine each major shift in Netflix’s strategy, what might have been an assumptions checklist that they might have used at each stage? What assumptions checklist might you use for VOD?

１.從有late fees到取消並且配合每個月「看到飽」的月費制。
傳統的影片出租店之所以要有到期日的限制是因為每部片庫存的支數有限，如果沒有到期日的約束，影片的流動率就會大大下降。Netflix在創立初期的模式和傳統影片出租店的差異就只在於改成線上出租並且郵寄到家的模式，市場並沒有預期中的熱烈，若選擇有到期日的限制，他們消費者反而必須負擔郵寄所需要的天數、費用和不確定性，在這些考量之下，Netflix決定取消到期日的限制。為了配合此項策略，Netflix也將收費方式改為「看到飽」的月費制，這樣做的原因有下列幾點：第一，會員會有儘早還片的誘因；第二，即使會員久久未歸還片子，由於該會員能租的片數也相對減少，因此Netflix也可省下郵寄影片的成本；第三，取消到期日以及沒有逾期罰金更是行銷與打擊競爭對手的利器，例如Blockbuster為了抵抗Netflix的攻勢，只得在2005年宣布跟進取消到期日的限制，而以客戶若超過一定時間未歸還片子視同願意購買該片的規定取代之。

２.由請part-time員工來寫推薦片單到客製化個人影片清單。
請員工來寫推薦片單無法符合每個顧客的喜好，於是Netflix開發出一套系統讓顧客可以編輯自己的影片清單（等候單），Netflix認為租片的顧客通常對想租的片子早有計畫，因此讓顧客自行編輯租片的順序清單，然後只要顧客一歸還影片，Netflix就會按照順序自動寄出下一部影片。這項功能看似平常，但功效卓著，因為顧客只要現在編輯好清單，在未來想租片的時候就不用連到Netflix網站去選擇現在其實已經確定想看的片子，如此自然可以帶來省事、省時的好處；此外，自動寄出下一部在清單上的影片也可以減少顧客的等待時間，使得顧客家中一直都有影片可看，顧客也不會因為等太久而改到傳統的影片出租店借片子；不過對於Netflix來說，最重要的還是藉以取得顧客喜好的資訊，透過這些資訊，Netflix依照顧客的喜好來編推薦片單給消費者，比起只是請part-time員工來寫影評推薦，這樣的作法更能貼近消費者本身的需求，如果在這樣的方式下去推薦較不賣座的影片消費者也會比較容易去採納。使用個人化影片清單還有個好處，Netflix可以估算每部影片所需購買的份數、每個配送中心所需的份數，這對後端的存貨管理以及顧客資料探勘都將有極大的助益。

３.VOD
　　Netflix所開創的線上租賃DVD的形式雖然受大眾的喜愛，然而這樣的模式也被Blockbuster複製，blockbuster更使用許多行銷手法來吸引消費者；加上還要與其他的家用影音娛樂業者共同競爭電影的愛好者，Netflix首先在2007年開始增加線上下載DVD影片讓消費者透過網路即時在PC上欣賞影片。不過值得注意的是，PC本來就不是一般消費家庭欣賞影片的方式，一般消費者最普遍看影片的方式還是習慣在電視上有高品質和大螢幕來享受，因此許多家公司都著手於開發VOD的使用。然而由於VOD的發展仍受限於需要特定的設備、網路傳輸的頻寬以及最重要的片源問題沒有獲得解決，使得VOD在目前仍舊屬於不成熟的產業，從而無法威脅到Netflix的地位，但是預期未來，VOD的概念配合IPTV技術設備的成熟再加上電影產業影音內容的釋出將會徹底改變大眾的影片收視習慣，因此Netflix也與樂金電子合作，開發一款機上盒，能將在Netflix上租賃的影片，透過這個機上盒在電視機中觀賞。