Video On Demand Services Of Netflix Information Technology Essay

Netflix which established in the 1997 is the largest on-line film rental company in the universe. It celebrated by the service that offers their clients subscribe the DVD online or online streaming without any due day of the month or late fees. Until the terminal of twelvemonth 2009, they have more than 100,000 films in DVD catalog, and in 2010, they have over 14 million endorsers. Their competitory advantages are the CineMatch recommendation package and the machine-controlled supply concatenation bringing. The recommendation system that make accurate suggestion film to their clients, and their 100 plus bringing centres across the state allows 95 % clients receive DVD within 1 concern twenty-four hours.

Presently, many overseas telegram and orbiter companies offer Video on demand ( VOD ) which make clients see the picture without waiting and cut down the cost of the cargo. In order to last in the competitory place filmed-entertainment industry, Netflix take series practical actions to strength its VOD service. Netflix offered a digital rental service call Netflix ‘s Watch that allows endorsers to download and see films or telecasting plans immediately on their Personal computer for free depends on their subscribe program.

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Base on the development of come ining VOD system through the cyclosis picture, Netflix will make a distinction comparison to other rivals. On the other manus, Netflix will alter from DVD on-line rental section to distributer of digital amusement.

Generic strategy- Differentiation

Netflix was founded in 1990s and pioneered the endorser based DVD rental service. Compared with most of the competitions which are in shop rental service such as Blockbuster, Netflix distinguish itself into a whole new concern section. Netflix created its bluish ocean by being wholly different from its rivals.

By dominated in the DVD rental market, Netflix required to introduce new engineering to vie against rivals who could besides cut down the monetary value. For illustration, Netflix emphasized on clients ‘ personalization, they utilizing recommendation system which provide client films suggestion harmonizing to their renting history. On the other manus, they established over 100 distribution centres to present the films and Lashkar-e-Taiba clients received the mail within one twenty-four hours. Netflix utilizing Oracle ERP Database to pull off stock list, clients ‘ informations and CineMatch system and adding value to each concern activity. hypertext transfer protocol: // ? p=2011 # ixzz0zsAJGoMY

Porter ‘s five forces analysis of Netflix

Buyer power-low

Netflix is the first company that offer on-line subscribe rental DVD and through the United States postal service to get off to their clients. Netflix provide their clients with many different efficient systems. For illustration, CineMatch recommendation package offer personalized service to clients harmonizing to their subscribed record, about 85~90 % of clients will bask the implicative films and go on their subscription. On the other manus, Netflix emphasized 95 % of clients will have the DVD in one concern twenty-four hours. Therefore, purchaser power is low because other companies do n’t hold such recommendation system and services compare to Netflix, and besides their month fees are higher than Netflix. For purchasers, their shift cost is high, so the purchaser power is low.

Supplier power-high

Netflix buy their films from the providers are film studio such as Hollywood movie distributers and USPS. In the movie industry, it is no other replacement can take in the rental market. Therefore, the provider power is high.

Menace of Substitute-high

The VOD ( Video on demand ) is a new system that allows users use set-top box, computing machine or other participant devices to watch picture at any clip. VOD is a menace of replacement for Netflix because clients no longer want to wait for the mail any longer ; they want to see the film right off. Therefore, Netflix has to aline with VOD system to keep its market portions.

Menace of New Entrants-low

It costs a important capital for new entrants to come in in VOD industry, so that will be a difficult barrier for new entrants to acquire into the market. On the other manus, the bing rental retail merchants already has the experience in selling, that is a immense experience advantage exceed the possible entrants. Therefore, the menace of new entrants is low.

Rivalry among Existing Competitors-high

This industry has several chief picture rental companies that engaged in monetary value war competition, such as Blockbuster, Hollywood picture and Redbox. Most of the rivals have developed the digital box to incorporate with VOD system in order to fulfill the clients ‘ demand. On the other manus, Apple and Amazon both offer clients downloaded digital picture and watched on their Television by Apple Television and TiVO, severally. Therefore, the picture rental market for VOD system has encountered strongly competition.

Netflix value concatenation

Primary activity:

Inbound Logisticss:

Netflix ‘s scheme is establishes partnership with top studios such as Hollywood studios, 20th century Fox in order to spread out its library informations. Therefore, Netflix have more new classs of films or Television episodes available for their clients.


The online recommendation system provided the best film that is non normally the high-demand new release for clients because they are often out of stock. Based on the recommendation system, company can set up their stock list direction without harass the lack of supply. Furthermore, the company devoted to spread outing the distribution centres to present mail within 1 twenty-four hours to their clients.

Outbound Logisticss:

Netflix cooperate with United States Postal Service ( USPS ) to cut down the bringing clip and costs. The returned of the film from clients is through by USPS to the closest Netflix ‘s distribution centre.

Selling and gross revenues:

Netflix ‘s members are available utilizing devices of Microsoft ‘s Xbox 360, Sony ‘s PS3 and Nintendo ‘s Wii consoles to watch films and Television episodes ; Blu-ray phonograph record participants from Samsung, LG and Insignia ; Internet TVs from LG, Sony and VIZIO ; the Roku digital picture participant and TiVo digital picture recording equipments, and until late Apple ‘s iPhone, iPad and iPod touch are accessible as good.


Netflix go oning developed the new technological system such as recommendation system, distribution centre, Oracle System and the development with VOD system to supply client convenient on-line subscribe experience in order to enlarge their endorser ‘s database.

Support activity:


Netflix purchases rubrics straight from the studios to spread out the library database, therefore their clients have more varied picks either on the bringing films and on-line download service.

Technology development:

Netflix provided a free Netflix application for iPhone and iPod touch, leting their members on programs get downing at merely $ 8.99 a month to immediately watch films or a series of Television episodes on their iPhone or iPod touch without bear downing extra costs.

Human resource direction:

To measure employees ‘ occupation public presentations for Netflix is the web site for clients ‘ satisfaction. Therefore, employees have to recognize the company ‘s nucleus values, openness, accessibility and honestness good before offering service to clients ( Patty McCord, 2009 ) .

Data Mining

Netflix has besides makes an outstanding information excavation to make its competitory advantages. For illustration, Cinematch recommendation system synthesizes client rental behaviour and film evaluations to help the company to urge the film to clients. This system will do clients maintain subscribing and buying the film. In add-on, the system besides helps company to put wider scope of films. Netflix avoid to pass excessively much money by identify more niche movie markets and expand distribution for smaller-budget movies. In this state of affairs, the company can salvage money by increasing demand for lesser-known movies and cut down demand for big-studio blockbusters.

Customer Relationship Management Systems ( CRM )

Customer relationship direction ( CRM ) systems helps Netflix serve their clients more expeditiously. The information that collects from their clients stored in the informations warehouse

and analyzed by CRM system. By utilizing this system, Netflix can analyse the demands of clients and further realized clients ‘ behaviours. The end of CRM system is to crate positive experiences for clients alternatively of the negative experiences ( Haag 50 ) .

One of the most of import engineerings that support Netflix ‘s client relationship direction is its made-to-order intelligent agent. An intelligent agent is unreal intelligence package that helps or acts on behalf of the user to execute repetitive-computer related undertakings ( Haag 224 ) . By utilizing this system, Netflix know clients ‘ penchants and disliked. Furthermore, Netflix is able to give accurate, personal recommendations to their clients.

Supply Chain Management Systems ( SCM )

By utilizing supply concatenation direction ( SCM ) systems, Netflix can maintain path on its stock list and information that go through its dealing processes. Furthermore, SCM system helps Netflix to cut down its stock list at the warehouse and administer its merchandises more expeditiously.

One of the SCM systems for Netflix can efficaciously cut down the stock list in warehouse by notify

employees where to present its stock list every bit shortly as DVD arrives in the warehouse.

When the stock list arrives at the warehouse, it is instantly sent off to its following finish ( Haag 189 ) . Consequently, most of the times stock lists are on the manner of going and being used by a consumer and really less clip remaining in the warehouse. This method besides makes certain that the merchandise reaches its following finish every bit shortly as possible. Netflix ‘s SCM system besides tracks stock list and determines the fastest path to allow the DVD into clients ‘ custodies.

Enterprise resources program ( ERP )

Database is resources to assist the company better understand clients ‘ behaviour and analyze operational efficiency. Oracle System is a system that Netflix uses to pull off the company ‘s database, so it is a anchor for organisational operation ( Netflix website, 2010 ) . The system utilizes the information to pull off stock list, fiscal consequence of the company ‘s public presentation, and clients ‘ informations ( Netflix website, 2010 ) . On the other manus, Oracle ERP database is besides to back up the Cinematch System. In add-on, the full DVD library and logistics are besides managed through this system. The company is utilizing this system to pull off its company ‘s information more effectual.

Video on demand ( VOD )

Cooperate with other companies: broadband-enabled devices

Harmonizing to the tendency and the popularity of utilizing VOD system for the rental DVD market, Netflix see the possible market and started to aline with other companies to progress this new engineering to sing films. Because consumers are non willing to wait for the films arrive by mail, alternatively, they seek for the company that allows them to see the film right off to fulfill their demand. For illustration, Netflix have partnership with LG Electronics, Samsung Blu-ray phonograph record participants, Microsoft Xbox 360 console, TiVo digital picture recording equipments, and the Nintendo-Wii. All these devices allowed the members through the hardware to bask Netflix ‘s services. In January 2010, Netflix have partnership with Funai, Panasonic, Sanyo, Sharp, and Toshiba, which besides allowed consumers to watch films and Television episodes through the digital telecastings. Furthermore, iPad from Apple developed a Netflix app in 2010, leting members entree Netflix ‘s library of films and telecasting shows.


Netflix creates their values by differentiate itself between their rivals, particularly Blockbuster. Its outstanding systems make the company accounted the most of the market portions in this industry. However, Netflix is non satisfied the current win and still develop the progress engineerings, for illustration developed VOD system and established the partnerships with other companies to increase their sum of endorsers. In decision, Netflix should make company values through invention and betterment, besides better the CineMatch system to progress the individualized website experience.

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