Netflix: The Streaming Challenge

  • Reference: P-1114-E

  • Year: 2011

  • Number of pages: 24

  • Geographic Setting: América del Norte, Irlanda, Reino Unido

  • Publication Date: May 21, 2012

  • Fecha de edición: Apr 14, 2016

  • Source: IESE (España)

  • Type of Document: Case

  • Company: US$ 3 billion

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The case describes the history and business model of Netflix, a worldwide leading company in movie rentals. From its beginnings in 1997/98, the Los Gatos, California-based company has focused on developing a movie rental business model that uses superior customer intelligence to ensure high customer satisfaction, while being able to use customer analytics to manage service-related costs and its bottom line. With the switch from being primarily a DVD rental company to an online streaming company, Netflix has moved into an arena where different regulations apply. This has a significant impact on its bottom line. By 2012 the future of the company - a darling of investors and analysts in 2010 - was not so clear anymore.

Learning Objective

The case illustrates the value generated from Long Tail effects by an intelligent use of IT and logistics in an environment of product proliferation and market atomization. Furthermore, it allows students to assess the implications of each of the technological transitions undertaken by the movie rental industry since the early 1990s. In doing so, students will foster a better understanding of technology-driven needs for business-model adaptation or even innovation.


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