Netflix Business Model Analysis Essay

Netflix is an online subscription-based DVD lease service that promises to connect their customers to the movies and television shows they approve through and through means of sending discs through the mail or streaming them promptly via the internet. For only $7.99 per month, Netflix alleges their customers unlimited access to their vast video library (>70,000 titles as of closing 2006) and is able to deliver DVDs by mail to over 90% of their nearly 7 million subscribers in only a single blood day.There argon many factors that go into how Netflix is able to generate profit with this melody model. First and fore most(prenominal), Netflix uses a subscription-based revenue model. This came about after adopting a more rising business strategy to better reconcile to tipdback being provided by its customers. Netflix initially utilize a revenue model connatural to that of the brick and mortar video rental stores with the opinion that the convenience factor of having discs mailed forthwith to your home would outweigh the inconvenience of having to appreciation the extra conviction it took to ship the discs. In 1999, Netflix shifted to the, more simplified, subscription-based model which, in turn, increase 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 study movie studios that allows them to purchase DVDs at a reduced up-front comprise in return for a fee based on how often those discs are rented in a given time period. This, in conjunction with a reliable recommendation system that brings older titles to the foreland of customers minds and the Netflix subsidiary company, flushed Envelope Entertainment allows Netflix to house a larger library of titles for a pull down cost than its competition while solid the sizable niche market of individuals who are interested in renting titles that they clear missed or re-renting titles they ve already seen that most video stores could not.