Netflix's entrepreneurship and management by the change of American film rental market

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When Taiwanese friends want to see a movie, they go to the cinema to see the film publishers publishing or introducing Taiwan's home lines? or a blockbuster rental movie? or Hichannel? or a mod? or a cable TV? or to PPS for free? or ... Network BT download?

If it should be no problem, but if it is like the author like to see the 60 or 70 's classic old films, such as the Italian Job in 1969, or 1968 years of the Thomas Crown affair (these two pieces in 2000, respectively) how to do? In Taiwan, whether it is a physical DVD rental store or a movie stores, it should not be found (I don't want to say mod or cable TV), it seems, only on the Internet.

In the United States, the author can easily find on the netflix.com, whether directly on the line streaming watch (Taiwan's IP may not be able to access netflix.com, so I grasp the map as pictured), or Netflix will send a DVD to the author (see figure II), I can easily watch at home.

(Figure I)

(Figure II)

This is not surprising, as if Netflix has a larger film database.

Intuition from the Internet's business model, it is true that Netflix rents films on the internet as if Amazon were selling books on the internet, which is to put the "long tail effect" to its fullest. Because the general physical film rental shop is limited by the store can display the area of the goods, most of the show only for a period of time or just the next stall of the film, or the past more popular films. It is not as if there is no limit on the size of the network, you can put all the possible film shelves, at this time the so-called "long tail effect" came out.

But a household name in the US, Netflix, would not be so easy to call blockbuster, the old signboard of the movie rental shop, to be closed in September 2010 and through auctions and other buyers, and Netflix co-founder & CEO Reed Hastings will not be on February 18 this year with Apple Steve Jobs,oracle CEO Larry Ellison, Facebook CEO Mark Zuckerberg and others are among the most influential CEOs of Silicon Valley technology, hosted by President Obama.

So apart from the "long tail effect", what is Netflix capable of and unique?

Just mentioned the general physical film rental shop area is limited, therefore, the limited number of available films, and also because of this, in order to increase the circulation rate of the film rental, the physical film rental shop for most of the film will be a return period Due date (depending on the popularity and size of the film) and if the penalty of late restitution, Is the so-called late fees. Founder Reed Hastings, who founded Netflix in 1997, said it should have a better way to offer film rentals after Apollo 13, who was fined $ $ late fees, for delaying return to the blockbuster rental.

This is one of the rules of entrepreneurship: to solve their own needs, to develop services or tools to meet their own needs.

As someone once said, "Solving your own problems will make you fall in love with what you do (solving your own problem lets you fall in love and what you ' re making.)". Because of his dissatisfaction with such a high late Fees, Reed founded Netflix to find a way to solve its own problems and needs.

But before September 1999, it was the online version of a traditional film rental: $ $ $ per DVD, plus $ $ $ postage, Netflix didn't get much attention, and the financial performance was poor, said Reed Hastings himself, "an ugly Financial story, with don't much hopenhagen of breaking Evan.

Netflix's turning point was to abandon the traditional pay-per-rental in September 1999 (and also the long-term habit and perception of rental films by consumers), with its launch of a monthly rental service with no limit on the number of films, free two-way mail, and no due dates and late Fees.

For example, you can bid for a one-month $9.99 service, and under this plan, you can take a few video rentals on Netflix's website, but Netflix will send you a film at a time with a return envelope. How fast (or how slow) you want to read, anyway no due dates and late Fees. After you have read it, send it back to Netflix,netflix with the enclosed return envelope and post the second one (so you have to select a few more to put in the queue, or Netflix doesn't know what to send to you), send it back to the second film, Netflix will notify you by email and usually within 3-4 days.

Calculate, if you are diligent, receive the film to see immediately, and the day (or next) to send back, sometimes the maximum one months can see five films, such a film rents down to $ $. Basically one months can see two to three films, even if reasonable.

If you bid for one-month $14.99 service, Netflix will send you two videos at a time, up to one months $27.99 service Netflix sends you four videos at a time (the following two images are the Netflix design's back-mail envelope, see this fiery envelope, it's showtime! This is also a very effective visual marketing, the author when I first arrived in the United States in 2005, is in a friend's home to see this envelope, asked to know the services such as Netflix.

(Figure III)

(Figure IV)

Therefore, this business model, control has been made by the film lessors (the development of due dates and late Fees), transfer to the film tenants (the decision to return time). This is a very important, revolutionary and destructive (disruptive) business model change, because there is no due Dates, no late Fees, consumers flocking, since this has gradually laid the Netflix in the online film rental market position, and even shook the foundation of blockbuster (Blockbuster also launched an online movie rental in 2004, but it was too late), and even Walmart or Amazon were looking for a sigh of Hope (Netflix's IPO in May 2003, which now has more than 20 million subscribers,2010 annual revenue of more than US $2.1 billion). )。

Entrepreneurship we talked to innovation, most of the thought is technological innovation, such as Skype to provide peer-to-peer voice service, is disruptive technological innovation. But the innovation of business model will have disruptive effect, Netflix is the best example. Entrepreneurs have to ponder, what kind of business model will provide customers with new value?

Netflix's innovative film rental model has changed consumer perceptions of the market, and the first value offered to customers is that there is no pressure to due dates and late fees, and the second is that the monthly rental service is determined by consumers to change the speed and frequency of the film, not the lessor. No late fees? Think about it. If you go abroad for a while, and the results of Netflix's film are not available, you will still be charged monthly fees, in fact, another form of late fees. But this is not a fine, and consumers ' perceptions and feelings are completely different.

But innovative business models can be replicated, and Netflix will soon be overtaken by competitors if it only drowns in a leading market and launches new movie rental models (remember that blockbuster is still a movie rental faucet, Walmart.com also launched a similar film rental service in the US in 2002, but ham the market in 2005 to cross-promotion with Netflix.

As the author of the previous article mentioned Amazon's sharp weapon is the precise purchase Recommendation,netflix develop a video recommendation engine, called Cinematch, is by 29,000 unique Lines of code and the algorithm generated by the combination of 180 million movie Fitch repositories. Netflix, by Cinematch, not just by mailing consumer-selected films, but also by telling consumers what videos they might like. Statistics say about 80% of the film rental behavior is occurring in 200 films, which may be the strong video of the hospital line film and vigorously marketing the popular film, so this is the traditional film rental stores such as blockbuster can be limited to the display area to survive the cause and effect.

But Netflix's Cinematch does not focus on such a popular mass market, but on the independent viewing behavior of each movie lessor. Netflix has encouraged consumers to evaluate their rented and watched films, and Cinematch will therefore recommend the consumer to a film that is likely to be of interest, regardless of whether the film is a blockbuster.

The recommendation, which extends and expands the consumer's taste and range, results in 70% of Netflix's rental films being recommended by Netflix, and 80% on 2000 films. This not only reduces the pressure on the demand for hot films (Netflix still has the cost of buying copies), increases the rental rate and circulation rate of other films, and reinforces the "long tail effect".

Netflix started a Netflix prize competition in 2006 to solicit the best algorithms to "speculate" on consumers ' next preferences and behavior in the light of consumer past film evaluations. The largest award, 1 million in 2009, was presented by the winner, who designed the algorithm to outperform Netflix's own Cinematch 10%. Such a film recommendation mechanism, is blockbuster such a physical film rental shop is unfamiliar and can not be done, so deep won the consumer praise! Understanding your users understand your users "this is the key to starting revenue generation for the start-up team, which Netflix has done with technology and is thorough enough to further pull away from competitors!"

Netflix started out as an online movie rental video-by-mail, but as the bandwidth of the Internet increased, the computing power of the PC increased, and Netflix started "Watch instantly" online streaming videos service in 2007.

The first is streaming selected videos to the PC or Mac, as long as you bid for the service of the month-rent mailing film, you can unlimited number of production and the number of times to see streaming videos ( At the end of 2010 launched Streaming-only one-month-7.99 monthly rental services. In addition to PCs, Netflix has been actively collaborating with hardware vendors in recent years, such as Lg,samsung,sony,vizio,netflix, a major television manufacturer such as the feature, which is one of the most essential to the Internet TV: Xbox Live and PS3 game Consoles has Netflix's services: Set-top boxes like TiVo has Netflix: Partnering with hardware vendors to push Netflix's streaming videos service further into the consumer's home (living room). and smart handheld devices such as Iphone,ipad and WP7, which have been popular in recent years, have Netflix apps that can streamding to the movies.

Mobile device chip manufacturer Qualcomm announced in February this year that its Snapdragon processor will be able to decode Netflix's streaming videos in the future, which can be applied to Android OS, but also to the peak of Netflix. Video-on-demand's convenience and mobile device development not only allows Netflix to gain a foothold in the online film rental market, but also quickly expands and adds to its user base, with the general expectation that Netflix will grow to 30 million users by the end of 2011.

Netflix started out as a founder who wanted to solve its own problems (Late fees) and created the value of consumers by innovating the mode of operating film rental (monthly rent, no Due Dates and no Late fees) in the face of bottlenecks. To actively understand the attitude of customers to provide customized film recommendation mechanism and improve the efficiency of operation. Work with hardware vendors to expand service delivery and access opportunities. This shows that Netflix will build today's online film Rental kingdom, is not accidental and lucky, it is worth entrepreneurs and business operators for reference and thoughtful.

To end this serious issue, the author's office in the United States is less than 1 miles from Netflix's headquarters. Netflix's head office is located at the southern tip of Silicon Valley in a beautiful and affluent town, Los Gatos. It looks like a nice vacation hotel, and it's actually part of a collection house. The author took a few photos, share with you readers, envy (as for the photos in the office, the employees of the game company are playing games in the office, that Netflix employees are not aboveboard in the office to see the film?) sell the story first and then share the next article about Netflix, yes, Netflix has a theme to discuss!