The future of Netflix- Qwickster?

The decision for Netflix to divide its streaming service from its DVD service, Qwickster, is one that seems necessary for the company to differentiate product offerings as the future of the DVD business dwindles and focuses on live streaming. Besides the obvious advantages for Netflix to switch from DVD to streaming live content, it is vital for future corporate growth. This situation appeared ultimately inevitable and largely stemmed from Netflix’s ill-perceived strategy of recently increased prices, offering the two products separately with no discount for combining the two, in an effort to encourage online viewing.

In order for Netflix to dominate the media industry, it must remain innovative, as competitors, such as Disney Co. and Dish Network Corp., are heavily developing streaming services. A main way for the company to compete and ensure an ultimately successful move into the online market is by developing its live streaming business separately from the DVD business. Furthermore, this strategy could potentially lengthen the life of its DVD operation, as management can concentrate on specific needs for each market. The likely issue that will develop for Netflix, in this complex process, is the inherent need to communicate the value of this decision to its devoted customer base in order to retain consumers and avoid a negative network effect.       

                                                                                                     

Netflix must create value for customers by developing and conveying a large online content base that is depicts convenience. Currently, only 20,000 titles are offered online compared to over 100,000 DVD titles. The firm could partner with licensors to lower costs by offering invaluable data collected on customer’s consumer behavior. In addition, the company must utilize its recommendation system in addition to promoting older, less distinguished films to further lower costs and to “lock-in” customers. Another option is to maintain the current pricing system for online viewing or even to slightly lower it for loyal consumers, guaranteeing a high retention rate and a switch to the new feature. Ultimately, customer acquisition costs are extremely high for Netflix. Therefore, the company must devise a well thought-out plan, not only to keep customers, but also to encourage the utilization of the online feature, as it concentrates on the future of the media industry, the video-on-demand business.