Netflix versus Blockbuster
From filling a gap (no late fees) to creating an opportunity (films by broadband).
- Sector
- Film rental and streaming
- Source
- Week 2 tutorial mini-case
The case in brief
Netflix was founded by Marc Randolph and Reed Hastings as a DVD rental service in 1997 and launched its streaming service in 2007. Reed Hastings originally said the company emerged because of late fees.
Tutorial 2 contrasts it with Blockbuster to show that discovery and creation can follow each other: Netflix first filled the gap of customers wanting to avoid late return fees, then created a new opportunity by moving from renting films to delivering them by broadband.
Key facts
- Founded
- 1997, by Marc Randolph and Reed Hastings, as a DVD rental service
- Streaming launched
- 2007
Analysis through module theory
Discovery and creation (Zucchella, Hagen and Serapio, 2018)
Removing late fees filled a gap that already existed in video rental (discovery). Delivering films by broadband created a way of watching that had not existed before (creation), showing that a firm can move from one type of opportunity to the other.
Discussion questions
- 1.Which market imperfection did Netflix first exploit?
- 2.Why is streaming better described as a created opportunity than a discovered one?
Takeaways
- Creation opportunities can follow gaps that were filled first.