Why Netflix Will Outlive Blockbuster

By Deane Barker on August 9, 2010

Netflix Stays One Step Ahead of Creative Destruction: Netflix has been planning for the demise of its core business ever since it began.  They started the company with the ultimate plan of streaming video over the Net, and developed the mail business to bide time until technology caught up with their vision.

The company was formed in 1997 with the idea of sending movie DVDs, then a new technology, through the mail. But Reed Hastings, the founder and chief executive, and early employees, recognized that delivery of movies over the Internet would replace the mail carrier soon. They named the company Netflix, not Mailflix or DVDs by Mail.

[…]  It was only last year, more than a decade after its founding, that streaming movies started to take off. But it was Netflix pushing people to do it, even though it meant that the company might rent fewer discs by mail.

The DVD-by-mail concept is dying, but that’s okay because Netflix planned for it to happen that way.  It’s passively trying to kill the mail business by pushing people into using the streaming service, where Netflix always assumed they would end up anyway.

Netflix’s stock has been on a steady climb and is trading somewhere neat its high.  Meanwhile, Blockbuster is begging for a one-month extension on its debt to give it time to file bankruptcy.

Gadgetopia

Comments

  1. I’ve been saying for a while that, with Netflix’s mail/streaming unlimited video service on one side, and the super-cheap Redbox on the other side, Blockbuster is doomed. The last time I went to Blockbuster, they were charging $5 per video (including older movies) a the rental was a week. Why would anyone do that? Redbox is $1 a night, or if you watch more movies (or older/obscure movies) Netflix is $9 a month for unlimited movies and no late fees.

    I find it very hard to imagine any customer for whom Blockbuster makes sense.

  2. Blockbuster is so stubborn that it may not accept bankruptcy as an option and continue draining itself and its shareholders of money.

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