Panic almost always leads to a huge, but ill-considered, bet-and failure. When that day comes, they switch to panic mode, as Blockbuster did once it realized Netflix had transformed DVD distribution. These companies tell themselves they’re making incremental improvements, only to wake up one day and find the world has changed.
Companies that sling newspapers onto doorsteps try to protect the paper form of their information. Companies that sell goods through a chain of physical outlets protect the outlets. Companies that sell products through a network of agents protect the agents. By contrast, most companies think small-they try to protect their existing business even if they can see a long-term threat from the Internet or other technological disrupter. Hastings pursued his big idea, streaming video, even though it would render obsolete his wonderfully successful, highly tuned, mail-based system for distributing DVDs. But executives need to truly understand the elements of the Netflix success if they want to emulate it and must have the discipline to follow each of the four steps that Netflix followed. Just about everything looks simple, even inevitable, after the fact. The Netflix success may seem straightforward.
Going forward, we expect we will be primarily a global streaming business, with the added feature of DVDs-by-mail in the U.S.
#BIG BUSINESS ON NETFLIX TV#
In 2010, we passed a significant milestone with the majority of our subscribers viewing more of their TV shows and movies via streaming than by DVD. In its recent annual report, Netflix said: That pricing-combined with the increasing size of the Netflix library, the spread of broadband connections, and the seemingly universal adoption of video-friendly tablets and smartphones-drastically accelerated the move to streaming. In late 2010, after almost 10 years of experimentation, Netflix offered a streaming-only option for about half the price of a subscription for DVDs by mail. That way, people could get used to streaming while he built his library of offerings, and he wouldn't create an opening for a competitor. Hastings also considered numerous pricing models for streaming, ultimately deciding to start by giving it away as part of DVD subscriptions. As streaming started to become real, Hastings did a host of deals with content providers to see which would work and to make sure he wasn't left out, even though it was clear that most of the deals wouldn't amount to much. In the years since, Hastings has frequently set up small tests to offer streaming video-only to junk the projects quickly when he realized they weren't feasible. As far back as 2001, Hastings spent $10 million a year on research into streaming he was willing to forgo most of his tiny company's profits to get started on his preparation. Even as he built the DVD business that toppled Blockbuster, Hastings was guided by the big idea that mailing people DVDs was a mere way station on the road to streaming video.
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