Netflix Leading

with Data - The

Emergence of
Data-Driven Video
In its competition with Netflix, where did
Blockbuster go wrong?

● Traditional Business Model - Blockbuster was into traditional video rental business
model, they failed to adapt with newer technologies. Their existing model was not as
profitable as Netflix.
● Flexibility - Blockbuster, constrained by inventory at its stores, could not offer flexibility -
because each store had a set inventory, the company could not allow customers to keep
movies indefinitely.
● Lack of Information System - They had a lack of an appropriate CRM system. Also, they
had very limited information about its customer preference and behaviours.
● Failed Initiatives - Blockbuster attempt to counter Netflix by marketing “no late fees”
program was not successful, as the program was misleading. Total access program was
not well integrated, as the customers had to maintain separate accounts for the web
system and the store.
How was the use of customer data a key
differentiator?

● Netflix had created a personalised and customized experience, there developed software
called Cinematch, asked customers to go through a rating experience, priming the system
to understand their movie preference.
● Data mining provided netflix with key advantage in targeting customers, this brought
several positive influences in the development of the Netflix
● These innovative system implemented by netflix allowed them to engage its customers
more effectively than Blockbuster, which tracked customers at the franchise level. They
leveraged what looked like strictly operational data to improve customer experiences
and marketing.
 Customer insight was one of the core competencies of Netflix’s
business model. How did it work, and how did the company
leverage business value from this competency?

● Cinematch collaborative filtering algorithms aided the discovery process- better customer experience. Most
customers saw Netflix as a convenient service that quickly delivered movies they could keep as long as they
wanted. But underlying that simple premise was a vast and complex software system that used more than a
million lines of code to compute who got what movie next, which movie would be in demand , and, above all,
which films should be recommended to specific customer. That was how Netflix kept its disparate audience
happy.
● Recommendation system and analytics allowed deeper understanding of customer trends, which let Netflix
adapt more quickly. This helped Netflix in targeting customers. Netflix tracked customers’ purchasing patterns
to predict inventory levels needed for certain types of movies and to strengthen its Cinematch recommendation
engine. This innovative system allowed Netflix to engage its customers more effectively than Blockbuster,
which tracked customers at the franchise level.
● Long-tail selection and variety. Netflix’s ability to recommend lesser-known movies was integral
to its consumer appeal. Consider the Netflix Top 100 list of rentals, comprising not only heavily
hyped studio blockbusters but also niche films. According to Reed Hastings, “ Our movie buyers
are very good. We constantly invest in and improve our technology. Using all of our
measurements, we know within 10% range whether a movie will be a hit with a subscriber
● Relationship with movie houses. Netflix’s capability to expose viewers to a broad range of movies
was like a boon to the studios. Netflix created audiences for films that Hollywood often would
not bother with: 85% films- even if showcased at festivals such as Sundance- never were
distributed to theatres and thus, never received adequate promotion or advertising.
● Employee Management. To become a successful technology-based service company, Netflix
leveraged its employee base as a laboratory for examining company processes from the
perspective of the consumer. To start, warehouse workers- those closest to the customer- got
free Netflix subscriptions and DVD players to better understand what customer went through
when Wall-E did not arrive in time for their child’s party. Netflix also paid its employees
handsomely and allowed them to structure their own compensation packages.
 What opportunities data and analytics might provide to Netflix
if the company switch from DVD to VOD? Can Netflix best
leverage this competency as a competitive advantage in VOD
and is it sustainable? Justify your response briefly.
● Change from DVD to VOD suited with expanding Internet and Smart phone penetration can help Netflix
influence this competency by joining SMAC in its business model:
● Mobility: Increasing web and cell phone penetration can give information identified with their browser and
applications use.
● Social: Netflix can use information gathered from Social systems administration sites that clients use for
making their account on Netflix platform.
● Analytics: Subjecting the information gathered through social networking platforms and Mobile to data
analytical tools can produce experiences to improve customer engagement, marketing, retaining and
acquiring customers
● Cloud: All the information identified with client for example information identified with their profile,
acquiring designs and so forth can be put away on cloud to decrease costs and accomplish operational
efficiency

Therefore by joining SMAC, Netflix can use the VOD's competency to it's benefit.
THANK YOU