Question

How different would you say Netflix's DVD-by-mail and streaming business model are? IS Reed Hastings right to want to separate these businesses?

Answer 1

The first business model of Netflix is to let people leasing videos by choosing it on the we and having ot delivered at their homes. This was DVD by Mail and this was an unparalleled service. This was a major move at that time.

After an year, there was a subscription model from Netflix where there were fixed charges per month and the DVDs can be leased online. The company has developed a great Logistics chain to distribute DVDs to customers.

At present, Netflix is a global TV network that enables subscribers to watch films, TV shows, documentaries and more on an extensive variety of internet connected devices. The online video streaming company works on a membership-based model. The subscribers pay for a month to month subscription plan and are offered access to content available on Netflix in the quality (HD/Ultra HD) they pay for. The company is additionally giving DVD rental plans where it supplies the films and tv shows on DVDs.

There are some differences in the two models:

1. From Rentals to Subscriptions

2. From Envelops to Streaming

3. From Licensing to Original Content

4. From Hollywood to Bollywood and much more

Hastings saw the company's future as providing streaming videos delivered to subscribers via internet. The strategy of expansion has been developed waiting for the time to launch streaming. Broadband speeds and Streaming Technology built into consumer devices got a huge response before Netflix stroke the market. The thought process was like it would become cost-efficient to stream the movie rather than to mail the DVD. Hence, the two businesses are seperated and it's the best choice made. The profit margins of DVD subscriptions are good and the streaming business is built from the profits derived from DVD side.