The innovation of Netflix

The online streaming service Netflix is a great example of a company that continuously innovates. It began in 1997 as a DVD mail rental service with the simple promise of never having late fees and within two years they had innovated the company into a subscription based service that offered unlimited rentals a month.

In 2008 they introduced online streaming that ran parallel to their DVD service, offering both services in one package. In  2011 they split the company between online streaming and DVD rental in order to aggressively cannibalise the company and move forward with online streaming. They effectively made their customers choose between DVD rental and online streaming otherwise they would face a 60% price rise. By doing this they allowed the streaming service to grow whilst allowing the  DVD rental service to slowly shrink away. This in turn gave them the money and subscribers needed to improve their streaming service, which has resulted in them now having the financial capability and confidence to create their own shows and films. Netflix knew they wanted the future of their company to be online, as this is the best platform for them to offer unlimited, easy to access content at a cheap rate.

Netflix products are film and television shows that it supplies now through it online steaming service but they have begun innovating their products as they have moved from simply distributing to creating content as well. An example of this is the Netflix original television show ‘House of Cards’.

They have successfully repositioned their image as an online streaming service as oppose to a DVD rental service. Netflix has also shifted the social paradigm of what should be expected from media distribution services by offering cheap, unlimited entertain that is easily accessible. By focusing on their long-term goals for the company Netflix have been able to grasp the online streaming market through radical innovation and aggressive cannibalisation.