Essay Sample on Netflix: The Birth of an Idea from an Embarrassing VHS Mishap

Introduction

The idea of Netflix was born out of Reed Hasting's occurrence with a videocassette. Hastings had visited a rental shop to borrow the VHS cassette and mistakenly misplaced it. He could not find it until six weeks later when he had to return it past the due date. Upon the return, Hastings was fined $40 for lateness (Byrne, 2011). He was so embarrassed about the ordeal that e concealed it from his wife and later thought about the experience. Hastings started thinking about the Internet and the emerging DVD that would replace VHS. In his opinion, Hastings was relieved that people would gladly watch videos of choice without paying lateness fess like in his experience with at the rental shop. In my opinion, I have had thoughts about purchasing books from Amazon online shop. I always hope that there would be soft copy formats for the books I intend to read rather than purchasing a book that will take me some time to access.

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Hastings was not struggling financially at the time of the ordeal. He had started a company early in his life and, in this same year, had sold it out worth $750 million (Byrne, 2011). Therefore, it is assumed that he used part of the amount to start the mailing business. At first, he tried to mail VHS and realized that it would cost 12 bucks for renting and sending emails back and forth (Byrne, 2011). Therefore, his friend tipped him about the DVD technology that was to be available in the market the following year. Since Hasting's idea was already ripe, he went to the Tower Record Shops and sent himself a package of DVDs to his home. He had to wait for twenty-four hours upon which the package arrived safely and as packaged. Hastings's excitement grew, and he developed the idea of renting movie shops online without lateness fees. Users would only subscribe monthly as members of a gym club.

Managing Netflix

Managing Netflix was a challenge in the first two months when demand was extremely high, and the costs of acquiring a single movie were high as well. The situation meant that the company had to compromise expenses against consumer interests. When the DVDs were already in the market, and demand started to decline in the third month, the operation costs became manageable (Byrne, 2011). Therefore, it was not simple for Hastings to lure clients to his company amidst rivalry from competitors. For instance, Netflix would have members signing up for three months of acting renting, and in the fall, there would be more signups and zero clients leaving. However, in the winter season, people are busy and cancel their subscriptions often. Thus, the exit strategy is simple for customers that makes them want to come back to the platform in the future.

Hastings made the idea practical between 1996 and 1999 at a time when the DVD rental system had become famous, Blockbuster had all the market to itself, and Netflix seemed like a threat (Byrne, 2011). However, soon enough, Hastings received funding for his practical idea and penetrated the market in 200. By 2002, the company was growing and had good profits (Byrne, 2011). The mistake made by Blockbuster was that their ideas were unpractical, with clients commenting negatively. Therefore, when Hastings developed his practical idea, it came out as a threat to Blockbuster's survival. Also, Blockbuster waited until 2004 to defend the business model when Netflix had been in operation for five tears. The timing was wrong and late.

Conclusion

The business model of Netflix began with altering that of companies like Blockbuster. Hastings sought a shift from VHS to emerging DVDs (Byrne, 2011). whereas one would have to purchase a videocassette in the VHS era physically, Hastings realized that it would be easier via the Internet. Thus, creating an online rental shop is a development that grew Hasting's business over the years. Reed Hasting advises entrepreneurs to uphold five things in their business journeys: identify a niche, be flexible, avoid shortcuts, and be sure of the extremes of competition.

Reference

Byrne, J. A. (2011). World changers: 25 entrepreneurs who changed business as we knew it. Penguin. https://mail.google.com/mail/u/0?ui=2&ik=190677c76f&attid=0.2&permmsgid=msg-f:1671850990367386400&th=17339b9e2e3bab20&view=att&disp=inline&realattid=f_kcga9dv80