BTEC Business Level 3: Unit 1 - Assignment 3. Distinction criteria has been met. The assignment is very well organised with appropriate colour coded sections for pass, merit and distinction. All relevant sources have been linked on.
Samina Khasiya
Unit 1 – Exploring Businesses
Assignment 3
Miss Akhtar
Investigate the role and contribution of innovation and enterprise to business
success
How has Netflix used innovation?
Even if Netflix has now become a major company, with thousands of employees, the start-up spirit is
still an essential component of Netflix’s identity. Innovation built Netflix. Innovation continues to
drive its success. Reed Hastings used vision, inspiration, and disruption to create this fearless brand. 1
Since its start in 1997 Netflix has grown from a small start-up delivering mail order DVD’s to the
world’s leading source of international movie streaming with more than 80.5 million members
around the world, including 35 million who watch Netflix internationally. In that time the company
has broken down barriers, innovated the industry and set the standard for others to follow. More
importantly than that is how Netflix has changed society. The services, the personalization and the
content have had an effect on how we all watch movies and TV. Now, instead of watching whatever
we can whenever we can find it, going to the movies or relying on bulky tapes or DVD’s, we watch
what we want when want wherever we want as often as we want.
The original concept is perhaps the biggest innovation the company has ever made. It led to the
corporate giant we have today, and all the other innovations which were to follow. The idea came to
Hastings after paying huge late fees for a movie, he wanted to provide movie rentals that were not
only cheap, but easy to deal with. Randolph brought the Internet to the table. He’d worked in
comparable businesses before and knew he wanted to sell something over the Internet but didn’t
know what. The solution was to sell movie rentals over the Internet and deliver them through the
mail. Together, the two men and only 30 employees began a business that drove the traditional
movie rental business out of business and is forcing the modern entertainment industry to conform
to a new paradigm.
They first introduced Netflix in 1998 with a pure rental model that came with the associated late
fees. This was complemented a year later with the addition of the subscriber model which eventually
led to the end of the original concept. Since then the company has been growing the business based
on the concepts of fees and unlimited rentals. The company wasn’t profitable until 2003, 6 years
after its founding, but this was primarily due to the growth-oriented strategies employed by Hastings
and Randolph.
Following the origin of the company the switch to the subscriber model is the second biggest
innovation made to date. Up until then movie rentals were a clunky process, even when using
Netflix. Viewers had to log in, choose a title, pay for it, wait for it, watch it, send it back and hopefully
not incur a late fee. Charges for movies were low compared to a rental store but still high compared
to today’s on demand model, and they could go up dramatically if not returned within the time
allotted. The original model allowed users to watch Netflix internationally for a low per movie
charge, lower late fees and all from the ease of home but was just not enough to truly capture the
eye of the market.2
The switch to a subscriber model was a gamble but one that paid off. Within the first year of its
launch it became clear that it was the future of video rentals and quickly eclipsed the original
business model. By 2000 it was abandoned in favour of subscriptions only and that move led the
company to growth and profitability. The fact that users could watch a movie whenever they
1
https://brandingforresults.com/netflix/
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