Twelve years ago if you mentioned the phrase “movie rental,” unequivocally the name Blockbuster would have come to mind. However, around that time a little Internet start-up called Netflix came onto the scene, and the face of movie rental was changed forever. For a low monthly price they allowed their subscribers to rent any movie they wanted, for as long as they wanted. No more racing back to the local rental store to drop off your DVDs before that noon deadline. No more late fees. It was a classic case of a paradigm shift.
Now, twelve years later, CEO Reed Hastings and company have built a billion dollar-plus company, with over 10 million subscribers, 2,000 employees, and the power to make Hollywood (and those frustrating cable companies) stand up and listen. They are changing the game again with technology that allows subscribers to stream content from the Internet directly to their TV via consoles like Microsoft’s XBox. You can even watch a significant amount of content streamed online (my 4 year-old has to have his morning serving of “Kipper the Dog”). The company is so pervasive, the phrase “what’s in your queue” is now part of the vernacular.
Even when Blockbuster started monthly memberships and DVDs by mail, it was too late to knock Netflix out. Add to that Netflix’s market cap of about $2.6 billion (vs. less than 1/10th that for Blockbuster), the big blue giant can’t buy them out either. Could it be game, set, match for Blockbuster?
So, what are the valuable lessons learned from Netflix’s story.
- Never rest on your laurels: Prior to 1997, no one would ever imagine anyone, let alone an internet start-up from Silicon Valley, would unseat a behemoth like Blockbuster. You never, ever know who or what will come along and snatch that crown from on top of your head. And that goes for Netflix too, as Hulu starts to make some pretty big waves of their own.
- Evolve: if you’ve read my book or follow this blog, you know this is a huge soap box for me. It’s imperative in today’s business environment that companies, both big and small, evolve. Evolve not only the products and services you offer, but evolve the WAY you do business. Use Twitter as your customer service desk. Give your clients (gasp) digital files and charge more for your service up front. Constantly change things up and stay fresh.
- Mutually beneficial and strategic partnerships: one of the smartest moves I believe Hastings made was abandoning Netflix’s plan to build their own players, and instead create technology that allowed their service to be played by multiple manufacturers. Not unlike the move that made Microsoft Windows and DOS the universal OS back when Gates and company were first growing the firm. By partnering with companies like Microsoft, Roku, LG, and others, they can now use the reach of these companies to further solidify their hold, while at the same time making these companies’ products more appealing.
BLOCKBUSTER OR NETFLIX?
So, just out of curiosity’s sake, tell me, do you use Blockbuster or Netflix? I think you know my answer already.