How Netflix Is A Better Business Model Then Charging Late Fee
In 1997, two software engineers named Reed Hastings and Marc Rudolph founded Netflix. Hastings got the idea of using the internet to rent movies on DVD after Blockbuster had charged him a late fee. Hastings wanted to create a place where late fees were voided. This is where the company would offer flat rate rental-by-mail to customers around the United States. Hastings thought to himself, that there had to be a better business model then charging late fees.
By 1999, Netflix launched a subscription service that would offer unlimited rentals for a low monthly subscription. This idea was the beginning of transforming the way people will rent and watch their favorite movies, never having to leave the comfort of their own home.
One year later, the year 2000, launches their plan of personalizing a person’s movie rentals by what they rented. Netflix members would be able to rate their favorite movies, in turn, Netflix will accurately predict the choices for their members on what to rent next.
With Netflix becoming popular, more members are signing up for subscriptions, by 2002, it becomes public in the stock market. 600,000 subscribers would become 4.2 million subscribers in 3 years. That is 7 times more people joining Netflix. Hastings has proven to have a better business model than the video rental giant Blockbuster which will eventually go bankrupt.
In the years 2007-2010, Netflix would introduce the idea of streaming, which member can watch their favorite television…