How Netflix Slowly Disrupted the Movie Rental Industry & Paved the Way for Today’s Streaming Services
By: Kimberly Grant
The year: 1997. The location: America. If you are old enough to have your knees ache before it rains, you can recall this simple time. Blockbuster was enjoying its very large and lucrative market share as the premiere movie rental location to get the latest releases every Tuesday. Then something happened: Netflix.
“Disruption”
To give you a sense of why the entry of Netflix into pop culture is a big deal, I have to explain a few things. Disruption in business can be when a small startup attracts customers that are ignored by mainstream companies in their marketing efforts. That small startup, then slowly builds on its “ignored” customer base and overtakes the mainstream companies using their own superior quality and lower costs products or services.
In order to understand where this post is going, I need to provide you with a few statements about disruption in the marketplace:
- Disruption is a process that starts at a small scale and builds into the mainstream market.
- Disruptors (small companies) build their business models differently from existing businesses in the marketplace.
- Some disruptive innovations succeed and some don’t.
- Thinking that all small companies should “disrupt or be disrupted” is a fallacy in thinking.
The Netflix Way
Netflix can be described as a disruptor in the movie rental industry considering the above. It started slowly by catering to film enthusiasts who didn’t mind waiting for their DVD movies to come in the mail. They liked the idea of watching new movies and the classics that were provided by Netflix’s library of licensed classic films and television series. Their business model was about the convenience of renting a DVD without leaving your house for a monthly fee that was equivalent to two or three Blockbuster rentals.
The success of Netflix isn’t just because of the above-mentioned convenience. The company soon expanded its business model to be a streaming service, which rivaled OnDemand at the time. This expansion to provide further convenience to film enthusiasts and families on a budget helped catapult Netflix into upmarket or mainstream status. In response to Netflix’s slow growth to become an industry leader, Blockbuster failed to respond adequately. In 2014 Blockbuster closed all of its stores after declaring bankruptcy. It became a relic of pop culture.
From Disruptor to Upmarket Industry Leader
Blockbuster’s failure to rise to the streaming service occasion left a large opening for Netflix to fill, which it did beautifully. Netflix enjoyed a fairly large chunk of the movie rental market share along with Red Box. And, then Netflix got into the original series market. Its first original series included Orange is the New Black (based on a memoir by Piper Kerman) and House of Cards (based on a popular British television series of the same name).
Netflix’s entry into the original series industry did not make it a disruptor, but it did become a force in the entertainment industry. This time, it was rivaling against powerhouses like regular network TV, basic and premium cable channels, and so on. Slowly but surely, Netflix has released more and more original content that has allowed it to become an industry leader in yet a different industry.
From Upmarket Industry Leader to Defending Its Territory
Netflix may have disrupted one industry and carved out its market share in another. But that doesn’t mean the streaming service is untouchable. Thanks to the wide success of Netflix’s business model, other entertainment companies have marched into the streaming service industry over the past fifteen years. Now, Netflix’s major competition includes streaming services like Amazon Prime Video, Hulu, Disney+, HBO Max, and Apple TV. Each of Netflix’s competitors have adopted their business models: offer streaming services and original content for a monthly subscription fee that is equivalent to a movie theater ticket. They’ve even partnered up to offer a bundle subscription.
The Little Streaming Service That Could
From movie rental industry disruptor to a leader in original TV and movie content, Netflix has slowly but surely carved out its own niche in the entertainment industry. It is a best-case scenario for would-be disruptors. Notice I mentioned “best-case scenario”. An industry disruptor doesn’t have to be at Netflix level to be considered successful. Remember, disruptor success is not assured. It’s just a gradual process of diligence and innovation.
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