Netflix VOD

Since the publishing of this case, Netflix has entered the video on demand (VOD) market. What is your analysis of how Netflix has attempted to update their business model with VOD?

Netflix has always been an industry leader that has embraced new ideas and new technology. They were the first to distribute DVDs through the mail. Video on demand (VOD) technology was a direct threat to their DVD rental business. The full integration of streaming content on computers and televisions was not a question of if, but of when. The timing of mass adoption of VOD wasn’t clear, however, but it was clear that integrating VOD into the business model was central to the long term success of Netflix.
Netflix wisely prepared for the future; dedicating cash for investment in VOD for several years, even as it grew its core DVD rental business. Netflix realized that the main impediments to VOD (technology and content) were out of their control and more importantly beyond the scope of their core focus- movie recommendation (through their proprietary system) and movie delivery.
Their foresight is paid off. Netflix now has a “Watch Instantly” feature for no additional cost to subscribers with the most popular plan ($16.99 for unlimited DVD rentals, three at a time). Netflix brought onboard major movie and television studios. Subscribers can stream near-DVD quality movies and television shows on PCs and Apple computers. Netflix has also expanded the VOD from the user’s computer to their television by forming partnerships with electronics manufactures to stream their content directly to televisions; via Blu-ray players, Xbox 360, and also directly to certain HD televisions.
Netflix could not ignore VOD and hope to remain a viable company. Technology was evolving that may eventually replace the DVD (or Blu-ray, or any other similar media). By investing early, Netflix was able to leverage their experience and specifically their proprietary movie recommendation system to expand into the VOD segment of the home movie market.