The Video Store Lesson
We all believed that Blockbuster and Hollywood Video had vastly improved our lives during the 1990s—and we admired the phenomenal business models they used to do so. Watching movies at home gave birth to the home theater revolution that allowed us to rent the latest box office movies as VHS tapes without having to buy the $99 video. But then something interesting happened. The digitization of movies radically decreased the size of the movie box, making it possible for a new company (enter Netflix) to mail the DVDs directly to us. We watched the DVD and sent it back, postage paid. We didn't even have to leave our homes!
The next thing we knew, Hollywood Video filed for bankruptcy, and Blockbuster, with over a billion dollars in debt, followed suit soon after. Was Netflix so small it was able to fly under the radar—and sneak up on Blockbuster and Hollywood Video?
Nope.
Netflix started in 1999 because the founder was a guy like you and me who was tired of being charged late fees by video rental stores. He created a company that allowed us to stay in our jammies and order videos that came in the mail. Then in 2000, Netflix changed to a flat-fee subscription service that gave users the chance for unlimited rentals without due dates, late fees, shipping or handling fees, or per-title rental fees.
Today, Netflix offers DVDs both by snail mail and by streaming movies online to (are you ready?) more than 14 million subscribers!
This trend didn't sneak up on anybody. ...
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