'Throttling' has been one way that Netflix prevents the costs of shipping the rentals to the movie-goer exceeding the shipping fee -- in other words, delaying shipments to its highest-volume users. Netflix only recently publicized the fact that the fewer DVDs customers rent, the higher the priority they receive in being sent their movie selection. They did so "after a San Francisco subscriber filed a class-action lawsuit alleging that the company had deceptively promised one-day delivery of most DVDs" (Frequent Netflix customers, 2006, MSNBC). Through using this practice, Netflix garnered a great deal of negative publicity.
Threat of substitutes
The threat of substitutes -- spanning from other forms of media such as the Internet and television, to the library, to bootlegged copies, to films seen online and 'good old fashioned theater' seen in-house -- is considerable.
Critical success factors for Redbox, Netflix, and Movies on Demand
Virtually every element of the 'Five Forces' for these companies is a resounding negative influence upon the industry. To survive, it is critical that the existing Redbox, Netflix, and Movies on Demand provide a unique 'value' through the services they provide to customers that cannot be offered by competing venues online, on television, or potentially through new entrants such as Amazon and Facebook. "CSFs are the essential areas of activity that must be performed well if you are to achieve the mission, objectives or goals for your business or project" (CSF, 2011, Mindtools). "Netflix has been aggressively pursuing the next generation of distribution channels -- web streaming, game consoles, and other connected devices" (Salter 2010). Netflix is seeking to stream more of its content to subscribers instantly online to compete with
Movies on Demand clearly is perhaps most threatened of all three, given the growing obsolescence of cable. While it, even more so than Redbox, offers instant gratification by allowing consumers to watch films with a flick of the remote control, unless it can offer unique value to customers through its television-focused format, consumers who are increasingly abandoning television for wireless may look elsewhere for entertainment. Its likely consumers, much like Redbox, are those for whom unlimited films are not of high premium, although it does offer some free movies. Unique 'event' programming such as sports events must be incorporated into the 'Movies on Demand' model for it to distinguish itself in the marketplace and retain loyal consumers.
References
Bond, Paul. (March 8, 2011). Netflix stock drops. The Hollywood Reporter. Retrieved March 11,
2011 at http://www.hollywoodreporter.com/news/netflix-shares-open-lower-as-165304
CSF. (2011). Mindtools. Retrieved March 11, 2011 at http://www.mindtools.com/pages/article/newLDR_80.htm
Frequent Netflix renters sent to the back of the line. (2006, February 10). MSNBC.
Retrieved March 11, 2011 at http://www.msnbc.msn.com/id/11262292/
Salter, Charles. (2010). Netflix. Fast Company. Retrieved March 11, 2011 at http://www.fastcompany.com/mic/2010/profile/netflix
Redbox's vending machines are giving Netflix competition. (2009, June 22). The New York
Times. Retrieved March 11, 2011
At http://www.nytimes.com/2009/06/22/business/media/22redbox.html?_r=1
