Chapter 3 dealt with Environmental Threats which is an issue that Netflix must be constantly thinking through. The history of business built around movies is long and glorious. I think back to the dominance of Blockbuster when I was a kid. There was nothing as great as going to Blockbuster on a Friday or Saturday to get rent some movies. If you did a Five Forces analysis then, you’d probably settle on a rival firm like Hollywood Videos being the biggest threat. However, Redbox then Netflix ultimately did Blockbuster in as the need to go into a store became irrelevant. Blockbuster didn’t react fast enough and the rest is history (kind of like Blockbuster).
The five forces model is a useful tool for Netflix as there are already competitors. The main ones being Amazon then Hulu which both offer similar services. The threat of entry is difficult unless you are a major company such as Amazon or Comcast. The threat of suppliers is interesting to consider as more providers of content have more bargaining power as the options increase and can even create their own platform. The threat of rivalry already exists (Amazon, etc.). The threat of buyers is another important component especially as Netflix seeks to raise prices. Finally, the threat of substitutes brings us back to the introduction. Could the streaming video rental of toady be tomorrow’s video rental store of the past?
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