Netflix Changes

Netflix Continues to Change the Face of In-Home Movies Around the Globe
Netflix changed the way consumers rent movies and was successful due to its availability on a wide range of platforms, including Blu-ray platers and gaming consoles. With a 25% penetration, there was still room for growth. However, Netflix decided to split its online-streaming video and DVD by mail services into separate subscriptions, to sustain the rising cost of expansion. This had upset many customers due to the price increase of 60% to get both options. Consumers vented frustrations on social media and threatened cancellation. At the same time, competitors such as Blockbuster, Amazon, and Walmart began to promote their own online video-streaming services to attract

When Netflix first started, it used disruptive innovation to compete with Blockbuster, the incumbent in the video rental market. Without physical retail locations, it enjoyed lower costs and offered its customers far greater variety. It offered subscriptions instead of rental fee, and customers could keep a video for as long as they wanted (Satell, 2014). On the other hand, receiving their videos by mail was slow and cumbersome. However, customers loved the service and started telling their friends, and as more people raved about Netflix, the laggards followed (Satell, 2014). According to network scientists, this phenomenon is called the threshold model of collective behavior, and as more people become willing to try the new thing, others will be more likely to join in, resulting in a viral effect.
When online streaming was added to Netflix, it became an added instrumental function which beat the competition. However, when customers now must pay the two instrumental functions as separate services, the symbolic function experienced by the original Netflix subscribers who have been loyal fans helping Netflix to be successful in its initial years, have now diminished. As a result, Netflix lost 800,000 U.S. subscribers for the quarter and the stock fell 28% (Yarow,