Opportunities for Netflix
With the fast pace advancement in technology, Netflix can easily source for the technology and infrastructure to provide VOD services to its customers. Moreover, Netflix can review on the current competitors in the VOD market to have a safer measure before entering into the market. Since Netflix already have an infrastructure for online customers, and that is their point of contact with customers, they could be at an advantage to change their business model to providing VOD online, or partner with Cable provider to deliver the VOD to customer via customers' television set. In the event, if VOD is unsuccessful, Netflix’s losses can also be reduced to a minimal.
With the licensing agreement with cable providers, Netflix will be able to bypass the technology challenge of connecting the computer with TV easily, without having to spend time, cost and effort in solving the problem of developing a large infrastructure capital outlay to deliver video content to subscribers by themselves. Netflix can also capitalized on cable providers existing networks and infrastructure to further enhance on their services, especially their core DVD rental service. While cable providers can leverage on Netflix well known recommendation services in tandem with their own infrastructure. Netflix can even take advantage of cable providers’ new customer bases, introducing the customers to their core DVD rental service as an alternative choice.
Making good use of Netflix’s existing strengths such as, its brand, its recommendation system and its large market share of online customers to increase penetration of the young VOD market and ultimately differentiate the company’s business from stand-alone sites such as Vongo and MovieLink.
With VOD, the problems associated with inventory control such as damaged as lost DVDs might be eliminated. More people have higher purchasing power since more are buying high-price durable goods like big-screen HDTV. Hence, it created opportunity for Netflix to offer VOD to this market segment.