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DVD rentals' mail model: from its roots in a dark closet, Netflix has grown by putting a premium on customer satisfaction. (Netflix 5th Anniversary). Laura Dunphy.
Full Text: COPYRIGHT 2003 Reed Business Information
For anyone who has returned to the video store 10 times looking for a film that's never in stock or discovered in his DVD player a rental that should have been brought back days before, Netflix is a wish come true.
CEO Reed Hastings first envisaged subscription rentals years ago after finding a long-overdue copy of Apollo 13 in his closet. About $40 in late fees later, he was mulling plans to turn the traditional rental model--pay per title, for a set time, with late fees--into a system in which customers pay a flat fee to use the service as much as they want each month. DVD made the idea a reality, because the weight and durability of discs made it feasible to send titles via the mail.
After its 1998 founding and launching its subscription service in 1999, Netflix now boasts more than 1.05 million subscribers. Those customers pay $19.95 monthly for unlimited DVD rentals from more than 14,500 titles, up to three at a time with no late fees, sent via one- to three-day mail delivery.
"When people think about renting through the mail, they think it might take too long, and we dispel that in the first try," says Ted Sarandos, VP of content acquisition.
About 60% of customers now receive one-day shipping, and the service will open about one new metropolitan shipping center each month, with the goal of 70% to 75% of customers receiving DVDs overnight by year end. Overnight delivery is crucial because it's a key way Netflix satisfies customers, a necessity considering how the comp ...