IS ch 4

For years, Netflix was known for best-in-class service, regularly and repeatedly ranking atop multiple customer satisfaction surveys.


Transitioning the Netflix to a future where Internet streaming dominates and DVDs go away resulted in a smooth transition and record profits.


Netflix has been able to rapidly add the streaming business with similar cost economics and product offerings because the fundamentals of this business are very similar to the firm's DVD-by-mail business, just streamed over the Internet.


The Netflix DVD-by-mail allowed users to pay per movie, akin to rental but with the efficiencies of an Internet business with inventory delivered via the mail.


Relate your understanding of Netflix dominance in the DVD-by-mail business to what you learned in the Strategy and Technology chapter: what three resources for competitive advantage did Netflix create in this market that rivals Blockbuster and Walmart cou

Brand, scale, data asset

Which of the following was responsible for luring firms such as Walmart and Blockbuster into direct competition with Netflix?

the Netflix IPO

Why did Hastings regret going public as early as he did?

Going public required the firm to reveal financial results, sharing its success with the world and attracting rivals.

Advertising can build _____, but brands are built through _____.

awareness; customer experience

While some debate the size of the "long tail," one fact that is critical to keep above this debate is that:

selection attracts customers and the Internet allows large-selection inventory efficiencies that offline firms can't match.

The phenomenon whereby firms can make money by selling a near-limitless selection of less popular products is known as _____.

the long tail

Which of the following is a significant advantage of the long tail model on which Netflix is based?

Scale advantage

Firms enjoy _____ when they are able to leverage the cost of an investment across increasing units of production.

scale economies

The three sources of scale advantage which the Netflix DVD-by-mail business had over rivals imitating its effort were:

a warehouse network, customer base, and long tail selection.

Although Netflix had a larger distribution network than rivals, other firms could build a similarly large warehouse network. What additional advantage made this more profitable for Netflix than newcomers?

The size of the firm's customer base, which enabled economies of scale.

Which term refers to a classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience?

Collaborative filtering

_____ is a marketing term referring to the rate at which customers leave a product or service.

Churn rate

The shift from physical to digital product offerings is often described as a shift from

atoms to bits.

Marketing managers need to understand key assets they need for the digital age. What key asset did Netflix embarrassingly fail to secure when rebranding the DVD-by-mail business as Qwikster?

The Twitter account

When firms find themselves in situations where they are both competitors and partners, the situation is called _____.


Economists often consider that the marginal costs of digital goods

are effectively zero.

The "First-Sale Doctrine" refers to an over-100-year-old U.S. Supreme Court ruling that allows Netflix to stream a nearly unlimited catalog of movies and television programs.


Which of the following factors shifts bargaining power to the suppliers of streaming video content?

All of the above

An industry practice whereby content is available to a given distribution channel for a specified time period, usually under a different revenue model is known as _____.


Streaming licensing fees have become an important part of studio profitability, and an increase in Netflix __________ offers the firm even more leverage.

streaming scale

Netflix doesn't actually own full, worldwide rights to many "Netflix Original" titles like House of Cards.


Removing an organization from a firm's distribution channel thereby collapsing the path between supplier and customer is known as _____.


Netflix uses its substantial data asset to recommend movies.

all of the above: evaluate potential licensing deals, drive software redesign and improve the user experience, tailor promotions of existing content.

Streaming content has increased a viewing habit of consumer multiple episodes or whole seasons of programing, known as:

binge watching.

France and China demonstrate that Netflix will have an even easier time expanding internationally than in the US, as these nations have less restrictive laws as a result of not having Hollywood-sized domestic media industries.


Netflix doesn't just see growth as a way to advance profitability; it sees it as a vital competitive asset to keep competitors at bay.


To avoid the hardware cost of getting it's content to the television. The firm developed a software platform and makes this available to manufacturers seeking to include Netflix access in their devices.


Cable subscribers who drop premium cable channels are referred to as _____.

cord shavers

Much of the infrastructure used by Netflix to deliver streaming is actually provided by Amazon.


The term _______________ refers to taking a job traditionally performed by a designated agent and contracting it out to an undefined generally large group of people in the form of an open call


_____ refer(s) to a limit imposed by the Internet service provider on the total amount of traffic that a given subscriber can consume.

Bandwidth caps

The costs associated with each additional unit produced.

marginal costs

A US Supreme Court ruling stating that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display or otherwise dispose of that particular copy, notwithstanding the interests of the copy

First Sale Doctrine

A classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience.

collaborative filtering

Costs that do not vary according to production volume.

fixed costs

Sometimes called a "colo," or carrier hotel; provides a place where the gear from multiple firms can come together and where the peering of Internet traffic can take place. Equipment connecting in colos could be high-speed lines from ISPs, telecom lines f

colocation facility

The rate at which customers leave a product or service.

churn rate

In this context, it refers to an extremely large selection of content or products. The long tail is a phenomenon whereby firms can make money by offering a near-limitless selection.

long tail

Coopetition or Frenemies is a situation where firms may both cooperate and compete with one another.


Removing an organization from a firm's distribution channel. Disintermediation collapses the path between supplier and customer.


A randomized group of experiments used to collect data and compare performance among two options studied (A and B). A/B testing is often used in refining the design of technology products, and A/B tests are particularly easy to run over the Internet on a

A/B test

A limit, imposed by the ISP (e.g., a cable or telephone company) on the total amount of traffic that a given subscriber can consume (usually per each billing period).

bandwidth caps

Viewing several episodes of a program in a single sitting.


Over-The-Top, an industry term referring to media services that are provided over the Internet instead of through conventional broadcasting mechanisms like cable or TV broadcast.


Making content available to a given distribution channel (in theaters, through hospitality channels like hotels and airlines, on DVD, via pay-per-view, via pay cable, and later broadcast on commercial TV) for a specified time window, usually under a diffe