Netflix Case StudyThe video rental industry began with a brick-and-mortar store that rented VSH tapes. The growth of Internet commerce and the advent of DVD have provided the opportunity for a new avenue to secure movie rentals. In 1998, Los Gatos, California-based Netflix began operating as a regional online movie rental company. Although the company proved that there was a market for online rentals, it was not financially successful. Netflix lost over $11 million in 1998 and as a result significantly changed its business model in 2000. The new strategy was to focus on becoming a nationwide subscription model and focus on improving the subscriber experience on the own website. The change in strategic focus has allowed Netflix to become the largest online entertainment subscription service in the United States with over 6.3 million subscribers (Netflix). Netflix first caught the attention of many customers when, unlike the local video rental store, it eliminated due dates and late fees charged by traditional video rental stores. The Netflix model allows customers to pay a monthly subscription fee for which they receive as many movies as they want in a month. Subscribers order DVDs through the company's website and they are delivered via the United States Postal Service. Subscribers keep the film for as long as they want and return it to Netflix in a stamped envelope when finished. Netflix derives much of its competitive advantage from its ability to offer each subscriber convenience and a personalized experience. The company's CineMatch software collects data from subscribers' online profiles, movie rental history, and a subscriber's movie ratings to develop a persona... paperless... leveraging convenience, selection, personalization, and a low cost for product delivery. Netflix reported gross profit for the fiscal year ending December 2006 of 996.7 million and an increase of 314.5 million from the previous year. In the same period, net profit increased by 16.8%. On February 25, 2007, the company reached a major milestone by delivering its billionth DVD.SourcesDatamonitor.com “Netflix” 2007, Jan EBSCOhost. .Laudon, Kenneth C. Traver, Carol. E-commerce: business. Technology. Society 3rd ed. Pearson Prentice Hall. Upper Saddle NJ, 2007.Netflix.com 2007. April 18, 2007.Netherby, Jennifer. “Pressure on Netflix” Videobusiness.com. 29, January 2007. United States Securities and Exchange Commission. (2006). Form 10-K: Annual Report of Netflixr, Inc.. Washington, DCWikipedia.com “Netflix”. April 18 2007.