Question

An internal team at Netflix developed a prototype set top box to enable the direct streaming of content to customers' television sets. However, the idea of offering it to Netflix customers was dropped because:

a. the market for online streaming was nascent and unprofitable.
b. all major US cable firms built Netflix streaming into their set-top boxes.
c. the Blu-ray standard requires streaming features, as well.
d. of the brutally competitive nature of the consumer electronics business.
e. the entire software team was recruited by TiVo after LinkedIn made it easy to target and poach rival talent.

Answer 1

The estimate of customers leaving Netflix was far off due to factors like the availability of close substitutes and the preference for physical DVD discs. Netflix management misjudged demand and customers' preferences. Streaming video may become more popular in the future.

Step-by-step explanation:

The estimate of customers leaving Netflix was far off due to a variety of factors. One factor was the increase in the number of close substitutes for Netflix, such as Vudu, Amazon Prime, Hulu, and Redbox. Many consumers still preferred physical DVD discs over streaming video in 2012, with Redbox kiosks being a convenient option for many Americans.

Additionally, Netflix management made missteps by misjudging the elasticity of demand and failing to account for customers' preferences and tastes. They may have underestimated the popularity of physical DVD discs and overestimated the demand for streaming video.

However, as the population increases, the preference for streaming video may eventually overtake physical DVD discs, showing that Netflix may still have an opportunity to succeed in the future.