Final answer:
The long tail phenomenon at Netflix refers to the company's shift from distributing physical DVDs to focusing on streaming video, allowing Netflix to offer a wide range of niche content and accommodating diverse consumer preferences. The substantial increase in subscribers indicates a preference for streaming, even as Netflix faced competition from other services and physical DVD rental options like Redbox.
Step-by-step explanation:
The long tail phenomenon at Netflix can be understood in the context of changing consumer preferences and the availability of substitutes in the marketplace. Initially, Netflix's business model revolved around the distribution of physical DVD disks. However, with the advent of new technology and increased internet bandwidth, streaming video began to emerge as a popular alternative. Netflix adapted by shifting its focus from physical media to an online streaming platform, which allowed them to cater to a wider variety of tastes and preferences with an expansive library of content.
The increase in the number of Netflix subscribers over time demonstrated a clear shift in consumer preference towards streaming video, suggesting that it may have overtaken the demand for physical DVDs. Despite facing competition from other streaming services and the convenience of physical DVD rental kiosks such as Redbox, Netflix's strategic pivot and its emphasis on streaming assisted the company in gaining a substantial market share. This move capitalized on the long tail effect, where a large number of niche products collectively can make up a significant portion of the market, similar to the vast selection at Netflix's disposal which appeals to diverse and specific consumer interests.
It appears that the initial misjudgment of customer preferences for physical DVDs over streaming content was a misstep by Netflix management. Nevertheless, with the increasing preference for streaming video and the company's adaptation to the marketplace, Netflix was able to correct its course and continue to thrive in an ever-evolving digital landscape.