Netflix

VI. Future Innovation

As shown in the previous section Netflix has the ability to significantly expand its current distribution system with current technologies available. However, the near future is will yield even more possibilities as technologies continue to advance. This section will outline some of the upcoming technologies which will change the distribution possibilities of Netflix. Among these technologies will be advances in the internet, television boxes, mobile satellite services and solid state hard drives. All of these technologies will yield a new outlet for Netflix’s distribution system and thus are important environmental considerations which the company should investigate.

The first technology that will be examined is the advancement of the internet with the introduction of fiber-optic cable. Fiber-optic cables are special cables which cause total internal reflection of light. Essentially, a light signal can be past through the tube, however the light can not escape until it reaches the end of the cable. The effect of this is information that moves at the speed of light. This technology will advance Netflix’s distribution system because it increases the quality of service for the customer and lower costs for the company, through this distribution channel. The quality of the product is increased because of the speed and the high-definition capabilities of fiber-optics. Verizon, one of the pioneers of fiber-optic internet says that speeds can get up to a 50 mb/s, which is currently unheard of in traditional systems (Verizon, 2008). Providers such as Verizon and Comcast both offer this service; however one down side to this is the fact that the area of service is currently limited.

Expanding on the previous section, Netflix already offers online downloads for movies. However, the internet as a direct channel is relatively limited for them at this stage, and has primarily been done to compete against blockbusters online downloads. However, the future of this channel has great potential for Netflix. In the future this may become one of the biggest, and certainly the most direct, channel of distribution for the company. This is also beneficial because it greatly reduces distribution costs. Without a physical product to be moved, it is merely the service that has to be transmitted. This service is the film and its entertainment. The consequence is there are no mailing fees, risk of loss or damage or holding fees for inventory.

The second technology which is related to fiber-optics and transmission is the possibility of high definition television boxes. This is discussed in the previous section; however the advancement of transmission and fiber optics is also affecting the television. More and more cable providers are switching their infrastructure due to the benefits of fiber optics. This has also come with the revelation of on demand options for Comcast users and similar copy cat ideas for other cable and satellite providers. These providers may prove to be a future level of distribution through the integration of Netflix’s database of movies, with the offerings of these television providers. The benefit rendered is their will be a much larger pool of movies for users than with the current “On demand” system which offers a limited number of films.

In addition to the possibility of using cable and satellite providers is the possibility of developing a Netflix box which hooks into both regular and televisions. These boxes would link directly to the Netflix database through a normal internet connection and be able to stream movies directly to the customer’s television. This box would be another form of direct channel distribution of the service however there is another level of distribution involved with this form.

In this case Netflix would have to become a manufacture, or outsource the manufacturing, so that they also move into the realm of physical product distribution. In this case the company would have to design a marketing channel. For this case there are a few possible options for Netflix. First they can go through a three tiered system involving the manufacture, Netflix, wholesalers, such as TNS Distributors or VideoCam Corp., and then move to a retailer such as Radio Shack.

Another future outlet for Netflix service can be seen in a different type of satellite technology. This would be the mobile satellite systems seen with XM radio and Sirius. Technology has become cheaper and smaller and as a result more people are carrying their entertainment with them. Similar, to a distribution deal with cable providers mentioned above, it may be possible for Netflix to enter a deal with companies like XM and Sirius. This would allow Netflix subscribers to enjoy their entertainment on the go, and remove the need for DVD players to be integrated into cars. This would also open up access to another distribution channel, car manufactures. With as satellite transmission contract not only will companies like XM, and their distribution systems, become part of Netflix, but car manufactures and retailers who already place these services in their products become part of the distribution channel. Although this means of distribution is more of a latent affect to dealings with XM or Sirius.

Finally the last technology that will open up new distribution channels is the advancement of solid state hard drives, or USB memory keys. Over the past decade the cost of memory space has greatly been reduced. Even now the cost of a 16 GB USB key on the retail market is about $150.00. This technology accents some of the distribution channels mentioned above, such as the internet, and opens up a possibilities for a channel mentioned in previous sections, vending machines.

USB technology has prices have reduced significantly over the years. The down word trend in price per megabyte for flash shows that with in a few years the production and sale of a USB Netflix chip will become extremely feasible and cost effective for the consumer. In addition, TV’s are becoming complementary products to this idea as many new televisions are starting to integrate USB ports.

This new technology has similar implications on the distribution channel as the idea of a Netflix box. Like the box a new element of a physical product for sale will be introduced to the traditional service aspect. As are result their will need to be a way to reach the customer. This once again would be advantage to use multiple channels, through a three tiered system and a two tiered direct channel system. This would give the proper coverage because a product like this would want a more intensive channel of distribution. Because of its small size it is relatively easy to store,