Netflix Must Solve a Problem


According to Yahoo News:


Netflix, the world’s largest online movie rental service, today announced that it has surpassed three million subscribers, as U.S. consumers continue to respond enthusiastically to the company’s offering. Netflix entered 2005 with 2.6 million members.

Since introducing online subscription DVD rental in 1999, the company has generated annual subscriber growth in excess of 50 percent. The company registered its first million subscribers in February 2003 — a milestone achieved more quickly than America Online — and surpassed two million members in May 2004, just 10 months ago.

“Reaching the three million-member level underscores the fact that we’re fundamentally redefining the movie rental experience,” said Reed Hastings, Netflix CEO and co-founder. “We’ve tapped a large and growing market that’s clearly attuned to today’s consumer lifestyle, and we foresee the continued adoption of the service as we refine and expand it over time.”

What does it tell you when 3 million people are willing to order their movies in DVD format and wait for the “snail” mail man to deliver them — watch them at their leisure and then, put the discs back in the mail and repeat the process?

This is such a loud lesson in consumer behavior, I almost don’t know where to start.  It tells us that the DVD form factor is comfortable and well understood by consumers.  Movies live on DVDs.  It tells us that DVD players are extremely widely deployed.  It tells us that the DVD players are connected to screens that Netflix consumers find emotionally satisfying.  It tells us that consumers understand the speed of “analog” delivery and don’t think it’s a problem.  I could go on and on, but you get the point.  This service is the anti-tech, anti-hype solution to a real problem — consumers want movies when they are in the mood to watch movies and they really know how to put a DVD in a player (or computer) and watch them.

I have heard many people dismiss the Netflix model over the years. But then as now, I believe there are a large number of consumers who (for many reasons) will never enter the on demand world — even in markets where the media distributors offer the service.  The big lesson here is one you learned in grade school – K.I.S.S. (keep it simple stupid!)  And, what could be simpler than putting a DVD in a player?

Click here to learn more about the Emmy Advanced Media Committee
Click here to subscribe to our weekly newsletter Shelly Palmer

About Shelly Palmer

Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit



PreviousThe Telecom TV Future NextFile-Sharing Downloads Down, Paid Song Downloads Up

Get Briefed Every Day!

Subscribe to my daily newsletter featuring current events and the top stories in technology, media, and marketing.