By Bethany Coates, Andrew Rachleff
2007 | Case No. E238
Netflix, the online movie rental subscription service, did not contend with significant direct competition in online DVD rentals for six years until Blockbuster, the movie rental chain giant, entered the market in 2004 and began a price war. After that point, Hastings’s company scrambled to maintain share and remain profitable. Investors balked at the impact direct competition had on margins and the unlikely sustainability of price cutting against a behemoth competitor. When Amazon began signaling an intention to enter the market in 2005, Hastings had at least two major decisions to make: whether to drop prices to match Blockbuster and whether to stay the course with regard to his historic strategy of “business-as-usual” when a competitor emerged on the scene.
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