growth is not enough

10/18/2004 08:47:00 PM
Netflix created a new model for movie rental when it launched in 1999. Five years after establishing the category, Netflix now finding competitors coming at them from all sides. Whether it is Amazon or Blockbuster, trying to protect their equity, or the giant Wal-Mart. Everywhere you turn there seems to be another company who wants a share of the DVD rental business. Suddenly price competition comes in and the creator of the category looks the most threatened.

http://news.com.com/2100-1026_3-5410639.html

http://www.fool.com/News/mft/2004/mft04101813.htm

The technology and logistics management that helped Netflix create its business is now a great deal less expensive.Netflix spent the money creating the category, only for others to reap the benefits. Netflix built a brand name and grew a user base, but did it innovate? Venture capitalists seem obsessed with encouraging their investments to grow their bases. They encourage companies to grow one idea. VCs believe the most important metric is number of users, but expansion at the expense of innovation, could prove to be a foolish strategy.

Five years is a long-time in business and to be a strong brand requires more than one idea flawlessly executed, it also needs the engine of innovation to prevent competitive threat. Netflix recently announced a partnership with Tivo, certainly an innovative move, but a little belated.
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