Not for Free

1

Segmentation

In 2003, the home movie rental industry suddenly shifted. Blockbuster Video had led the market for more than fifteen years with a network of retail outlets whose in-store inventory tended toward newer, popular releases, rented at $4.99 for three days or so. This physical, time-limited model made visiting Blockbuster a lot like going to the public library: the clientele was diverse; the odds of getting a movie you wanted were fifty-fifty; and late fees were steep. Still, the pay-per-rental revenue model for video rental was the only option.

Then, in 2003, Netflix launched a subscription-based Internet movie rental service that uprooted Blockbuster’s dominant position. Netflix had no physical stores, seemingly limitless inventory, ...