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Netflix's decision to unbundle the single fee for its $10 base service into two separate $8 plans for DVD-by-mail and streaming over the Internet proved to be a welcome surprise to most customers.

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By going public, Netflix encountered competition from the large, established firms Wal-Mart and Blockbuster. What aspect of Netflix going public lured these firms into the market?


A) By going public, Netflix was required to disclose its financial position.
B) By going public, Netflix was forced to reveal the Cinematch algorithm used to classify user ratings.
C) Netflix's model of flat-rate monthly subscriptions was found to be more profitable than a per-disc rental fee model.
D) Netflix's plan to enter the online movie streaming market alerted rivals to the possibility of losing their market share.
E) The migration of Netflix services to cover the Blu-ray disc market opened up opportunities for rivals.

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Ownership of digital assets isn't always as it appears to consumers. Many Netflix original series like "House of Cards" are actually not own by Netflix, and other firms can license these titles, while Netflix may need to acquire additional rights to stream these titles overseas.

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Netflix gets to retain the entire subscription revenue for every disc sent out to a customer.

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How is scale important to Netflix streaming business?


A) A larger firm with more customers can spend more on content licenses
B) The firm can build larger data centers as it competes with the likes of Amazon Prime
C) Netflix can continue to expand its network of nationwide distribution centers to overseas locations
D) It will allow the firm to improve the marginal cost of its titles, which will also improve profitability
E) All of the above

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The high degree of customer satisfaction that Netflix enjoyed is tightly linked with the firm's sized-based advantages.

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How does Netflix leverage its data asset, even as it has shifted from atoms to bits?

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Netflix uses its substantial d...

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The practice of windowing involves:


A) making content available to a distribution channel for a specified time period under a different revenue model.
B) scheduling movies to be streamed online at primetime periods to pull in more revenue from advertising.
C) relaying advertisements for limited time periods during online movie steaming, as opposed to frequent ad breaks.
D) displaying content in apps and browser windows.
E) streaming movies to customers' computers beforehand and then relaying them on television.

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_____ is a situation where two or more firms are both competitors and collaborators, or "frenemies."

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Which of the following is true about the Netflix streaming business?


A) Its marginal cost for title acquisition is zero as it is currently focusing on distributing digital content.
B) It has the support of major studios such as Fox and Warner that have allowed it to stream any content the firm buys on DVD.
C) Its cost of acquiring streaming content has fallen in the recent past due to its long tail advantages.
D) It has attempted to counter rivals with exclusive content by securing exclusive streaming rights for several popular shows.
E) From the beginning it has experimented with various streaming revenue models, including pay-per-view, download-to-own, and ad-supported content.

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Relate your understanding of Netflix dominance in the DVD-by-mail business to what you learned in the Strategy and Technology chapter: what three resources for competitive advantage did Netflix create in this market that rivals Blockbuster and Walmart couldn't match?

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Brand, sca...

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Which of the following is true of Netflix?


A) It started as two separate services but is now viewed as a single subscription.
B) It began as a DVD subscription model and then simultaneously introduced a video streaming subscription while maintaining the legacy business.
C) It isn't a substitute good for conventional use-based media rental.
D) It got its start offering a DVD-by-mail service for an annual, per-disc rate subscription fee.
E) It started out as an IPO.

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_____ is a classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience.

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Collaborat...

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Which of the following represents an advantage enjoyed by the Netflix DVD-by-mail business over traditional video stores?


A) Lower technology overhead
B) Lower shipping expenses
C) Larger entertainment selection
D) Higher energy costs
E) Higher churn rates

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For traditional retailers selling physical goods, _____ is the biggest constraint limiting a firm's ability to offer customers what they want and when they want it.


A) shelf space
B) video piracy
C) shipping costs
D) distribution rights
E) disintermediation

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The phrase __________________ refers to the media industry practice of making content available through a given distribution channel for a specified time period, usually under a different revenue model.

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Walmart and Blockbuster were well-known firms. Why weren't they able to leverage their brands to compete against Netflix?

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Blockbuster and Walmart, discovered that...

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___________ refers to the rate at which customers leave a product or service

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Even if Netflix gave Cinematch away to its rivals, they would still not be able to make the same kind of accurate recommendations as Netflix. This is because of Netflix's _____.


A) technological superiority
B) customer loyalty
C) movie expertise
D) data advantage
E) large inventory

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Firms with high churn rates are likely to be more profitable.

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