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Old March 28 2010, 10:22 PM   #31
Holdfast
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Re: long waits on Netflix

Temis - I think one aspect you might be missing on is that Netflix won't actually WANT to be able to send everyone every DVD they want immediately. They may SAY that they want this, but it really isn't somthing they should be trying to do, and I bet they don't.

What they'll be trying to do is balance demand vs supply and find the sweet spot. The sweet spot NOT being matching demand completely, but finding the minimum level of supply to ensure an acceptable rate of growth of customer base. They'll want to find the minimum level of supply, because it will then cost them less to provide it, and so their profit will increase. They don't want to poison the well too much of course, but a little bit of toxicity in the water isn't a problem as long as the number of customers annoyed isn't enough to generate enough negative noise that it puts off new subscribers and the vast majority of their current customer base.

This is what I meant by it being efficient to annoy you and others like you a little bit. Of course, they run the risk of losing you as a customer, but since they're already losing money on you, that hardly matters. The only problem would be if there are enough of you, generating enough negative commentary, that it affects the rate of acquisition of profitable customers. Given what I hear of Netflix's rate of growth, they've probably got the balance reasonably well-judged, and are operating fairly efficiently. This may change over time as their customer base matures, and they may need to adapt their model in one direction or another, but so far, they seem to be operating well enough.
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