In short, Reed Hastings is not a man who gets locked in by sunk costs: he’s willing to kill projects (or, in this case, spin them off) even if he’s got years invested in them. A good example for my students when we discusses costs in a few weeks. And just another example of the strengths of Netflix’s culture.
I suppose you can also say NetFlix has better allocation of resources as they don't have as much idle inventory as BlockBuster has and also extracting the more revenue from having the mobility of resources. Depending on the geogrpahic region, determining the 'correct' amount of movies to match its demographics can be difficult. NetFlix removes that geographic conflict with the said reasons above.ReplyDelete