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Netflix, the online DVD rental company, said yesterday that it expects to have five million subscribers by the end of next year, and 20 million subscribers within five-to-seven years.

"Our outlook for the future reflects the continuing rapid subscriber growth and the increasing impact of the cost advantages and other financial benefits that flow from our market leadership," said Reed Hastings, co-founder and chief executive.
KC's View:
There are a few things that distinguish Netflix as a fascinating business case.

1. It virtually created its segment of the business – online rental – because it understood there were both shortcomings in and dissatisfactions about the way video rental market leader Blockbuster did business.

2. When Wal-Mart saw Netflix’s burgeoning success, it decided to get into the game – but fairly quickly decided that it couldn’t compete with the superior service offered by Neflix. (How often does that happen?) So, it basically decided to outsource its online rental business to Netflix, further building that company’s sales base.

3. Founder Reed Hastings has long said that his company is in the business of providing entertainment, not the online rental business. This isn’t just a semantic difference. It means that Netflix is positioning itself to change the way it delivers movies once online downloading of films becomes technologically common. In other words, it is peering around the corner and preparing for the future, understanding that business models must change in order to remain relevant to consumers.

Netflix is a terrific company offering a wonderful service…and we say that having rented more than a hundred movies over the years, and never having been disappointed in the level of customer service and the expansiveness of the choices available. But more importantly, it is a company that seems to understand that the most important thing about having a business model is being willing to break it.