Loved this article from the New York Times on Netflix; maybe it’s because Netflix is one of my favorite companies.

When Netflix came into the picture and offered “No Late Fees,” along with a mail-order and eventually an online-viewing model, they went against every convention in the brick-and-mortar movie rental industry. Blockbuster was earning $600 million a year of revenue in just late fees! Netflix’s business model was a killer, and has essentially killed Blockbuster’s profitability since. After trying to “catch up” and remove late fees themselves, and offering their own mail-order and online services, Blockbuster has failed to catch up. This year they even reinstated late fees.

Netflix’s ability to think ahead of the curve, “change the game,” and think about what would benefit the customer most (in this case, enhanced convenience), even if it cost them money in the short term or required a new way of thinking- ultimately put them in the lead to stay. Very similar to the costly Zappos policy of “Free Returns” that has similarly paid them huge dividends.

Goes to show that sometimes to benefit in the long term, you need to be bold in the short term. What is your version of “No Late Fees?”

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