Early last year my company, alteraxion, explored the possibility of launching an online DVD rental service (such as the one offered by Netflix) in the UK. We invested a significant amount of time studying the market and developing a business plan for it but in the end decided that proceeding on a standalone basis instead of in partnership with Netflix would be taking a risk that we were not prepared to assume.
Aside from the fact that Netflix had stated its resolution to proceed independently, one of the key issues influencing our decision at the time was the fact that with over 100 competitors Netflix controlled some 95% of this market - it still does.
We have since continued to give a lot of thought to the question of why and how Netflix has managed to maintain its dominance against other equally well-funded competitors such as Wal-Mart. In the end, we concluded that there can only be two reasons to help explain Netflix' success: 1) it is the very best at what it does and executes flawlessly or 2) its competitors are executing poorly or simply don't 'get it' thus handing the market to Netflix on a silver plate (for example, by contributing marketing funds which raises the awareness for online DVD rental services in general without first having developed a service of its own that can stand up to Netflix'.)
More recently we completed a short analysis assessing the impact of Netflix' forthcoming UK market entry to share our learnings and raise awareness among local players. Some of the points raised are excerpted below. Please note that while we had UK players in mind when writing our report it is evident that many of the issues apply equally to the hundred odd Netflix contenders in the US. Our conclusion is that we continue to view Netflix' leadership as unassailable with current competiting offerings (in either the US or UK).
You can read the report by following the link below.