Diffusion of Innovation (DOI) Theory, developed by E.M. Rogers in 1962, attempts to explain how, over time, an idea or product gains momentum and diffuses or spreads through a specific population or social system. The end result of this diffusion is that people, as part of a social system, adopt a new idea, behavior, or product. Adoption means a person does something different than what they had previously (i.e., purchase or use a new product, acquire and perform a new behavior, etc.). The key to adoption is that the person must perceive the idea, behavior, or product as new or innovative. It is through this that diffusion is possible. (Diffusion of Innovation)
While looking at Netflix through the lens of the Diffusion Theory, the theory can help explain why Netflix became such a success. To begin, the first group of people who tried Netflix are known as innovators. Netflix would mail DVDs to people’s homes. The DVD was a new form of technology, so it may be safe to say those embracing the new technology would be more willing and more likely to take a chance on a new company.
In the case of Netflix, the company marketed to the early adopters. At the time, Netflix was an excellent alternative to the classic video store, particularly Blockbuster Video. Blockbuster would charge customers late fees as well as fees if a customer did not rewind the cassette. Additionally, one could receive DVDs via mail which was more convenient than going to the video store. For many going to the video store was viewed as a hassle for various reasons. Additionally, when renting from Blockbuster, the movie needed to be returned the very next day if not, a fine would be imposed. Netflix circumvented this and made it extremely convenient for the customer.
Some people were late adopters due to being skeptical of change. At the time, Netflix was unique, no other company offered what they did. All they knew was that when one wanted to watch a movie on a Friday night, either one went to the movies or rented one from the video store. There was also skepticism about having a movie mailed. More and more people were using Netflix. The company could focus on two items to attract this group. First was the number of monthly subscriptions Netflix obtained. The number would sway a late adopter. Additionally, Netflix's cost remained low. If a person rents one movie a week, joining Netflix costs less. The laggards, the people who were extremely skeptical about Netflix, but their hand was forced. This might have been the group of people who typically did not watch movies and would not find it cost-effective to subscribe. The brick-and-mortar video store began disappearing as Netflix kept taking over the market. At some point, the only alternative to Netflix was not renting a movie at all.
The original version of Netflix, mailing a DVD, had a downside. One had to be strategic about watching movies. If one wanted to watch a movie via Netflix, one needed to plan this out a few days in advance. People needed to allow time for the DVD to be mailed to their homes. While utilizing the local video store or Blockbuster, as long as you lived near one, a person could decide to watch a movie on the spur of the moment. All they needed to do was go to a Blockbuster, rent a movie, and then go home. Once Netflix moved to a streaming service, they made renting a movie even more convenient. One did not even need to leave their home and could, at the spur of the moment, have access to a video.
When weighing the cost-benefit analysis with new communication technology of technology, time and money would both be considered. The original cost of $9.99 monthly could be less than one spent renting movies from a traditional store. Additionally, one did not need to go to the store to get the video and return it. If one returned the video late, there was an additional cost.
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