Change In Supply

For those old enough to remember, Netflix started out as a DVD rental service. Its DVD-by-mail platform and zero late fee policy successfully competed against Blockbuster Video to win out in the end. Although they actually do still rent DVDs, Netflix saw the value in pouring its resources into HD digital streaming, which would prove cheaper for them in the long haul, and would mean less dependence on the US Postal Service and physical DVD distribution deals. The subsequent explosion in new streaming subscriptions jet fueled its stock price, and Netflix was thus able to justify billions in bond underwritings to expand its own proprietary productions and market share.

Change in Supply is an economics term that references products or services that experience a change in supply numbers due to technological, market demand or economic cost and profit margin factors. The Netflix example summarizes all three. So blame Change in Supply for Netflix’s cancelling of great shows like Luke Cage and Orange Is the New Black to make more lame Adam Sandler comedies.