Netflix and TiVo are two companies that are constantly evolving their business models in an effort to not have their markets leave them behind. Let’s take a look at each.

Netflix, when it began, specialized in the DVD-by-mail business. This was a great model at the time (and was supported by a great website), but the inevitable time has come to where streaming content is replacing physical media. So, instead of dying with the DVD, Netflix has rolled out a browser-based streaming product with a ton of content behind it. Not only that, they’ve gone on to bring their services to consumer devices through partnerships with the likes of Microsoft (the upcoming update to the XBox 360) and TiVo. In short, Netflix saw a problem, tackled it head on, and are now reaping the rewards of being an early entrant into an emerging market. Their monthly subscription model is perfect for access to streaming media, all of which is only a web browser away.

TiVo is a provider of DVRs and the associated program lineup services that, like Netflix, relies on a monthly subscription service to make money. TiVo is essentially a company that provides a value-added service (time-shifting of TV and program-subscription services) to an existing industry (television). TiVo has in the past (and still does) face stiff competition from the likes of cable and sattellite companies that can develop their own DVRs to sell to their customer base. TiVo has had to evolve rapidly to keep their position as a premier player in order to stay competative. They’ve done so through their additions of HD DVRs, their partnership with NetFlix to enable streaming through TiVo boxes, and by creating a top-notch DVR. They’ve also kept subscription costs low to keep customers.

Of the two companies above, the one with the murkier future is TiVo. There’s nothing special about DVR software – free alternatives exist, and they’re only going to keep getting better. Also, as programming shifts online, their set-top market will shrink and eventually disappear. In order to have them around for the long term, expect them to evolve still.

Now, let’s look at an industry that have all but failed to change their business model, and now is withering away – the music industry. CD sales are in the tanks and the major record labels are in a terrible position since their core product strategy revolves around the CD. They failed to pioneer the online subscription model, and consumers have reacted by finding illegal alternatives. DRM has been a debacle – customers avoid it like the plague nowadays. To make matters worse in this case, though, the absolute most boneheaded response to a shifting market is to sue your customers. That’s just asinine.