Netflix platform is the new alternative to theatres and Television for watching movies and other streaming channels. What started as a local pay for DVD rental service in the nineties has today become a giant on the internet. Today, nearly 15% of the internet bandwidth is consumed by Netflix services, indicating the kind of viewership it is enjoying.
Who started Netflix?
Two entrepreneurs, Marc Randolph and Reed Hastings, founded Netflix in 1997 in Scots Valley, California. It started as a movie rental service, where users ordered movies online on the Netflix website and got the DVDs by post. The users had to return the DVDs in the envelopes after they had finished watching.
The founders- serial start-up owners
Marc Randolph went on to start six successful start-ups with a university degree in geology before co-founding Netflix. He mentored many other start-ups and laid the foundations for a service that went on to become a 150 million + customer base and changed the way the world looked at online entertainment.
Reed Hastings, the other founder, has a university degree in arts and also in artificial intelligence. He started a software company in 1991, went public in 1995. His company Pure Software was later acquired in 1997 by Rational Software. Apart from being an entrepreneur, Hastings was a mathematics teacher in Swaziland in the eighties. Today he also serves as an educational philanthropist and on the board of various educational organizations.
Why the name “Netflix”?
This is simple. Netflix is a combination of Net and Flix.
Net as an abbreviation from the internet and Flix from the popular term flick used commonly for films.
In 1997, Marc Randolph was a co-founder of Micro Warehouse- a computer mail-order company and Marketing director in co-founders Reid Hastings company, Pure software.
The idea of Netflix came when the founders used to commute from their homes to their offices. Hasting would later sell his company in 1997 for $700 million. From this, Hasting provided seed capital of $2.50 million in cash for the Netflix start-up.
The founders, inspired by Amazon’s e-commerce model, explored selling portable items on the internet. Initially, they thought of VHS cassettes but later decided on DVDs. The first trial was done by posting a DVD to their homes in Santa Cruz. After seeing that DVDs arrived in perfect condition, they decided to launch their revolutionary model. In April of 1998, the world’s first online DVD rental company started with a few staff and under 1000 movie titles. The rental cost for each DVD was $4 and delivery charges of $2. After some growth, Netflix started the paid-up subscriber model where users could keep the DVD as long as they wanted but had to return it to get a new one.
The Big Snub
Around the year 2000, the offline brick and mortar rental giant, Blockbuster, was dominating the rental market. The online Netflix CEO and co-founder Hastings approached Blockbusters for a partnership but got snubbed. Netflix then went public in 2002. Around the time of public issues, it had a membership base of 600,000 in the US alone. Netflix offered the initial public offering of 5.50 million shares at $15 per share on the Nasdaq. Blockbuster could not compete with Netflix and filed for bankruptcy in 2010. Blockbusters had the opportunity to partner or even buy out Netflix for $50 million only but lost out. Netflix market capitalization grew to $210 billion with the share price at $476, whereas Blockbuster got wiped out of business.”
After a successful initial public offering, Netflix ended the year 2002 with 857000 registered users. By 2003, it touched the one million subscriber’s mark. The company got its subscription rental service patented. This year also saw co-founder Marc Randolph stepping down from the company’s board and exiting Netflix.
Growth of Netflix
In 2004 Netflix’s subscriber base doubles to 2 million, and the very next year, it doubles again to 4.2 million. The growth keeps unabated as it touches the 5 million mark in 2006 and finishes the year at 6.30 million. The company launched a Netflix prize of $1 million to the first person or team who can accurately set movie recommendations based on personal preference. It also released 100 million movie ratings, using a rating system from one to five stars. This set of data was the first of its kind.
Diversification and value-added tie-ups
In 2007, Netflix introduced a streaming service known a “watch Now,” which allowed subscribers to watch television shows and movies on their PCs. This new business model was unique and initially allowed only 1000 titles, with a cap on the viewing hours. A maximum of 18 hours per month of free streaming was allowed depending on the subscription plan.
Even though Netflix was bullish on the longevity of DVDs, it was clear that streaming would be the future of entertainment. By the end of 2007, the subscriber base increased by another 20% to 7.50 million.
In the next two years, Netflix reached out to a broader audience by partnering with consumer electronics companies. It allowed streaming on Television set-top boxes, Blu- ray disc players, PlayStation like Xbox 360, PS3, and other internet-connected devices. The impact was huge as the subscribers increased to 12 million by the end of 2009.
By the end of 2010, Netflix reached 20 million subscribers. The services were available on smartphones,iPhones and iPad, and other internet-connected devices. They launched their services in Canada and expanded to Europe. With its wide array of streaming services in different genres and languages, Netflix became the number one streaming entertainment service. Paid memberships continued to increase, and Netflix won its first prime time Emmy Engineering award.
In 2014, Netflix won seven Emmy awards in the creative segment. By this time, its presence in other European countries increased and had more than 50 million members globally.
2016 was a big year as Netflix added 130 countries to its list. It was now present in 190 countries, offering programs in 21 languages. The subscriber base reached an astounding 100 million.
In 2017 Netflix won its first Academy Award for Best Documentary Short film for “The White Helmets.”In 2019, Netflix won four Academy Awards for Best Director, Best Foreign Language Film, Best Cinematography Best Documentary.
To date, Netflix has grown to over 180 million subscribers in 190+ countries globally. It has now become a craze in the digital entertainment platform, and in hindsight, not bad for a start-up that began lending DVDs on rent at a slow pace.
Some of the contributing factors for the massive success of Netflix were:
- Streaming content
- Original content
- Attractive pricing
- International expansion
- Fast-growing tech stock
Netflix started by Marc Randolph and Reed Hastings
Netflix launches its first DVD rental service
Personalizes subscribers paid-up plan
Netflix goes public. Gets listed on Nasdaq.
Reaches one million registered subscribers
Ends the year at 6.30 million subscribers
Ties up with consumer electronics platforms. Subscriber base now 12 million
Expands to Europe and Australia
Big years. Netflix expands to 190 countries in 21 languages
Subscribers base over 180 million in 190+ countries