The Story of Netflix
[Preamble]
Netflix [“Net” internet and “Flix” shorten version of flicks, synonyms for the movie] was founded by Reed Hastings and Marc Randolph in 1997 — California. Its a media service provider and production company.
[Genesis of Netflix]
In 1991, Reed founded Pure Softwares, which made tools for software developers and it was acquired by Rational Software in 1997. Reed is an active educational philanthropist and currently serving in several educational organisations. Reed received a BA from Bowdoin College in 1983, and an MSCS in artificial intelligence from Stanford University in 1988. Between Bowdoin and Stanford, Reed served in the Peace Corps as a high school math teacher in Swaziland.
Marc graduated with a degree in Geology, then found and run various companies including the magazine Macworld in 1984. Marc was a member of the founding team of integrity QA, an automated quality assurance company which got acquired by Pure Softwares in 1996. Reed retained Marc as vice president of corporate marketing for the rapidly expanding Pure Atria, later acquired by Rational Software.
Reed and Marc commuted together between their homes in Santa Cruz into Silicon Valley for about four months while the Rational merger was finalized, and on these drives, the idea for Netflix was born. Marc wanted to replicate the e-commerce model pioneered by online bookseller Amazon. He had heard that digital-versatile-discs (DVD) were being tested in several U.S. markets, and he wanted to explore the concept of selling the compact new digital format online. He and Hastings could not find a DVD, so they tested the idea with a compact disk. Reed and Marc bought a used CD and then bought those little blue envelopes that you put the greeting cards in and mailed a CD to Reed’s house. The next day when they came to pick up the envelope and it had gotten to his house un-broken that was the moment where they decided that this idea just might work.
In 1997, Netflix launched as the worlds first online DVD rental store.
[Progression of Netflix to IPO]
The innovation they had is that been able to match people and help them find movies they like. In 1999 Netflix launched a monthly subscription and dropped the single rental model.
In 2000, when Netflix had just about 300,000 subscribers and relied on the U.S. Postal Service for the delivery of their DVDs, they were losing money and offered to be acquired by its brick and mortar rival Blockbuster for $50 million. They proposed that Netflix, which would be renamed as Blockbuster.com, would handle the online business, while Blockbuster would take care of the DVDs, making them less dependent on the U.S. Postal Service. The offer was declined.
In early 2001, the sales of DVD players took off as they became more affordable and Netflix saw a huge increase in their subscription.
Netflix initiated its Initial public offering [IPO] in 2002 and posted its first profit during the year 2003, earning US$6.5 million profit on revenues of US$272 million. In 2005, 35,000 different films were available, and Netflix shipped 1 million DVDs out every day.
Marc retired from the company in 2004.
[Netflix.com]
In the mid-2000s, data speeds and bandwidth costs finally reach the point where asking users to download an entire movie online no longer seemed like a crazy idea. Netflix considering the idea of offering movies online was “Netflix box” that they could use to download movies overnight to watch the next day. It was incredibly difficult to acquire the download rights to movies, just as it was difficult to create the new box and service, but by 2005, they were finally ready to launch.
Witnessing the popularity of YouTube was a revelation that caused them to stop their launch and pivot to a service that would allow consumers to stream movies remotely instead of downloading them. That pivot took two long years, during which they had to renegotiate all their rights and build an entirely new architecture to host and serve content. They had to transform “Netflix box” from a hard drive that would download the video to one that would stream it. But finally, in 2007, they launched Netflix streaming.
[Today]
Netflix has grown its subscription user base nearly 150 million in 2019 and estimate of 37% of the world internet users use Netflix. Netflix is available in 190 countries with the US has the highest penetration subscription rate of 64.5%.
In 2019, Netflix made a revenue of $5.2 billion, registering a 31% year on year increase from the previous year. Netflix has 2.2 million minutes of content currently available. Translated into years, that’s just over four years of continuous content if you were to sit down and watch it all in a single sitting. That roughly translates to 36,000 hours in total.
