FROM REJECTION BY BLOCKBUSTER TO SKYROCKETING GROWTH: SUCCESS STORY OF NETFLIX

5 Fantastic Facts About Netflix:

1. Netflix was originally called “Kibble”.
2. Over 66% of Netflix users share the same account.
3. Netflix employees are allowed to take as many days of vacation as they want.
4. Netflix made special socks that pause TV automatically when you fall asleep so that you don’t miss out on anything.
5. Netflix users spent a combined 164 million hours per day watching Netflix content, and about 120 new subscribers get added to Netflix every minute.

Introduction

Netflix, the world’s leading streaming entertainment and online subscription video service provider, offers commercial-free movies, TV series, and documentaries across a wide variety of genres and languages, including original productions with unlimited viewing on any internet-connected screen for an affordable, no-commitment monthly fee, which currently upholds 222 million paid subscribers in over 190 countries. 

How Netflix started

Founded in the state of California in 1997 by two serial entrepreneurs, Reed Hastings and Marc Randolph, Netflix started streaming as the world’s first online movie rental service on April 14, 1998, with only 30 employees and 925 DVDs. 

Initially, Netflix was purely a rent-by-mail DVD service that used a pay-per-rental model. At that time, the users used to order movies on the Netflix website and receive the DVDs in the post with a rental charge of 4 USD and a postage charge of 2 USD. When they were finished watching the DVDs, they used to simply post those back to Netflix in the provided envelopes.

After the significant growth in 1999, Netflix switched to a subscriber-based model for a $22 subscription fee, where the users could keep the DVDs for as long as they liked but could only rent a new movie after returning their existing one. Netflix’s mail-order rental model would directly challenge the market-dominant giants like Blockbuster. In fact, Blockbuster could ultimately not compete with the move to online streaming and rentals and filed for bankruptcy in 2010.  

Story Behind the Name

Netflix was previously and originally called Kibble. Netflix co-founder Marc Randolph confirmed this to Fortune Magazine. The idea behind Kibble was that a product isn’t a success unless “the dogs eat the dog food.” Then eventually, they changed the name to Netflix, the combination of two relevant words that describe the complete concept of their company, Net & Flicks. The word Net was taken from the word Internet, as the idea was to deliver service over the internet. And Flix is a cool re-spelling of Flick, which means a cinema film. These two words combinedly created the brand name Netflix to serve cinema films over the internet. 

First Model

The home entertainment market was dominated by video rental stores in 1997. In this environment, Reed Hastings and Marc Rudolph saw an opportunity because the market wasn’t customer friendly and used to charge high fees, especially for late returns. From here, Netflix started working with their first business model, renting out DVDs by mail. At that time, only 2% of American families had a DVD player. But the founders had a strong vision and they believed that the percentage was going to increase really fast. And guess what? They were right. Eventually, 95% of the families had a DVD player! 

This model was really helpful for the customers. They had to select videos online and then they would get the DVDs delivered to their home, directly. In 1999, a year later, Netflix introduced a subscription model, where customers could rent DVDs online for a monthly fixed fee. 

Tough Time

Netflix had 300,000 subscribers by 2000 but still, it was having a tough time and operating at a loss. In this situation, Reed Hastings wanted to sell the company and also offered Blockbuster to buy it for 50 Million Dollars. Fortunately, Blockbuster rejected this offer and within 3 years in 2003, Netflix became a profitable company and also it crossed 1 million subscribers.

Future of Netflix

Though Netflix experienced some tough times, did it stop? The short answer is, no! According to many analysts, it has the strength to lead the industry for years. Their plans and activities are proof of this.

In 2018, they’ve spent $12 billion building its library of original films and series, an 88% uptick from 2017. The move was to fill its warehouse with original contents to gain and retain subscribers. Almost 13% of ex-Netflix users became subscribers again just to watch the third season of Stranger Things. Their most-watched series are Stranger Things and Black Mirror, these are their lead subscriber magnets. Netflix tweeted once that Stranger Things 3 was viewed from 40.7 million accounts since its debut on July 4.

Currently, 148 million memberships in 190-plus countries use Netflix and it stands as the leader in streaming. As said earlier, analysts said it has a bright future. Here are a few:

Analyst at eMarketer, Ross Benes, says Netflix has brand awareness on its side. From Forbes Magazine it was collected that,  “Disney and others will have a marketing blitz, but the person who doesn’t work in media and marketing is probably not aware of all the streaming services that will be launching soon. The media companies behind new streaming services are going to promote their new products heavily to get them in consumers’ minds and habits, but the fact that everyone already knows what Netflix is will be a huge plus for Netflix.”

SVP of Research, Global Media and Entertainment at Magid, Andrew Hare, adds how loyal Netflix subscribers are. It was also collected from Forbes that, “Netflix is the one video service subscribers say they would not get rid of by a wide margin. The +22% video power score (least willing to give up minus most willing) far outpaces the next most popular services: YouTube +2% and Cable TV 2%. Netflix holds a unique, differentiated place in the ecosystem today.” He does, however, wonder how much longer this will last. 

By analyzing all the insights, and expert opinions, we can surely say that Netflix will be on the leaderboard for a very long time in the future.

Key Milestones of Netflix

1997: Marc Randolph and Reed Hastings founded to offer online movie rentals.

1998: Netflix launched as the world’s first online DVD rental and sales service.

1999: Initiated subscriber-based business model.

2000: 1. Netflix CEO and co-founder Reed Hastings approached Blockbuster about a partnership.

2. Unveiled subscriber personalized recommendation system.

2002: With a membership count of 600,000 in the US, Netflix made its initial public offering of 5,500,000 shares for $15 a share.

2003: Netflix hit a new record with more than 1 million accounts.

2004: Netflix doubled in the number of members to 2 million. 

2005: Netflix ended the year doubling its subscriber base again with 4.2 million members.

2006: 1. Netflix ended the year with 7.5 million members, up 18 percent over 2006.

2. The company also launched its “Netflix Prize”, promising a whopping $1 million to the first person, or team, who can achieve a set accuracy goal in recommending movies based on personal preferences.

2007: 1. Delivering its billionth DVD, Netflix began to move away from its original core business model of DVDs and introduced video streaming via the Internet. 

2. Netflix ended the year with 9.4 million members, up 26 percent over 2007.

2008: Netflix teamed up with Red Envelope Entertainment to avoid competition with its studio partners and ended the year with 12.3 million members.

2009: 1. Netflix is added to Playstation and smart TVs in 2009.

2.  Netflix ended the year with 20 million members, up 63 percent from 2009.

2010: 1. Netflix connected to Apple devices and expands into Canada in 2010.

2. Blockbuster could not ultimately compete with the move to online streaming and rentals and filed for bankruptcy in 2010 against Netflix.

2011: Netflix announced its intentions to rebrand and restructure its DVD home media rental service as an independent subsidiary called Qwikster, separating DVD rental and streaming services.

2012: Netflix became available in Europe, including the United Kingdom, Ireland, and the Nordic Countries, and hit 25 million subscribers.

2013: In February 2013, Netflix announced it would be hosting its own awards ceremony named “The Flixies” and was the first internet TV network nominated for the Primetime Emmy.

2014: In April 2014, Netflix approached 50 million global subscribers with a 32.3% video streaming market share in the United States.

2016: 2016 is a big year for Netflix, expanding to another 130 countries around the world, bringing its reach to a total of 190 countries. It also offers programming in 21 languages.

2017: 2017 is another killer year for the company, winning its first Academy Award, for Best Documentary Short Subject for “The White Helmets”. On April 17, 2017, it was reported that Netflix was nearing 100 million subscribers.

2018: Netflix signed a five-year exclusive overall deal with international best–selling author Harlan Coben.

2020: To date, Netflix’s subscriber base has grown to well over 180 million, with 70 million or so from the United States alone.