Netflix Inc - A Journey From DVDs to Digital Dominance

Netflix, the leading name in online video streaming, is present in over 190 countries. You might think it has always been this great and popular. Well, that is far from the truth. Before Netflix, people went to rental stores to rent movies, which they had to return after watching. A late return would usually incur a fee.

Netflix was founded by Reed Hastings and Marc Randolph in Scotts Valley, California. Hastings has said he started Netflix as a reaction to the late fees he was charged for returning a rented movie late. Essentially, Netflix was founded in 1997. The founders brainstormed on a business they could operate online, admiring Amazon and seeking a product they could sell similarly. They got the idea to rent movies online and tested this concept by mailing a CD to themselves using the US mail service. When they received the CD intact, they launched the business.

Looking at Netflix today, it’s hard to imagine they started with mail delivery, especially for those born into a world where Netflix is already accessible on TVs, mobile devices, laptops, game consoles, and more.

From a business standpoint, Netflix's journey offers invaluable lessons. From surviving the dot-com bubble burst to staying ahead of their competitors and expanding to numerous countries, there is much a business owner can learn. Did you know that Netflix did not make a profit until 2003? That is six years after its founding, yet they survived and have proven themselves repeatedly.

Netflix got its initial funding from the sale of Pure Software, where Hastings was a co-founder and Randolph was the marketing director. Pure Software was sold for $750 million. Amazon offered to buy Netflix for $15 million in 1998, but Hastings refused on their way back from the meeting, owning 70% of the company at that time.

Netflix introduced a monthly subscription model in September 1999. The per-rental model was dropped early September 2000. Their move to a subscription-based model helped them in retaining customers rather than the previous per-rental model where a customer is not likely to come back. No due dates, late fees, shipping and handling fees, or per-rental fees anymore. This is obviously an attractive choice for any customer.

Netflix even offered to sell to Blockbuster in September 2000 for $50 million due to suffering losses, but Blockbuster turned them down.

Even as great and successful as Netflix is, they don't always get it right. One popular example of this was the Qwikster debacle. In September 2011, the streaming giant announced that it would split its DVD rental service and the video streaming service into two separate services. The DVD rental service would be known as Qwikster and the video streaming would maintain the Netflix brand. The two platforms would be accessed by two separate websites. Users interested in both services had to create two accounts and pay for two separate services. Of course, users saw this as corporate greed rather than a decision for company growth, especially as Netflix gave no justification for the action. This decision by Netflix also affected their stock prices as investors resonated with the customer reaction to this decision. It's no wonder that Netflix quickly reversed this decision.

Netflix today faces competition from other streaming services like Disney+, Amazon Prime Video, Hulu, Apple TV, YouTube TV, etc. But somehow Netflix has managed to stay ahead. However, the biggest challenge comes from illegal video streaming websites that offer free video streaming to viewers of the latest movies, sometimes even before they are available on Netflix. How do you beat free?

As of May 2024, Netflix has a net worth of $276.02 billion. It has nearly 270 million subscribers globally. It's the 24th most visited website. Netflix have won over 30 awards including Primetime Emmy Awards, Golden Globe Awards, Screen Actors Guild Awards, Emmy Awards, etc. No matter what the future holds, you can't argue with the fact that they have made their mark in history.