3.1 About Netflix
Netflix is the world’s most prominent internet based entertainment service. Currently, it has over 109 million subscribers and is present across 190 countries. The subscribers can watch their preferred movies, shows, documentaries and feature films from across the world without any commercials whenever & wherever they wish to. All they need is an internet connection & a Netflix compatible device like a smartphone, laptop or tablet.
3.1.1 History of Netflix
Netflix was established on August 29, 1997 by Marc Randolph and Reed Hastings. Reed Hastings founded a software company called Pure Atria (later known as Pure Software) and Marc Randolph was the co-founder of MicroWareHouse, a computer mail-order company. In the mid-1990’s, Marc Randolph worked as the marketing director for Pure Atria. Both, Reed Hastings and Marc Randolph were captivated by the influence that Amazon had on internet driven sales & e-commerce. Marc Randolph wanted to sell an absent product category over the internet using a model similar to that of Amazon. Both of them deliberated and overruled VHS tapes because they were excessively costly, difficult to stock and excessively fragile, especially during transportation.
In 1995, Philips & Sony developed the DVD (digital video disc). It could store any sort of information and was generally utilized for programming and additionally used to store videos that could be seen with the help of DVD players. In 1997, when movies on discs became more prominent, Reed Hasting & Marc Randolph decided to try something new. They bought a CD & shipped it to Reed Hasting’s address in Santa Cruz. The CD reached the address safely and the shipping cost for the CD was also reasonable. They then decided to start Netflix with an initial $2.5 million in cash by Reed Hastings.
On April 14, 1998, Netflix was launched, offering 925 DVDs available via a pay-per-rent model. The rental rates & due dates were kept similar to the business model of a brick & mortar DVD rental firm, Blockbuster.
By September 1999, Netflix started offering a monthly subscription service which allowed the customer to rent unlimited movies as well as they were not required to pay any handling/shipping fees or any late fees for the rentals.
By 2000, Netflix had a very large customer base & high revenues. Reed Hastings & Marc Randolph went to Blockbuster, a brick & mortar DVD Rental Company & Netflix’s biggest competitor, to sell Netflix $50 million but Blockbuster declined the offer.
In May 2002, Netflix initiated an IPO by offering 5.5 million shares at the cost of US$15.00 per share.
In 2003, Netflix earned a US$6.5 million profit on incomes of US$272 million. In 2005, there were 35,000 different films available on Netflix, and they shipped around 1 million DVDs per day. Marc Randolph left Netflix in 2004.