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Success Story of Netflix
Netflix is a giant of the internet today, but how did it start and who founded it?
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Netflix is the world’s biggest online subscription video service provider.
Netflix has revolutionized the entertainment industry and now is present in over 190 countries.
In order to completely understand the success story of Netflix, you should also learn about Reed Hastings, one of its co-founders.
So read on.
In October 1991, Reed Hastings co-founded Pure Software along with his friends, Mark Box and Raymond Peck.
This company provided debugging software to the UNIX systems.
In August 1997, Pure Software was acquired by Rational Software for 750 million dollars.
This deal made Reed Hastings a millionaire and provided him with the funds to start a new company, Netflix.
During the 1990s, people used to watch movies by either visiting a movie theatre or renting cassettes.
In 1997, Reed Hastings rented an Apollo 13 cassette from a video store.
Later, he misplaced the cassette and failed to return it on time.
Reed Hastings returned the cassette after a period of six weeks, so he was levied a late fee of 40 dollars.
He was very embarrassed by this and so he hid this incident from his wife, Patricia Ann Quillin.
On one fine day, Reed Hastings was working out in a gym where he realised that the payment model of a gym is fair when compared to that of the cassette rentals.
In the gym, one can exercise as much as he wants after paying a monthly membership fee.
Then, an idea sparked in his mind by which he wanted to apply a similar payment model to the cassette rentals.
Reed Hastings saw the problem of late fees and realized that in the future cassettes will get replaced by DVDs and this gave birth to a new business model, Netflix.
He shared his idea with his friend Marc Randolph.
During that time, Marc Randolph was very impressed by the online book-selling business model of Amazon.com and longed to start a new business model similar to that of Amazon.
Whereas Reed Hastings wanted to find a solution to the high fees charged at the video stores.
But Marc Randolph had no idea regarding what to sell online and so he was convinced with the idea of Reed Hastings to rent DVDs online.
Netflix has revolutionised the way we consume media in the digital age and provided a solution to the hassle of visiting video stores.
In the initial days, Netflix allowed the users to select the movies and deliver them the movie DVDs, mostly within a business day.
Netflix also produces its own digital content.
Netflix could be viewed on many devices like computers, mobile phones, tablets, video game consoles, Blu-ray Disc players, smart TVs, etc.
Birth of Netflix-
Netflix was founded by Wilmot Reed Hastings Jr. and Marc Bernays Randolph on August 29, 1997, in Scotts Valley, California with 30 employees.
Reed Hastings provided an initial investment of 2.5 million dollars.
Netflix started as an online DVD rental store and was the first one in the world to do so.
During that period, the VHS cassettes were getting outdated and were getting replaced by much better DVDs.
DVDs in comparison to the VHS tapes were lightweight, sturdy, and economical.
Initially, they posted a DVD to Reed Hastings’s house and ascertained that the DVD reached the house in the right condition.
Reed Hastings and Marc Randolph decided to distribute DVDs directly through the mail to the customers.
Initially, Netflix had 925 titles and 30 employees and it worked on a pay-per-rent model.
In September 1999, they introduced the monthly subscription model.
By subscribing to this model, one could borrow several DVDs and become free from the headaches of the due date, shipping charges, and late fees.
By the year 2000, Netflix gained 300,000 subscribers, thanks to its excellent service.
On May 29, 2002, Netflix offered its initial public offering (IPO), and its every share was sold for US$15.00.
In 2004, Marc Randolph retired from Netflix.
By 2005, Netflix had 35,000 films and was shipping 1 million DVDs on a daily basis, this mirrors its popularity at that time.
In 2000, Netflix was operating at a loss even though it acquired 300,000 subscribers.
So, Reed Hastings offered to sell Netflix to Blockbuster for 50 million dollars.
And he also offered to rename Netflix to Blockbuster.com and maintain their online business.
But Blockbuster rejected this offer.
Netflix became profitable in 2003.
During this same year, it crossed one million subscribers.
Video streaming service-
Netflix wanted to start its internet video streaming service in 2005, but it got delayed until the year 2007.
The internet streaming feature was offered for free of cost as a bonus to the Netflix subscribers.
In the initial days, the content was restricted to 6 to 18 hours per month based on the subscription plan.
During the year 2007, the subscribers rose to 7.5 million and Netflix made a profit of 1.2 billion in the same year.
First mover advantage-
As Netflix is the first company in the internet video streaming field, it succeeded in securing many exclusive deals with several media companies.
Its first contract was made on October 1, 2008, with Starz, an American premium cable and satellite television network for 20 million dollars.
Thanks to this deal, Netflix gained access to streaming more than 2500 new films, which included many hit Hollywood films.
By the year 2010, Netflix accounted for almost 30 percent of the internet usage during the peak hours in America and during this same year, Netflix started to expand globally starting with Canada.
In 2011, they expanded to South America and the Caribbean, and a year later they expanded to Europe.
Hulu and Amazon-
From the year 2010, Netflix began to face stiff competition from Hulu and Amazon with Hulu offering the Hulu Plus program and Amazon offering the Amazon Prime Video.
Creating original content-
Reed Hastings was inspired by the cable networks which initially started on the other’s content but eventually grew to produce their own originals.
In 2005 itself when Netflix was shipping DVDs, Reed Hastings wanted to produce his own original content but was unable to do so because at that time Netflix was a small-scale company.
In 2011, Netflix decided to produce its original content as the costs for licensing the content were going uphill.
On 15 March 2011, Netflix announced its first production, House of Cards, a political thriller.
Netflix gained huge popularity thanks to the success of House of Cards and many people started to associate House of Cards with Netflix.
100 billion dollars-
By 2018, Netflix garnered more than 137 million subscribers.
Now, Netflix has one of the largest user bases in the world and its market cap has crossed 100 billion dollars.
Apart from streaming third-party content, Netflix also produces its own content.
Unlike regular cable television, Netflix releases all the episodes of a show at a time.
With the regular television, the viewer must wait for a week or so to view the next episode of the show but with binge viewing, Netflix did something different and empowered the consumer.
Netflix employs smart algorithms to recommend videos to consumers based on their interests.
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