In 2000, Reed Hastings, the C.E.O. of Netflix, flew from San Jose to Dallas for a summit meeting with Blockbuster, the video-rental giant that had 2700 stores worldwide handling mostly VHS tapes. Three years earlier, Hastings, then a thirty-six-year-old Silicon Valley engineer, had co-founded Netflix around a pair of emerging technologies: DVDs, and a website from which to order them. Now, for twenty dollars a month, the site’s subscribers could rent an unlimited number of DVDs, one at a time, for as long as they wished; the disks arrived in the mail, in distinctive red envelopes. Eventually, Hastings was convinced, movies would be rented even more cheaply and conveniently by streaming them over the internet, and popular films would always be in stock. But in 2000 Netflix had only about three hundred thousand subscribers and relied on the U.S. Postal Service to deliver its DVDs; the company was losing money. Hastings proposed an alliance.
We offered to sell a forty-nine-per-cent stake and take the name Blockbuster.com. We'd be their online service.
Blockbuster wasn’t interested. The dot-com bubble had burst, and some film and television executives, like those in publishing and music, did not yet see a threat from digital media. Hastings flew home and set to work promoting Netflix to the public as the friendly rental underdog. By the time Blockbuster got around to offering its own online subscription service, in 2004, it was too late. By 2005, Netflix had 4.2 million subscribers, and its membership was growing steadily.
By 2007, when Netflix began streaming movies and TV shows directly to personal computers, it had all but won the rental war. Blockbuster said that it was going out of business; Netflix had announced that it had thirty-one million subscribers in the United States, three million more than HBO, and that its stock was at an all-time high. In 2013, it launched an original-programming series, “House of Cards,” which became a critical hit. During peak hours, Netflix accounts for more than thirty per cent of all Internet down-streaming traffic in North America, nearly twice that of YouTube, its closest competitor. The Netflix Web site describes the company as “the world’s leading Internet television network.”
The rise of Netflix
- 1997: Reed Hastings and fellow software executive Marc Randolph co-found Netflix to offer online movie rentals.
- 1999: Netflix launches the subscription service, offering unlimited rentals for one low monthly subscription.
- 2000: Netflix launches the personalized movie recommendation system that uses Netflix members’ ratings to accurately predict choices for all Netflix members.
- 2002: Netflix makes its initial public offering (IPO on Nasdaq under the ticker “NFLX” with 600,000 members in the US.)
- 2005: The number of Netflix members rises to 4.2 million.
- 2007: Netflix introduces streaming, which allows members to instantly watch television shows and movies on their personal computers.
- 2008: Netflix partners with consumer electronics companies to stream on the Xbox 360, Blu-ray disc players and TV set-top boxes.
- 2009: Netflix partners with consumer electronics companies to stream on the PS3, Internet connected TVs and other Internet connected devices.
- 2010: Netflix is available on the Apple iPad, iPhone and iPod Touch, the Nintendo Wii, and other Internet connected devices. Netflix launches its service in Canada.
- 2011: Netflix launches throughout Latin America and the Caribbean.
- 2012: Netflix became available in Europe including the United Kingdom, Ireland and in the Nordic Countries. Netflix wins its first Primetime Emmy Engineering Award.
- 2013: Netflix expanded to the Netherlands. Netflix garners 31 primetime Emmy nominations including outstanding drama series, comedy series and documentary or nonfiction special for “House of Cards”, “Orange is the new black”, and “The Square” respectively. House of Cards won three Primetime Emmy Awards. Netflix was the first internet TV network nominated for the primetime Emmy.
- 2014: In 2014 Netflix launched in 6 new countries in Europe (Austria, Belgium, France, Germany, Luxembourg and Switzerland). Netflix wins 7 creative Emmy Awards for House of Cards and Orange is the New Black. Netflix now has over 50 million members globally.
The future of television
According to the company, people love TV content, but they don't love the linear TV experience, where channels present programs only at particular times on non-portable screens with complicated remote controls. Linear TV was a huge advance in entertainment over radio, just as fixed-line telephone was an advance in communications over the telegraph. Now Internet TV - which is on-demand, personalized, and available on any screen - is maturing and will eventually replace the linear TV experience.
Streaming Video has grown at such a rapid pace in North America that the leading service in 2015, Netflix, now has a greater share of traffic than all of streaming audio and video did five years ago.
Throughout this report, we'll explore in more nuanced detail how Netflix created and continues to grow it's brand equity, strengthening its leadership position in the market. I invite you to, in Neflix-style, binge the following episodes and enjoy.