History

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

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.

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