Netflix is the Revolutionary Streaming Service

Netflix is the revolutionary streaming service that allows users to watch a wide variety of movies, tv shows, and documentaries through internet-connected devices. It is currently the leader in creating original content. However, Netflix hasn’t always been the company they are today.
Netflix was started in 1997 as a way to offer online DVD rentals. In 1998 Netflix launched their website netflix.com where they could make rentals and sales. The following year, Netflix debuted their subscription service, where you can rent an unlimited number of DVDs for a low monthly subscription. By 2000, Netflix released a personalized movie recommendation system that used ratings from Netflix members’ predict choices of all users. In 2002 Netflix had about 600,000 members domestically but rose to about 4.2 million by 2005.

Then Netflix did something groundbreaking, in 2007 they released streaming, allowing subscribers to watch movies and TV on their personal computers. In 2008 Netflix begins partnerships with consumer electronics companies, giving them the ability to stream on the Xbox 360, TV set-top boxes, and Blu-ray players, adding the PS3, Apple iPad, iPhone, iPod Touch, Nintendo Wii, internet-connected TVs, and other internet connected devices, over the next two years. By 2010, Netflix expanded to Canada, followed by Latin America and the Caribbean in 2011. In 2013 Netflix launched their first set of Original Programs, including hits like House of Cards and Orange is the New Black. They went on to receive 31 Primetime Emmy Nominations for their originals the following year, becoming the first Internet TV network to be nominated for an Emmy. By 2014 Netflix subscribers surpassed 50 Million members globally. Over the last few years, Netflix continued expanding globally, and by 2016 they became available worldwide in over 190 countries.

Today, Netflix has surpassed well over 100 million subscribers. And this last year Netflix has also begun airing international originals like Scared Games from India, La Casa de las Flores from Mexico, and The Rain from Denmark.

Situation Analysis

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In recent years, more US households have been cutting the cord and dropping traditional TV packages to switch to streaming services. The pace at which people are cord cutting is increasing faster than expected. But what is the appeal of streaming services as opposed to traditional live TV? First, there are no contracts to deal with. With traditional TV, you are typically stuck in a year-long contract and are charged if you try to cancel before the contract is up. While with streaming services, you pay month to month and can cancel any time. Second, it’s more affordable. Many streaming services offer packages as low as $5.99/month, compared to TV packages which are typically closer to $50/month, and usually bundled with other (even unnecessary) things to try and keep costs low. Streaming services are also just more convenient. You can access them on almost any device that has internet access. As a result, you can watch your programs anywhere and anytime you want.
While Netflix was the first to introduce online streaming, many competitors have emerged recently. A few their competitors include Amazon Prime, Hulu, Sling TV, PlayStation Vue, and HBO Now. Because of this ever-growing phenomenon of cord cutting, more and more companies have been trying to enter the streaming service market, for example, Disney will be launching their streaming service, Disney+, in late 2019.

With all that said, currently, Netflix’s biggest competitor is Hulu. They offer 5 different packages. For $7.99/month, you get streaming on 1 screen and have limited ads. For $11.99/month you get an ad-free experience. For $39.99/month, you get access to live tv, the ability to record up to 50 hrs. of live tv, and the ability to stream on two devices simultaneously. For an additional $14.99 you can record up to 200 hrs., and fast forward through commercials on the recorded content. Another package that is also an additional $14.99 gives you the ability to stream simultaneously on an unlimited number of screens.

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Netflix was introduced to the world in 1997 online DVD rental service. In 2002 Netflix only had 600,000 members but rose to about 4.2 million by 2005. They didn’t introduce their now popular streaming service until 10 years later in 2007. By 2010, Netflix began expanding internationally to Canada, followed by Latin America and the Caribbean in 2011. In 2011 they had less than 23 million subscribers. Over the next five years, Netflix continued to expand globally, and by 2016 was available in 190 countries. Today Netflix has 130 million subscribers.

Netflix can attribute this growth to a few things, including but not limited to, their affordability, personalized recommendations, their variety, and their original series.

Netflix currently offers 3 packages at 3 different price points, all coming with a free trial month. The basic package costs $7.99/month. With the basic package you to watch on 1 screen at the same time. The standard package costs $10.99/month, and you get HD streaming and can watch on two screens at the same time. The premium package costs $13.99/month and has HD available, Ultra HD, and can watch on 4 screens at the same time.

While they were just an online movie rental company, they released a personalized movie recommendation system that used ratings from Netflix members’ predict choices or all users. Today Netflix uses a more advanced version of this algorithm, to suggest and create curated feeds based on what you watched previously. As of December 2017, they have added a feature that can predict what type of imagery will entice viewers to click and continue watching. This feature works by displaying unique images to their 130 million subscribers and using past behavior (which images were most clicked on) to predict which will be watched.

Netflix currently has about 14,800 titles available to choose from. This includes documentaries, tv shows, and movies. This large amount of variety is something that has made Netflix so successful. In order to have such a large selection, Netflix partners with content providers to license streaming rights for these movies and shows. This is paid for by the money generated from monthly subscription fees, unlike other providers that use advertising to pay for licensing rights. In order to keep subscribers, Netflix has to constantly negotiate new licensing deals. Because streaming services have gained more popularity in recent years, purchasing licensing inexpensively has become rather difficult. Netflix’s current budget for content is 7.5 billion as of 2018.

In order to counteract expensive licensing costs, Netflix is heavily relying on the creation of In-house content. They launched their first original series in 2013, which included hits like House of Cards and Orange is the New Black. Later that year their received 31 Primetime Emmy Nominations for their originals and the following year they became the first Internet TV network to be nominated for an Emmy. In 2016 Stranger Things was released, which almost instantly became a pop culture phenomenon. Today, Netflix has become the most nominated service at the 2018 Primetime Emmy Awards, with 112 nominations. And this last year Netflix has also begun airing international originals like Scared Games from India, La Casa de las Flores from Mexico, and The Rain from Denmark. As we mentioned, Netflix has a current content budget of 7.5 billion, however, 85% of that budget is allocated to original shows and movies rather than licensing. Because of the high cost of creating original content, Netflix is currently $8.34 billion in long-term debt.

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