Netflix / Photo Credit: Netflix
WHAT IS NETFLIX? (In the
Entertainment industry.)
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WHAT IS NETFLIX?
How does Netflix work?
If you’ve ever used a streaming service, Netflix’s
interface will be instantly familiar, but even for first timers, getting
started is a breeze. Your primary source of movies will be your queue. As you
look through content on the Netflix website and app, you’ll see a little plus
sign in a circle. This button adds things to your queue for later viewing.
When you start using Netflix, your queue will be
empty. Enjoy this period. It will be the last time as a Netflix user your queue
will be fresh and new.
Netflix, Inc. is an American media-services provider
headquartered in Los Gatos, California, founded in 1997 by Reed Hastings and
Marc Randolph in Scotts Valley, California. The company's primary business is
its subscription-based streaming OTT service which offers online streaming of a
library of films and television programs, including those produced in-house. As
of April 2019, Netflix had over 148 million paid subscriptions worldwide,
including 60 million in the United States, and over 154 million subscriptions
total including free trials. It is available almost worldwide except in
mainland China (due to local restrictions) as well as Syria, North Korea, and
Crimea (due to US sanctions). The company also has offices in the Netherlands, Brazil,
India, Japan, and South Korea. Netflix is a member of the Motion Picture
Association of America (MPAA).
Netflix's initial business model included DVD sales
and rental by mail, but Hastings abandoned the sales about a year after the
company's founding to focus on the DVD rental business. Netflix expanded its
business in 2007 with the introduction of streaming media while retaining the
DVD and Blu-ray rental business. The company expanded internationally in 2010
with streaming available in Canada, followed by Latin America and the
Caribbean. Netflix entered the content-production industry in 2012, debuting
its first series Lilyhammer.
Since 2012, Netflix has taken more of an active role
as producer and distributor for both film and television series, and to that
end, it offers a variety of "Netflix Original" content through its
online library. By January 2016, Netflix services operated in more than 190
countries. Netflix released an estimated 126 original series and films in 2016,
more than any other network or cable channel. Their efforts to produce new
content, secure the rights for additional content, and diversity through 190
countries have resulted in the company racking up billions in debt: $21.9
billion as of September 2017, up from $16.8 billion from the previous year.
$6.5 billion of this is long-term debt, while the remaining is in long-term obligations.
In October 2018, Netflix announced it would raise another $2 billion in debt to
help fund new content.
Netflix was founded on August 29, 1997, in Scotts
Valley, California, by Marc Randolph and Reed Hastings. Randolph worked as a
marketing director for Hastings' company, Pure Atria. Randolph was a co-founder
of Micro Warehouse, a computer mail order company, and was later employed by
Borland International as vice president of marketing. Hastings, a computer
scientist and mathematician, sold Pure Atria to Rational Software Corporation
in 1997 for $700 million in what was then the biggest acquisition in Silicon
Valley history. They came up with the idea for Netflix while commuting between
their homes in Santa Cruz and Pure Atria's headquarters in Sunnyvale while
waiting for government regulators to approve the merger, although Hasting has
given several different explanations for how the idea was created.
Hastings invested $2.5 million in startup cash for
Netflix. Randolph admired the fledgling e-commerce company Amazon and wanted to
find a large category of portable items to sell over the Internet using a
similar model. They considered and rejected VHS tapes as too expensive to stock
and too delicate to ship. When they heard about DVDs, which were first
introduced in the United States on March 31, 1997, they tested the concept of
selling or renting DVDs by mail, by mailing a compact disc to Hastings' house
in Santa Cruz. When the disc arrived intact, they decided to take on the $16
billion home video sales and rental industry. Hastings is often quoted saying
that he decided to start Netflix after being fined $40 at a Blockbuster store
for being late to return a copy of Apollo 13. But this is an apocryphal story
that he and Randolph designed to explain the company's business model and
motivation.
Netflix was launched on April 14, 1998, as the
world's first online DVD rental store, with only 30 employees and 925 titles
available, which was almost the entire catalogue of DVDs in print at the time,
through the pay-per-rent model with rates and due dates that were similar to
its bricks-and-mortar rival, Blockbuster.
Netflix introduced the monthly subscription concept
in September 1999, and then dropped the single-rental model in early 2000.
Since that time (see Technical details of Netflix), the company has built its
reputation on the business model of flat-fee unlimited rentals without due
dates, late fees, shipping and handling fees, or per-title rental fees.
In 2000, when Netflix had just about 300,000
subscribers and relied on the U.S. Postal Service for the delivery of their
DVDs, they were losing money and offered to be acquired by Blockbuster for $50
million. They proposed that Netflix, which would be renamed as Blockbuster.com,
would handle the online business, while Blockbuster would take care of the
DVDs, making them less dependent on the U.S. Postal Service. The offer was
declined.
While they experienced fast growth in early 2001,
both the dot-com bubble burst and the September 11 attacks would occur later
that year, affecting the company badly and forcing them to lay off one third of
their 120 employees. However, sales of DVD players finally took off as they became
more affordable, selling for about $200 around Thanksgiving time, becoming one
of that year's most popular Christmas gifts. By early 2002, Netflix saw a huge
increase in their subscription business.
Netflix initiated an initial public offering (IPO) on
May 29, 2002, selling 5.5 million shares of common stock at the price of
US$15.00 per share. On June 14, 2002, the company sold an additional 825,000
shares of common stock at the same price. After incurring substantial losses
during its first few years, Netflix posted its first profit during fiscal year
2003, earning US$6.5 million profit on revenues of US$272 million. In 2005,
35,000 different films were available, and Netflix shipped 1 million DVDs out
every day.
Randolph, a dominant producer and board member for
Netflix, retired from the company in 2004.
For some time, the company had considered offering
movies online, but it was only in the mid-2000s that data speeds and bandwidth
costs had improved sufficiently to allow customers to download movies from the
net. The original idea was a "Netflix box" that could download movies
overnight, and be ready to watch the next day. By 2005, they had acquired movie
rights and designed the box and service, and was ready to go public with it.
But after discovering YouTube, and witnessing how popular streaming services
were despite the lack of high-definition content, the concept of using a
hardware device was scrapped and replaced with a streaming concept instead, a
project that was completed in 2007.
Netflix developed and maintains an extensive
personalized video-recommendation system based on ratings and reviews by its
customers. On October 1, 2006, Netflix offered a $1,000,000 prize to the first
developer of a video-recommendation algorithm that could beat its existing
algorithm Cinematch, at predicting customer ratings by more than 10%.
In February 2007, the company delivered its billionth
DVD, and began to move away from its original core business model of DVDs, by
introducing video on demand via the Internet. Netflix grew as DVD sales fell
from 2006 to 2011.
Another contributing factor for the company's online
DVD rental success was that they could offer a much larger selection of movie
titles to choose from than Blockbuster's rental outlets. But when they started
to offer streaming content for free to its subscribers in 2007, it could offer
no more than about 1000 movies and TV-shows, just 1% compared to its more than
100,000 different DVD titles. Yet as the popularity kept growing, the number of
titles available for streaming was increasing as well, and had reached 12,000
movies and shows in June 2009. One of the key things about Netflix was that it
had a recommendation system known as cinematch, which not only got viewers to remain
attached to the service, by creating a switching cost, but it also brought out
those movies which were underrated so that customers could view those movies
too from their recommendations. This was an attribute that not only benefited
Netflix, but also benefited its viewers and those studios which were minor
compared to others.
In January 2013, Netflix reported that it had added
two million United States customers during the fourth quarter of 2012, with a
total of 27.1 million United States streaming customers, and 29.4 million total
streaming customers. In addition, revenue was up 8% to $945 million for the
same period. That number increased to 36.3 million subscribers (29.2 million in
the United States) in April 2013. As of September 2013, for that year's third
quarter report, Netflix reported its total of global streaming subscribers at
40.4 million (31.2 million in the United States). By the fourth quarter of
2013, Netflix reported 33.1 million United States subscribers. By September
2014, Netflix had subscribers in over 40 countries, with intentions of
expanding their services in unreached countries. By October 2018, Netflix's
customer base reached 137 million worldwide, confirming its rank as by far the
world's biggest online subscription video service.
Early Netflix Original content
Netflix has played a prominent role in independent
film distribution. Through its division Red Envelope Entertainment, Netflix
licensed and distributed independent films such as Born into Brothels and
Sherrybaby. As of late 2006, Red Envelope Entertainment also expanded into
producing original content with filmmakers such as John Waters. Netflix closed
Red Envelope Entertainment in 2008, in part to avoid competition with its
studio partners.
Entertainment dominance, presence, and continued
growth
Netflix has been one of the most successful dot-com
ventures. In September 2002, The New York Times reported that, at the time,
Netflix mailed about 190,000 discs per day to its 670,000 monthly subscribers.
The company's published subscriber count increased from one million in the
fourth quarter of 2002 to around 5.6 million at the end of the third quarter of
2006, to 14 million in March 2010. Netflix's early growth was fueled by the
fast spread of DVD players in households; in 2004, nearly two-thirds of United
States homes had a DVD player. Netflix capitalized on the success of the DVD
and its rapid expansion into United States homes, integrating the potential of
the Internet and e-commerce to provide services and catalogs that
bricks-and-mortar retailers could not compete with. Netflix also operates an
online affiliate program which has helped to build online sales for DVD rentals
as well. The company offers unlimited vacation time for salaried workers and
allows employees to take any amount of their paychecks in stock options.
By 2010, Netflix's streaming business had grown so
quickly that within months the company had shifted from the fastest-growing
customer of the United States Postal Service's first-class service to the
largest source of Internet streaming traffic in North America in the evening.
In November, it began offering a standalone streaming service separate from DVD
rentals. On September 18, 2011, Netflix announced its intentions to rebrand and
restructure its DVD home media rental service as an independent subsidiary
called Qwikster, separating DVD rental and streaming services. Andy Rendich, a
12-year Netflix veteran, was to be CEO of Qwikster. Qwikster would carry video
games whereas Netflix did not. However, in October 2011, Netflix announced that
it would retain its DVD service under the name Netflix and would not, in fact,
create Qwikster for that purpose.
In April 2011, Netflix had over 23 million
subscribers in the United States and over 26 million worldwide. In July 2011,
Netflix changed its prices, charging customers for its mail rental service and
streaming service separately. This meant a price increase for customers who
wanted to continue receiving both services. On October 24, Netflix announced
800,000 unsubscribes in the United States during the third quarter of 2011, and
more losses were expected in the fourth quarter of 2011. However Netflix's
income jumped 63% for the third quarter of 2011. Year-long, the total digital
revenue for Netflix reached at least $1.5 billion. On January 26, 2012, Netflix
added 610,000 subscribers in the United States by the end of the fourth quarter
of 2011, totaling 24.4 million United States subscribers for this time period.
On October 23, however, Netflix announced an 88% decline in profits for the
third quarter of the year.
In April 2012, Netflix filed with the Federal
Election Commission (FEC) to form a political action committee (PAC) called
FLIXPAC. Politico referred to the PAC, based in Los Gatos, California, as
"another political tool with which to aggressively press a
pro-intellectual property, anti-video-piracy agenda." The hacktivist group
Anonymous called for a boycott of Netflix following the news. Netflix
spokesperson Joris Evers indicated that the PAC was not set up to support the
Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA), tweeting that the
intent was to "engage on issues like net neutrality, bandwidth caps, UBB
and VPPA."
In February 2013, Netflix announced it would be
hosting its own awards ceremony, The Flixies. On March 13, 2013, Netflix
announced a Facebook implementation, letting United States subscribers access
"Watched by your friends" and "Friends' Favorites" by
agreeing. This was not legal until the Video Privacy Protection Act of 1988 was
modified in early 2013.
Services
Netflix's video on demand streaming service, formerly
branded as Watch Now, allows subscribers to stream television series and films
via the Netflix website on personal computers, or the Netflix software on a
variety of supported platforms, including smartphones and tablets, digital
media players, video game consoles and smart TVs. According to a Nielsen survey
in July 2011, 42% of Netflix users used a standalone computer, 25% used the
Wii, 14% by connecting computers to a television, 13% with a PlayStation 3 and
12% and Xbox 360.
When the streaming service first launched, Netflix's
disc rental subscribers were given access at no additional charge. Subscribers
were allowed approximately one hour of streaming per dollar spent on the
monthly subscription (a $16.99 plan, for example, entitled the subscriber to 17
hours of streaming media). In January 2008, however, Netflix lifted this
restriction, at which point virtually all rental-disc subscribers became
entitled to unlimited streaming at no additional cost (however, subscribers on
the restricted plan of two DVDs per month ($4.99) remained limited to two hours
of streaming per month). This change came in a response to the introduction of
Hulu and to Apple's new video-rental services. Netflix later split DVD rental
subscriptions and streaming subscriptions into separate, standalone services,
at which point the monthly caps on Internet streaming were lifted.
Netflix service plans are currently divided into
three price tiers; the lowest offers standard definition streaming on a single
device, the second allows high definition streaming on two devices
simultaneously, and the "Platinum" tier allows simultaneous streaming
on up to four devices, and 4K streaming on supported devices and Internet
connections. The HD subscription plan historically cost US$7.99; in April 2014,
Netflix announced that it would raise the price of this plan to $9.99 for new
subscribers, but that existing customers would be grandfathered under this
older price until May 2016, after which they could downgrade to the SD-only
tier at the same price, or pay the higher fee for continued high definition
access.
On November 30, 2016, Netflix launched an offline
playback feature, allowing users of the Netflix mobile apps on Android or iOS
to cache content on their devices in standard or high quality for viewing
without an Internet connection. The feature is primarily available on selected
series and films, and Netflix stated that more content would be supported by
the feature over time. Netflix will partner with airlines to provide them with
its mobile streaming technology. This will start in early 2018 as part of an
effort to get airlines to provide better in-flight Wi-Fi.
In 2018 Netflix introduced the "Skip Intro"
feature which allows customers to skip the intros to shows on its platform,
also known as "cold openings". They do so through a variety of
techniques including manual reviewing, audio tagging, and machine learning.
Subsidiaries
DVD.com – A Netflix company that allows members to
rent their favorite movies and shows.
Millarworld – A comic book company that was founded
in 2004 by Scottish comic book writer Mark Millar as a creator-owned line.
Netflix Pte. Ltd. – Netflix's studio in Singapore.
Netflix Services UK Limited – A British division that
holds Private limited with Share Capital.
Netflix Streaming Services International B.V. – A
Netflix subsidiary in the Netherlands.
Netflix Streaming Services, Inc. – A subsidiary that
license and streams all of Netflix's films and shows.
Netflix Global, LLC – A Foreign Limited-Liability
Company filed on August 3, 2016 that co-produces all foreign programming and
films
Netflix Studios – A film and television studio that
co-produces any original or foreign content.
Netflix Services Germany GmbH – A studio that
contributes to German film subsidies supporting domestic movie and TV production
in the country.
NetflixCS, Inc. – Another located 1108 E SOUTH UNION
AVE Midvale, UT 84047 (Mid-Atlantic U.S.).
Netflix Luxembourg S.a r. l. – A subsidiary located
in Luxembourg, Europe.
Sources, References & Credits: Google, Wikipedia, Wikihow, WikiBooks,
Pinterest, IMDB, Linked In, Indie Wire, Film Making Stuff, Hiive, Film Daily, New
York Film Academy, The Balance, Careers Hub, The Numbers, Film Maker, TV Guide
Magazine, Blurb, Media Match, Quora, Creative Skill Set, Chron, Investopedia,
Variety, No Film School, WGA, BBC, Daily Variety, The Film Agency, Best Sample
Resume, How Stuff Works, Studio Binder, Career Trend, Producer's Code of
Credits, Truity, Production Hub, Producers Guild of America, Film Connection, Variety,
Wolf Crow, Get In Media, Production Beast, Sony Pictures, Warner Bros, UCAS, Frankenbite,
Realty 101, Careers Hub, Screen Play Scripts, Elements of Cinema, Script
Doctor, ASCAP, Film Independent, Any Possibility, CTLsites, NYFA, Future Learn,
VOM Productions, Mad Studios, DP School, DGA, IATSE, ASC, MPAA, HFPA, MPSE,
CDG, AFI, Box Office Mojo,
Rotten Tomatoes, The Numbers, Netflix
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Netflix / Photo Credit: Netflix
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