Introduction
Netflix is a prominent player in the digital entertainment streaming market with the constantly growing number of subscribers. In 1997, Reed Hastings and Marc Randolph founded Netflix and established its headquarters in Los Gatos, California. Currently, Netflix can be accessed in more than 190 nations worldwide. Since 2000, analytics for business have guided Netflix’s marketing initiatives, making it a leader in the sector. Online platforms for movies and series are actively developing now, and people in all countries use these services, which foregrounds the importance of developing this type of business.
Historical Development of Netflix
Netflix can be regarded as the pioneer in online streaming services, and its distinction is that it does not only stream video but also creates content. The first-ever online TV show to be awarded with an Emmy for best director was Netflix’s series “House of Cards.” In 2014, Orange has gained three Emmy Creative Awards. The streaming service received 31 nominations in 2014 and 34 nominations in 2015. With 56 nominations in 2016, Netflix surpassed HBO with only 96 awards and FX Networks with 38 awards as the third-largest platform for online video. Therefore, the history of Netflix shows that the idea that determines the business decisions of the company is successful and appreciated by the audience.
The format of the company and its business model changed with time due to the development of technologies. Marc Randolph and Reed Hastings founded the company in 1997, as already mentioned. The business model was based on the idea to rent individual copies of 900 different DVD movie titles and send them to customers via mail. The business moved to a subscription model in 2000, allowing consumers to receive DVDs regularly for a monthly payment. It delivered its one billionth DVD in 2006, making it the most extensive DVD subscription service. These services were determined by the spread of the devices that could read DVDs, and Netflix focused on the most popular video distribution format.
The last decade was marked by the revolution in people’s access to content on their devices. Netflix launched a movie streaming service in 2007, and this format continues to be relevant at this moment due to the accessibility of the quick Internet connection. Nonetheless, it continues to operate a DVD subscription business for those customers who want to buy physical copies of the video materials they like. To service its clients, Netflix took up more than 35% of the Internet bandwidth in the United States in 2016. In other words, Netflix is the most significant participant in the streaming movie and TV show business, making the subject critical for discussion.
The company has achieved financial success and popularity in recent years, evidence of choosing the appropriate business model. For example, by the second quarter of 2016, there were 83 million users globally, including 45 million in the US, where 60% are located. Netflix declared in 2016 that it was now available in every international market outside of China and that it had added 3.5 million new users outside of the US. Since going public in 2002, Netflix’s shares have grown by over 8000%. The statistical data shows that the corporation’s development is significant, and the progress happened after Netflix became the online streaming platform.
At the same time, Netflix faces challenges and complexities in developing its business and retaining its position in the market. The first problem is low earnings, and although revenue in 2015 increased by 22% to $6.7 billion compared to 2014, earnings were less than half of the previous year’s total. Another issue is subscription losses, and in 2016, several Netflix customers canceled their accounts due to price increases and the expansion of Amazon’s separate video streaming business. It is viewed as a growth company, trading for more than 300 times its estimated earnings, making it far more costly than Google, Facebook, or other companies in the technology sector. Therefore, Netflix has rivals in the streaming services market that have launched similar platforms.
Conclusion
Observations regarding market rivalry, company dynamics, and identifying potential opportunities and risks show that Netflix is among the leaders in streaming video services. Netflix can set itself apart from television programs and draw in prospective subscribers looking for original programming rather than repeats from the broadcast channels by creating its material. Even though the cost of producing unique creations is substantially higher than that of licensing already-existing content, it makes Netflix unique in the market.
References
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Greenstein, S., ‘The Basic Economics of Internet Infrastructure’, The Journal of Economic Perspectives, vol. 34, no. 2, 2020, pp. 192–214.
Lobato, R., Netflix Nations: The Geography of Digital Distribution, NYU Press, 2019.