Netflix, Inc. is an American media-services provider and production company 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 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 worldwide except in mainland China (due to local restrictions), 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 (MPA).
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 initial DVD rental business. Netflix expanded its business in 2010 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 diversify 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.
Video on demand introduction, declining DVD sales, global expansion
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.
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.