Welcome to the channel. You’re about to watch “How Netflix Started.” Before jumping into the video,
don’t forget to click the bell button and subscribe to the channel for more amazing and
exciting videos. For millions of people around the globe, Netflix is the perfect place to go for TV
streaming and movies. In fact, it has been reported that over 15% of the total internet
bandwidth of the world consists of its services alone. Well, not bad for a company that used
to post DVDs by snail mail. Today, we’ll explore the origins of Netflix and take a
look at some of its important milestones. Without further ado, let’s get started.
When Netflix started streaming movies and TV shoes back in 2007, it had the market more or
less to itself. At that time, watching videos on the Internet truly meant to be on YouTube,
where you could see cats or dogs on skateboards and some short SNL clips.
Now, many media companies and racing to catch up to Netflix and started their own streaming
service. But they are still far behind. It is actually their own fault. They saw Netflix turn
into a streaming powerhouse right in front of them – and even worse, with their help.
First of all, you might be wondering how it got the name “Netflix?”
But you could actually work this one out of yourself. Even if you’re still stumped, the name
is a combination of “Net” which is an abbreviation for Internet and “Flix” which would be variation
of the term “Flick” commonly used for movies. The story of Netflix kicks off with a ride down
the Sunset Boulevard where it all started physically.
Billboard that were used to advertise TV shows and movies from different studios and network are now
solely dedicated to products of Netflix because Netflix purchased all of these billboard.
But the origin story actually goes back to 1997. Founded by Reed Hastings and Marc Randolph,
Netflix was actually a movie rental service when it first opened. The users on the website
were allowed to order movies and then, they would receive the DVDs in the post.
When they were finished watching, they would simply post those DVDs back to Netflix in
the given envelopes. This was actually pretty convenient for those who did not have any video
rental stores nearby. Remember those stores? The story behind this idea is actually pretty
interesting. Legend has it that Reed Hastings decided to start movie rental service through
Netflix when he went to his local Blockbuster to return the copy of Apollo 13. He was told that
he owed them $40 in late fees. Fearing about what he would tell his wife about the steep late fees,
he was convinced that there must be a better option for renting videos. It this way, he
began to devise what would later become Netflix. Although Marc Randolph disputed the Reed’s origin
story about the origin of Netflix, but one thing was clear that it changed the way we
rented movies. In 90s, Blockbuster was the king of video rental but the mail-order DVD
rental service of Netflix was unique in its own. Although the mail-order rental service
was an important element in the early business of Netflix, but it was never set out to be an
entertainment distribution company. In fact, DVD rentals were never the endgame of Netflix. It was
just a way for the new company to gain a good start in the competitive entertainment market.
The rental costs for the DVDs was about $4 plus extra $2 for postage. The users were given a
time span of seven days to return the DVD. After making a significant growth, Netflix changed to
a subscriber-based model in 2000. According to this model, the users could keep the DVDs for
as long as they wanted but they could only rent a new movie when the returned the previous one.
Over the next five years, Netflix achieved significant milestones. It hit one million
subscribers in 2003. It was during the same year that Marc Randolph stepped down as a
member and said goodbye to Netflix forever. 2006 was an amazing year for the media company as the
subscriber count hit 6.3 million. During the same year, they announced the “Netflix Prize.”
It announced a prize of $1 million to the team or person or anyone who would accomplish a set
accuracy goal in recommending movies based on their personal preferences. Do you think
you would win that if it was announced today? 2007 was an amazing year for Netflix. Although
the rental DVD business of Netflix was going great but the entertainment company decided to take an
innovative step and permanently transformed their business by introducing their first streaming
product, “Watch Now.” The introduction of this streaming product was radical at that time. As we
can see, the introduction of streaming wasn’t that all radical, it was a logical extension of what
Netflix had already been doing. But the fact that they were willing to essentially transform the
whole company with streaming was truly radical. At that time, the demand for video streaming was
actually non-existent. Clearly, the technologies for streaming were really bad in 2007.
Even the fastest broadband connection could not get you a higher resolution for video streaming.
This means that the overall quality for streaming the video was worse as compared to DVDs.
When the streaming was launched by the company, it was only compatible with Internet Explorer
after the users downloaded an applet for the video player to work. You can imagine all of the
struggle! For this purpose, the company invested $40 million for the innovations in the streaming
technologies. It was a real risk. Even though their core business was going strong but they
decided to invest time and money in their streaming product even though there was no
consumer demand and only few people thought that it would work. But when people caught on, Netflix
had the largest library of titles with best streaming technology and biggest subscriber base.
In 2008, Netflix decided to stop the DVD retail sales just a week after announcing its partnership
with American cable TV network Starz which gave access to more than 2,500 TV shows and movies.
Although retail sales had created a strong base and earned amazing revenue, but it was clear
that retail sales was never a part of their long-term growth strategies. Later in 2011,
a new platform named Qwikster was launched by the company which would serve as a separate option for
rental service while Netflix would focus solely on streaming. This proved to be a blunder. With
the new increased prices, the company lost over 800,000 subscribers. It was being labelled as the
imminent downfall of the company. But less than a month after announcing the new platform Qwikster,
the plan for it was entirely scrapped off before its launch. Despite the mistakes,
Netflix finished the year on a high note. Between 2007 and 2011, the number of subscribers edged up
from 6 million to 23 million due to the streaming services. And the app was introduced on Google
Play and App Store during this period. Although the period of 2007 to 2012 may
have been a hard time, but from 2013 onwards, the entertainment company continued to exceed
the expectations and made innovations in the world of streaming. The first step? It reinvented itself
as a TV and movie studio. In 2013, Netflix already had the ambitions of producing original content.
Although it may sound counterintuitive for an engineering company, but it made perfect sense to
Netflix. The more content it produced, the more subscribers it gained which resulted in higher
revenues. It was in no time that Netflix released its first high profile production show “House
of Cards” which is said to attract comparable audience as that of the major cable TV shows.
In 2014, Netflix made steps to expand the services globally by launching in six European countries.
The same year it had won seven creative Emmy Awards for Engineering. In 2015, the services
expanded in Australia and Asia and many other countries in Europe. By 2016, they service was
successfully made available in 190 countries, with programs being offered in 21 languages.
They also introduce the download features which would allow the users to stream offline.
2017 was another amazing year for Netflix. They won their first Oscar for Best Documentary Short
Project for “The White Helmets.” During the same year, the subscriber count had crossed 100
million mark. They expanded globally with popular series like Dark, La Casa De Papel and Suburra:
Blood on Rome. The year ended with a little controversy as the company jokingly called
out users for watching the same film multiple times. This sparked a debate about privacy that
the users were being monitored by the company. 2018 was another amazing year for the company.
It won 23 Emmys out of 112 nomination – tying the most wins with HBO. In 2019, Netflix won
four Oscars for the original film Roma. However, everything has not been rosy for Netflix lately
as other companies have been expanding their streaming services like Disney and Apple.
With the launch of Disney+, it meant that Disney blockbusters like Star Wars film to be pulled
off from the platform. Therefore, Netflix is moving to the production of original content.
That is why, they spent over $12 billion to increasing their library of original series
and films. Based on this, it is clear that they will focus majorly on producing their own content
instead of relying on other competitors not pulling their content from the platform.
Another option would be to move with an advertisement based system.
However, they have strongly opposed to this. But the subscriber count for Netflix
doubled that the estimation during the lockdown with more than 16 million paid subscribers
increased. Because it had so much content already banked, its 2020 release schedule has hardly been
impacted by the virus. (Traditional film studios, meanwhile, still have no idea how or when they’ll
be able to release their movies.) Netflix had about 60 original films and TV series
due for release in July alone—almost two new pieces of content every day.
The company has weathered many storms before and we are pretty sure it will
continue to grow with new innovations in streaming services. But only time will tell.
You’ve just watched “How Netflix Started.” Are you a user of Netflix or any other streaming
service? Tell us in the comments. We hope you liked the video. Thanks for watching.