Netflix Company History

Netflix was founded in 1997 by Reed Hastings and Marc Randolph in a small California city called
Scotts Valley in Santa Cruz county. Reed Hastings has said the idea was sparked by a $40 fine he got
for renting the movie Apollo 13 from long-dead Blockbuster and returning it six weeks late.

While working out at the gym one day, the sting of the fine inspired him to think up a service that
allowed one to order a movie online and get it by mail.

According to Marc Randolph, however, this story is not true and was just a marketing gag. Instead, in
early 1997, Reed was the CEO of the company they worked for (Pure Atria), and Marc was its VP of
Corporate Marketing. Because a looming merger with another firm would leave them both out of a
job, Marc says Reed had told him, "Let's come up with an idea and you can run it and I'll fund it."

As they carpooled to work every day from their homes in Santa Cruz to Silicon Valley, Marc, who
wanted to start something like Amazon.com, pitched all sorts of e-commerce ideas to Reed:
surfboards, custom-built baseball bats, personalized dog food, and home-delivery shampoo. To all of
them, Reed's reply was simply, "that will never work."

Then, Marc heard of a hot new product invented in Japan called the DVD. He realized DVDs would
soon replace VHS Cassettes as the home viewing standard. After a bit of brainstorming in the car on
Highway 17, Reed was sold on the idea.

On a hot summer day in 1997, Marc and Reed walked into Logos Books & Records in Santa Cruz,
bought a CD of Patsy Cline's greatest hits, and mailed it to Reed's house a few blocks across the
town. When the CD arrived intact, they knew they had found their ticket to e-commerce glory.

On August 29, 1997, Netflix was registered and set up using at least $1.9 million from Reed Hastings.
Other investors later supplemented this capital. Reed Hastings, 37, became Chairman with 70%
ownership, and Marc Randolph, 39, the CEO and a minority owner.

After a few iterations in its first few years, Netflix eventually crafted a successful business model: a
subscription-based service with no due dates or late fees and unlimited access to content at $19.95.
It also had a "Queue" that subscribers use to specify the order in which DVDs should be mailed to
them and a delivery system that automatically mails out a DVD as soon as the previous DVD is
returned.

At first, Netflix would pack the DVDs in white envelopes, and it wasn't until 2000 that Netflix
changed them to yellow envelopes. But it only took the company one year to switch to the iconic red
envelopes we're more familiar with. The DVDs arrived in a thin package with a postage-paid return
sleeve inside, and Netflix covered all postage costs.

This formula proved a hit, and Netflix steadily added subscribers. Within five years of launch, Netflix
was shipping millions of DVDs daily.

KEY MILESTONES

August 29, 1997: Netflix is registered in Scotts Valley, California. The service is called Kibble in beta
testing, a kind of dog food, to remind the team of the old advertising adage that "It doesn't matter
how good your dog food advertising campaign is if the dogs won't eat the dog food."

April 14, 1998: The website launches as Netflix at 9 am. The video library has approximately 900
titles. Marc orders the movie Casino as a test, and it works. Within 15 minutes, the website crashes
as other orders start coming in, forcing them to run to the store to buy more servers. At the end of
the first day, they booked 137 orders.

1999: 239,000 subscribers sign up. Netflix's video library expands to 3,100 titles. After a meeting
between Marc and Sony goes bad, and growth becomes sluggish, Reed demotes Marc to President
and takes over as CEO.

2000: Reed Hastings approaches former Blockbuster CEO John Antioco and asks him to buy Netflix
for $50 million. During the meeting, John turns him down and laughs at Reed and the Netflix team.

2001: Netflix hits one million subscribers and continues to grow.

2002: Netflix goes public in May. The IPO raises $82.1 million and values Netflix at $309.7 million.
Reed has 500,000 shares, and Marc has 166,000 shares.

Netflix opens regional warehouses, bringing overnight delivery in response to subscriber complaints
that it took too long to get their DVDs.

2003: Marc Randolph leaves Netflix and sells his shares.

2006: Netflix finally becomes profitable, generating more than $80 million. Subscribers rise to 6.3
million.

2007: Netflix begins streaming content, delivering directly to TVs, computers, and tablets through its
Watch Now service. The first trial is in Canada. The service launches with 1,000 titles and is included
free in Netflix's $5.99 per month physical DVD subscription tier.

2010: Netflix changes its focus to streaming and introduces it to the United States. Reed tells
investors, "Three years ago we were a DVD by-mail company that offered some streaming. We are
now a streaming company which also offers DVD by mail."

Blockbuster files for bankruptcy

2011: Netflix splits its streaming business and its DVD rental business into two distinct subscription
packages: Netflix for streaming and Qwikster for DVD rentals. Reed reverses the unpopular decision
in less than a month after 800,000 subscribers abandon Netflix.

2012: Netflix starts making original shows. Its first show is Lilyhammer, followed by House of Cards in
2013. Since then, it has produced over 1,900 originals (becoming one of the best streaming services
for original content), many of which, like Squid Game and The Crown, have gone on to be
tremendously popular and won many awards.

2013: Netflix introduces user-profiles and rolls this feature out to all Netflix subscribers in August.

2015: Netflix is present in 50 countries.

2016: Netflix goes live in 130 countries simultaneously and adds local languages to its user interface,
subtitles, and dubbing.

2017: Netflix officially hits 100 million subscribers worldwide.

2021: Netflix hits 209 million subscribers in over 190 countries. Notable exceptions are North Korea,
Syria, China, and Iran. It has more than 15,000 titles across all its international libraries and earns
over $25 billion in annual revenues. The company introduces mobile games, allowing users to play
games on Netflix.
2022: Netflix loses 200,000 subscribers in the first quarter, the first time in over ten years.

https://www.makeuseof.com/how-when-netflix-start-brief-company-history/#:~:text=Netflix
%20was%20founded%20in%201997,returning%20it%20six%20weeks%20late.

Overview of the video streaming service industry

Video streaming has taken the world by storm over the past five years. By taking advantage of faster
internet speeds, companies in the entertainment have gradually transitioned to streaming in one
way or another. Through subscription or ad-based models, industry participants allow users to
stream movies and television from any mobile device with an internet connection. Companies
acquire content either through licensing deals or in-house film studios. The move to original content
has become increasingly popular since the pandemic. The video streaming industry provides a
variety of on demand content to users across the globe. Through paid subscriptions or ad-based
viewing, this industry allows customers to watch movies, TV, and live events from their television or
mobile device. Industry leaders often provide a tier-based subscription system where users can go
from a free (ad-based) account to a premium account with a monthly fee. The onset of the COVID-19
pandemic marked a turning point in the industry as demand for these services rose as well as
competition. Subscriptions grew 32% YoY in 2020 as the world was confined to their homes for
entertainment. As competition grew, many of the prepandemic ways of business were changed.
Media companies like Disney who had previously licensed their content to streaming services were
now starting their subscription-based services, effectively cutting off access to content for their
former business partners. This has pressured the likes of Netflix to invest heavily in original content
to compete.

Industry Positives

• Increased spending on original content which creates more incentives to become a subscriber

• Cable cutting trend allows users to save money and select shows they want to watch, slowly
eating into cables profits

• Popularity of foreign shows in U.S. market allow for larger amounts of content and more diverse
library

• Faster than before internet speeds increase visual quality of content and allow for a more mobile
experience

Industry Negatives

• Highly competitive market with plenty of options for consumers

• Low barriers to entry for companies already established in the digital media industry

• Subscriber retention rates drop around big releases, with some users only getting subscriptions to
watch the new content

https://www.biz.uiowa.edu/henry/research/
Corporate strategy & Mission statement
Netflix Inc.’s corporate mission is “To entertain the world.”

The first point of Netflix’s corporate mission statement indicates the entertainment business nature
of the company. However, this business category broadly includes movies, series, performance art,
stage plays, and others. Thus, this point of the mission statement may be too broad in specifying
Netflix’s operations, although it indicates possible strategic plans of diversifying the business. A
factor to consider is that the company’s “core strategy is to grow our streaming membership
business….” This core strategy refers to Netflix’s generic strategy for competitive advantage and
intensive growth strategies, and strategically implies the corporate mission statement. For example,
to effectively entertain the world, the movie streaming business must grow its membership to a
larger global scale. This is where the second point of Netflix’s corporate mission comes in, as the
corporation aims to reach audiences globally. This worldwide scale of operations also entails that
Netflix’s organizational structure is suited to providing online services to diverse audiences and
markets. The on-demand media streaming company’s corporate vision statement also addresses
such a strategic goal of international operating scale.

The online company’s strategic management uses the corporate vision statement to inform
organizational development direction, and the corporate mission statement to guide higher
performance achievement. Netflix’s operations management accounts for multinational business
growth, including that of subsidiaries and franchises like StoryBots. Based on its corporate mission
and vision statements, the company targets the international entertainment market’s biggest share,
as executives seek new partnerships to penetrate current and new markets. Furthermore, Netflix’s
corporate vision and mission statements keep the business open to diversification into other
markets that are not limited to online media. This possibility points to potential higher growth and
expansion of the movie streaming business, in line with the corporate mission statement’s aims in
entertainment products and the corporate vision statement’s emphasis on industry leadership.
Despite challenges regarding competitors’ similar strategic initiatives, Netflix satisfies the strategic
requirements of its corporate mission and corporate vision.

Netflix’s mission statement and vision statement push for greater business performance in the
global entertainment market. However, threats and strategic challenges against international
business growth are due to strong competition involving Amazon, Walmart, Apple, Google, and
Disney, as well as other firms that distribute entertainment content through media like DVDs. Still,
Netflix Inc. focuses on growing its multinational operations as a strategic management implication of
its corporate mission statement and corresponding corporate vision statement, ensuring the
improvement and strengthening of the business despite the forces of competitors.

https://www.rancord.org/netflix-corporate-vision-statement-mission-statement-strategic-analysis

Core Competencies
Netflix’s core competencies are its resources and its subscriber base. They help the company procure
shows, produce originals, and ensure that enough viewers watch them to justify the costs and
attract more people. Most of its competitors lack either the resources or the customer base. To hone
and modify these competencies, Netflix has to ensure that it keeps providing popular, high-quality
content to people

https://ivypanda.com/essays/netflix-incs-strategy-innovations-expansion/
Marketing Strategy
Marketing Strategy of Netflix

Netflix follows multi-channel marketing and utilizes social media, print media, website, Youtube,
billboards, and various other channels for promotions. Netflix does not only spends a huge budget
on campaigns but also utilizes the cost-effective tactics of marketing. So stream on the most
successful marketing strategies of Netflix.

Hyper-Personalization

Nowadays, marketers use personalization in their marketing strategies to make better relationships
with customers. But Netflix is one step forward in personalization. Hyper-personalization is a tactic
that Netflix uses to build relationships with customers. if you are a Netflix user, you must’ve got a
push message from Netflix suggesting any movie or series you might like. Also, in their application,
they prepare a list of “top picks for (your name).” Using the user’s name instead of using “top picks
for you” makes a big difference. After all, we got a name, and we would love to hear it from Netflix.

Pure content (no ads)

The content they offer is movies and series, and they know how to use them to create
advertisements. Netflix uses snippets from their movies/series or popular scenes to form their
advertisements. Netflix’s social media adverts, youtube ads, and other digital are purely based on
their content.

Meme Marketing

One can confuse Netflix’s social media page for a meme page. The OTT platform knows well that
Millenials and the Gen Z generation love memes, so they use meme marketing strategy to target the
audience. Moreover, most of the memes they create are based on their content to draw the
audience’s attention to their streaming platform.

Guerilla Marketing

The marketing strategy of Netflix includes guerilla marketing which is a non-conventional and low-
cost practice to promote a brand. But the results guerilla marketing brings are big in numbers.

Moment Marketing

Moment marketing is an approach to marketing that focuses on targeting your business to

consumers at the moment it matters – when they're already looking for you. Netflix, they are well
aware of the going events and use them perfectly in their marketing strategy.

Buzz Marketing

if the people know less about something, they will talk more about it. Netflix sells itself using this
tactic. Netflix releases snippets and drops hints for their upcoming releases. It forms an urge in the
audience to know what the brand is planning, and it creates a lot of excitement in the audience. All
this becomes a topic of all the chatters.

https://marqueex.com/marketing-strategy-of-netflix/
Netflix Target Market Segmentation
The Netflix target audience is located worldwide in around 190 countries. The typical age of Netflix
users is in the younger adult age bracket, a member of Gen Z or Millenials, and with a lower income
range of $25-50K. There are more female Netflix viewers than male, but only just – 52% female to
48% male. In the US, the average Netflix user profile has been found to correlate very strongly with
the average US citizen, based on a study of census data.

Netflix Demographic Segmentation

While Netflix demographics are highest for younger age brackets (Gen Z 70% and Millenials 65%),
the Netflix user age shows that older consumers are also a strong audience.

In fact, 54% of Gen X and 39% of Baby Boomers are reflected in Netflix viewer demographics as of
2020. In the US, Hispanic Americans are more likely to have a Netflix subscription, with 70% saying
they were subscribed compared to 61% of white Americans. The average Netflix target consumer is
not highly educated, with close to 70% having some or no college education.

Netflix Geographic Segmentation

Once, Netflix users had a majority base in the US, however this is no longer the case. Worldwide,
Netflix subscriber numbers are split quite evenly between North America, and Europe, Africa and the
Middle East combined, with Latin America and Asia Pacific trailing behind.

https://www.statista.com/statistics/483112/netflix-subscribers/

Interestingly, in recent years, the Asia Pacific market has demonstrated the greatest growth in how
many Netflix subscribers, with 65% increase alongside a 62% increase in revenue in 2020.
In contrast, Netflix already has high penetration in the US, with 70% of US broadband homes
subscribed to the streaming service. This points to the fact that the US is a saturated and mature
market, with less potential room for growth than newer target markets in Asia

Netflix Behavioral Segmentation

The Behavioral segmentation of Netflix is used to provide customized TV and film content daily to
every active subscriber. This is done automatically using artificial intelligence (AI), machine learning
technology. The subscription plan and pricing, and viewing preferences of every Netflix customer are
profiled. This profiling is done by the behavioral pattern of each subscriber while they are on Netflix
mobile device app. The information gathered is then used to divide customers into different
segments based on their viewing choices and actions. Netflix is fully aware of the films or TV series
viewed by its customers in the last 30 days. Therefore, they can promote movie or TV programming
genres and content to subscribers based on recommendations by their AI/machine learning
technology.

While the largest group falls into the $35-50K income bracket, more affluent consumers make up a
large chunk of the Netflix target market, with 40% earning $75K or above. Password sharing is rife,
with 70% of Netflix consumers who share their Netflix password.

Netflix enjoys very high conversion rates with 93% of users who signed up for the free trial deciding
to take a subscription.

For Netflix users, pets are an important part of their viewing experience. Twenty-two percent of
users who watch Netflix with their pets say they bribe them with a treat to continue watching
together, and a full 12% say they switched shows because their pet didn’t seem to like it!

Netflix Psychographic Segmentation

The Netflix target market is very broad, ranging across all age groups and socio-economic levels.
Netflix aims to appeal to a wide range of psychographic segmentations, reflected in the broad
content streamed on the platform, from kids entertainment, to documentaries, rom coms, action
movies and comedy.The Covid lockdowns spurred a surge in Netflix consumption, with Netflix
accounting for the largest share in streaming minutes in the US (34%). The Netflix audience tends to
skew liberal politically, with just 34% of Netflix users saying they identify as conservative.