This case presents the phenomenal growth and enormous success of a young and forwardlooking company called Netflix. It discusses the turbulent industry environment where it confronts rapid and ongoing shifts in technology, everchanging consumer preferences, and intense competitive challenges. Netflix is the largest subscription service or movies and TV episodes in the world. For $8.99 per month, Netflix offers an unlimited quantity of movies and
TV episodes streamed instantly over the Internet to a continually expanding variety of devices and DVDs delivered by mail to more than 15 million subscribers. Let’s start at the beginning and see how this company became so successful.
Chairman and CEO Reed Hastings cofounded and incorporated Netflix in August 1997
as a more conventional rental service, with online offerings. A former Netflix director described
Hastings as, “ An engineer, is analytical and very charismatic… that’s a rare combination.”
Almost a year later, Netflix opened its Internet store for DVD rentals and then in 1999, it offered a subscription service. Their initial rapid growth can be attributed to its early strategic relations with leading DVD hardware and home theater equipment manufacturers such as Sony or
Toshiba as well as marketing tactics to build brand recognition and acceptance among the growing DVDrental consumer base. At the end of 1999, Netflix announced the elimination of due dates and late fees, helping it to quickly become a popular rental service and it also did not charge shipping and handling fees or pertitle rental fees. Netflix became very popular and due to a very high demand Netflix needed to build new distribution and shipping centers every year.
In 2003, Netflix recorded its first profitable year with record revenues of $272.2 million, up 78%
from the prior year. In 2005, the number of subscribers grew to a record high of 4.2 million, 60% over the previous year. Netflix continued to have solid growth years in 2005 and 2006. In 2007, Netflix launched its streaming service “Watch Now” which allowed subscribers not only to rent online and continue to receive DVDs through mail but also watch more than
1,000 movies and television shows via their PCs. In the same year, Netflix launched Red
Envelope Entertainment, which was a division whose purpose was to “leverage its proprietary technology to offer subscribers unique and original content to which they wouldn’t otherwise have access. In 2008, Netflix joined with Roku, an innovator in digital media streaming technology to produce The Netflix Player by Roku. This device was crucial because it enables subscribers to instantly stream movies and TV episodes from Netflix directly to the TV. They also entered a partnership with Microsoft to offer customers the ability to use their Xbox 360 video game system to stream Netflix. More partnerships would take place with companies including CBS, Disney Channel and Starz entertainment. Over the next few years, more alliances would be made and Netflix continued to grow. At the end of 2009, Netflix employed
1,883 fulltime and 2,197 temporary employees at the corporate headquarters in Los Gatos,
California and in its shipping centers across the nation. Netflix has many organizational strengths which have contributed to their success. One of their most important strengths is the constant improvements being made to Information
Technology. Netflix realizes the importance of IT and the crucial role it plays in the industry they compete in. In order for Netflix to cut costs, while also providing incredible customer service requires Netflix to stay on top of their IT. Another strength of Netflix's organization is their superior web platform which is compatible with almost every portal available. Their web platform
can also withstand a large amount of users which is the foundation of their Brand experience.
Making sure consumers have a