Netflix Case Study Essay

Submitted By egodson
Words: 1404
Pages: 6

NETFLIX The year was 1895; attendees at the Berlin Wintergarten Novelty Program excitedly piled in to the amphitheater seats to view the first motion picture ever projected for an audience. Fast-forward to today’s world, and the fascination with film and motion picture is still just as strong and viable; the only difference is the advanced technology and choices that are available. One of those choices is Netflix, the online Internet movie provider that streams thousands of movies and television shows to a subscriber’s computer, television, or hand-held device for a monthly fee. Netflix was founded in the summer of 1997 in Scotts Valley, California, the brainchild of Marc Randolph and Reed Hastings, who previously had worked together at Pure Software. The idea of Netflix came to Hastings when he was forced to pay $40 in overdue fines after returning the movie Apollo 13 well past its due date. Netflix as a firm came from humble beginnings with only 30 employees and 925 works available for rent upon launching its operations on April 14, 1998. Since beginning its initial operations, Netflix has ballooned, raking in billions of dollars in revenue annually. By employing a simple yet creative subscription based business model, Hastings and Randolph have been able to catapult the firm to the forefront of the entertainment industry, becoming the number one online movie company in the United States.
With the basic foundation of Netflix’s operations laid, we can now delve deeper into the firm’s inner workings, discover how it became such a largely successful enterprise, and offer some future projections for the firm based on current market and technology trends.
Netflix was established in 1998 and headquartered in Los Gatos, California. The firm has a selection of over ninety thousand DVD titles and offers a flat rate rental by mail to customers. In addition to its current inventory of fifty five million discs, Netflix also has a growing library of more than five thousand choices that can be watched instantly via PC or streamed through a television. The firm garners a strong following with over 6.7 million subscribers worldwide with 1.6 million discs shipped daily on average.
Netflix has had a storied corporate history since its inception in 1997. Only four years after beginning its initial operations, the firm initiated an initial public offering (IPO) on May 29, 2002 selling 5,500,000 shares of common stock at the price of $15.00 per share (denominated in US dollars). On June 14, 2002, the firm sold an additional 825,000 shares of common stock at the same price. Although Netflix’s unique business model was light-years ahead of its time, the firm didn’t post any significant profits until fiscal year 2013. As far as the operations side of the firm is concerned, Netflix mails about one hundred and ninety thousand discs per day to its six hundred seventy thousand monthly subscribers The firm’s subscriber counts increased from one million by the fourth quarter of 2002 to around 5.6 million at the end of the third quarter of 2006, resulting in increased revenue.
Today Netflix enjoys a large following of monthly subscribers; subscribers obtained by utilizing a simple, yet effective four-step business model. The first step begins with the customer; in this stage the subscriber creates their own customizable list of movies online from Netflix’s inventory of over ninety thousand titles. In the second step of the process, Netflix rush delivers the selected titles to the subscriber, usually in one business day. In step three, the customer receives the titles that they selected, and can keep the titles for as long as they want with no late fees, until they want to select a new list of titles, which leads to step four. In this final stage of the process, the customer returns the viewed discs via mail in prepaid envelopes and begins the process again; or they can skip all four stages of the process and view over five thousand titles