Netflix case Study: Digital transformation of the Century

“Netflix” is the world’s largest streaming channel for the film industry, providing Independent Films, Movies & Web Shows.

Netflix case study, Netflix

Netflix: The Rise of Video-on-Demand

The internet has completely changed the Life & Lifestyle of the Peoples. The days are gone where the entire family will assemble in the living room to watch the very same show as everybody else. Technology has advanced to the point where we’ve dumped the old immovable boxes in favor of our phones and computers. In today’s world you can watch whatever you want, whenever you want, on-demand straight from the internet. Hence, The ‘Netflix Case Study’ is an Important topic to discuss as we are now in the age of Video-on-Demand,and so this week on Behind the Business we’ll be taking a look at the company that lies at the heart of this recent revolution.

Netflix, as the Revolutionary Platform that has given the rising opportunity for the independent Film making in the form of Web Series. It’s not going to be false if we credit Netflix to popularize the Web Series among the people and many different countries.

Netflix History & the Beginning of an Idea

The year was 1991 and Reed Hastings was getting ready to start his first company. Hastings and two of his friends started a company in 1991 called Pure Software. The company sold a range of debugging tools for Unix operating systems at a time when there were few good ones on the market, and so it rapidly became a big player in the IT world. It doubled its revenue every year for 4 years in a row and in 1996 it was sold to Rational Software for 700 million dollars. In the span of half a decade Hastings had become a millionaire. Life seemed great, but in 1997 he suffered an inconvenience that would eventually become a world-changer.

Hastings had forgotten to return his video-rental of Apollo 13 and as a result was slapped with a 40 dollar late-fee. He was embarrassed and didn’t want to tell his wife, and that got him to thinking of a solution. Perhaps not a remedy with his own delayed dilemma, but a solution to the problem of everybody else; a wholly separate film-rental scheme that might render late-fees redundant. Together with a friend of his, on August 29th 1997 in Scott’s Valley, California, Hastings founded a brand new movie-rental service called ‘Netflix’, with the idea of mailing DVDs to paying customers.

The creation of Netflix was essentially abet on the DVD player. Later, the DVD player was introduced by Sony in Taiwan in 1994, but not until March 1997 that this was launched for the first time in the US. Back then a player cost over a thousand dollars, and when It was formed, less than 1 percent of Americans actually owned one.

In a step that appeared crazy at the moment, Hastings played all this on the promise of DVD innovation to overtake the heavier, lower-resolution video tape as the country’s chosen medium. In 1997 it was almost impossible for people to rent DVDs because very few places had any. After trying over 200 different mailing packages and testing them out by mailing them to himself, Hastings discovered that he could safely ship DVD for the small cost of a first-class mail stamp.

They also introduced something that is now one of Netflix’s proudest hallmark: smart suggestion algorithms (An Artificial Intelligence technique we are using today). Once a customer had rented enough titles, It could automatically suggest new movies that were likely to interest them. Nowadays when Google and Facebook know everything about us through our data, it’s easy to take such algorithms for granted, but in 1997 they were practically unheard.

Roller-Coaster Journey of the Netflix

Netflix started strong and just 48 hours after opening they had to upgrade their website’s bandwidth due to excessive traffic they were receiving. They quickly decided to sign special offers with Toshiba, Hewlett-Packard and Sony, offering free rentals to people who purchased new DVD players. In July, 1999, It secured a 30 million dollar capital injections from Groupe Arnault, which allowed them to start a subscription-based service called the Marquee Program. For just under 16 dollars per month, customers could rent out as many DVDs as they wanted, as long as they had no more than 4 DVDs at any given time: no late fees, no due dates; it was perfect.

At that time, Netflix had already earned 10,000 DVD orders nearly everyday, however the overall revenue was merely $5 million. Evaluate this with the $4.5 billion in sales from Blockbuster and maybe you’ll definitely have that Netflix wanted to continue to partner up with them. They invited Blockbuster to become a strategic partner and investor. Netflix would become the Internet arm of the Blockbuster brand, dropping the Netflix name altogether in favor of Blockbuster laughed them out of the boardroom. Blockbuster were certain Netflix would crumble, as it has yet to turn a profit three years after its creation.

Few months later Blockbuster partnered up with Enron Broadband, a division of the energy company you probably know today for its notoriously fraudulent accounting practices. Of course at the time nobody knew that and so investors praised Blockbuster’s decision. The situation for Netflix looked grim. They began making a loss quickly and recorded a massive loss of $57 million at the end of the year.

Hastings was convinced that DVD technology would prevail. The only thing that mattered to him was to simply survive until that happened and 2001 was the year when things finally started going on his way. The price of DVD players plummeted, with some going around for less than a hundred bucks. 2001 also saw the 9/11 terrorist attacks. Fearful Americans took refuge in their homes and Netflix subscriptions skyrocketed. Despite growing at an unprecedented rate, It still hadn’t turned a profit, and so in 2002 they went public to keep the company going. They passed the 1 million subscription threshold in 2003 and eventually saw their first productive year. Just as their fortune started to turn, however,in 2004 Blockbuster finally released their own online DVD mail service. Before long Walmart also joined the fray,and a three way battle to undercut one another ensued. Blockbuster and Walmart, however, were a bit late to the party.

By 2005, out of its range of over 35,000 movies, Netflix sold 1 million DVDs a day. Eventually this drawn-out battle of attrition took its toll and in 2005 Walmart decided to quit. Blockbuster followed suit, and as the era of brick-and-mortar video rental came to an end, so did their success. The same CEO who had refused Netflix was removed in 2008 when Blockbuster reported in bankruptcy in 2010. Netflix performed heroically and welcomed the delivery of its billionth DVD in 2007.


Hastings began the journey of making the very bedrock of his company obsolete. This was his end-game; the reason he had been willing to sacrifice profits for so long and the same reason he had prophetically cited back in the year 2000: Video-On-Demand. In 2007, Netflix finally began to offer streaming of on-demand content, and the platform was originally free of cost.

They made an agreement with premium cable outlet Starz in October 2008, which resulted in several major launches from Disney and Sony Library. The deal cost Netflix only $20 million dollars. The reason It got such a great price was because they were the only big player in town, and pretty soon they signed deals with Paramount, MGM and Lionsgate. Netflix were also pushing for partnerships with other brands and before long they were featured on nearly every major entertainment system on the planet.

Extreme Rise & Global Expansion

Nearly 30% of all North American broadband traffic at prime times originated from Netflix by 2010. In 2010, they spread to Canada, in 2011, Latin America and the Caribbean, and in 2012, Europe. 2011 turned out to be a year of huge surprise for Netflix. Netflix announced the production of their first piece of original content; a political drama called House of Cards, featuring Kevin Spacey and directed by David fincher. Netflix managed to outbid HBO by ordering the first two seasons upfront for 100 million dollars.

The first piece of Netflix original content was ‘Lily hammer‘, which aired on February, 2012. It was a relative success and it paved the way for the bigger shows that were to follow in 2013. It was ‘House of Cards,’ which first screened on February 1 and is now one of Netflix’s highly celebrated franchises. Broadcasting all at once the whole 1st season was indeed a daring decision by Netflix and it reshaped the way viewers watch television shows. Following the same format came ‘Arrested Development‘ in May, and ‘Orange is the New Black‘ in July.

Strategy of Suggestion Algorithm – [Artificial Intelligence]

Netflix brand case study is Incomplete without discussing about the Suggestion Algorithm, Also the Technology of Artificial Intelligence we are Experiencing nowadays. To keep individuals connected to their devices watching shows following show, Netflix kept going to use recommendation algorithms, all available on demand in its fullest. These algorithms have grown increasingly intelligent in recent years, and so they can now identify demand holes, offering Netflix an advantage in producing new shows. At this stage, Netflix will produce original content solely based on what its consumers desire before they have even realize they really want. That strategy has worked out marvelously for them so far and in 2013. Netflix received 14 Emmy nominations, nine of which were for House of Cards. They keep producing original content—from TV shows to documentaries to movies.

In 2019, Netflix have an estimation of 2768 hours of new original content for the year of 2020 and they will have spent more whopping dollars on content acquisition. Hence Now It is Proved,As an entertainment & media service provider; Netflix is The World’s leading Streaming Platform, now dominating the Entertainment Industry including Independent Documentaries, Movies & Web Series. Many Other Platforms like Amazon Prime, Starz, Showtime, etc. are knocking doors to beat Netflix.

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