I couldn’t even tell you how much time I’ve spent watching Netflix.
Today everyone thinks of it as a video streaming service but I’m sure many of you remember that they actually started out by renting DVDs.
There were two people who started Netflix together, they were Marc Randolph and Reed Hastings. Before founding Netflix, they were working in the software industry in the Silicon valley.
In 1991, Reed Hastings was the co-founder and the partial owner of a company named pure software. Within five years, that same company became so big which made it involved in a near billion dollar merger to a company named Atria that further made a new company called Pure Atria.
Soon after that, they acquired a small start-up with only nine people in it and Mark Randolph was one of those people. He became the Head of the Marketing where he soon started working with Reed.
They became quite good friends as they used to live close together. After one year of that big merger, Rational software acquired Pure Atria. This transition led them to leave the company for the better. They had the money, experience and the time to think of a new business. They used to research on ideas for their new business in the big portion of the day.
They knew that internet community was growing at an excessive limit and will continue to grow in the future as well but they didn’t know what products to sell.
They were gravitated towards the ideas of movies but then they extract the exact potential of DVDs. For them, DVDs could bring them a profitable business. DVDs were released in early 1997 in United States and these two started testing them immediately.
They test these with CDs and the test went well. In April of 1998, they started NETFLIX. It is a startling fact that if DVDs would not have been released at that exact moment then Netflix was most likely would never been existed. So, starting of something can lead to the generation of something more marvellous phenomenon and only a starting push is required to do so.
When the service first started, they offered DVDs for a 7 days rental period. They procured more money by selling them rather than renting them.
In 1999, they completely stopped selling movies and it was kind of a bold move to cut off their main source of the revenue. For that year, their sales accounted for only 3%. They were getting sales due to lack of competition but once the competitions start their sales could have gone down. So, they came up with the idea of monthly subscriptions…
They called it as Marquee Program where some one can four rentals for $15.95 per month which also included shipping in it. In February, 2000, they extended their subscription to unlimited rentals at $19.95 per month with the limit of 4 at a time.
There were no due dates or late fees in Netflix which people hated in other rental shops. They always thought of a strategy for a long term. Basically, they were never concerned about making quick money. They wanted their product to be known for the better.
For their first five years, Netflix made about nil money and they sacrificed something to get much better in the further future.
Reed Hastings keep investing his money on Netflix for a long period of time. Even though the company was facing the losses, it had believers.
In 2002, they raised 82 million dollars through a public stock offering. Netflix went crazy with their marketing budget. They would run advertisements all over the internet. They would run radio commercials, prints, mails and they even had the free trials to promote Netflix every place they could get into. Needless to say, all that hard work actually got paid off.
In 2004, they announced their partnership with TIVO saying that they would work together to develop an effective way of streaming movies over the internet. Everyone was excited about this. In reality, it was in 2007 when Netflix actually started its first streaming through their watch now service.
Today the streaming service make up of 98% of their total revenue and Netflix has become a leader of its own in the streaming of movies.