Netflix History
In this age of online industry, there are tons of great things available for everyone. When we want to know something, we just Google it.
When we want to get socialize, we use Facebook and when we want to watch a TV series or a movie the first thing that comes in our mind is Netflix. Today we will talk About Netflix Business Model after talking about some Netflix History.
Netflix is a champion of innovation which is looking for new ways to grow and outcome their competitors. In the old days, when you wanted to watch a movie you have to visit a physical store like Blockbuster or a random Cassette shop.
They rent us our favorite movie and we watch it with our family with a bucket full of popcorns. Life was happy and satisfying. With the advancement of the internet came Netflix, making all the Blockbuster stores around the globe a memory.
Fun Fact is Netflix also started as a DVD rental store now it’s one of the main distributor and video content creator around the globe with millions of subscribers that are advancing rapidly. So what is the Netflix business model and revenue that makes it across all the charts of this entertainment industry?
Netflix Business Model – The Beginning
Watching a movie on a rent was a little bit of trick at the start. If your rental time has just exceeded a little bit, they will charge you more. The founder of Netflix Reed Hastings and Marc Rudolph found this very convenient for the customers.
They started renting movies via Mail at the start of Summer. At that time, Reed and Marc were admired by the services of Amazon, so they wanted something same that is portable, durable and desirable to deliver through the mail.
Netflix Business – A major risk at the start
Video Home System VHS was quite famous when Netflix started their renting services and DVD technology just entered the show. It was a new technology with advanced features. VHS cassettes were both heavy and bigger than an ordinary DVD. They started renting DVDs when there were only 2% of households available in the US that are using DVD players.
They took a major risk and started their business. The initial business model was to use the internet where customers come and order a specified video and later delivered to them via mail.
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Start Of Netflix Business Revenue Model
Netflix innovated on the revenue model instead of Paid to Rent Model. Netflix tested subscriptions which were a real game changer at that time. With subscriptions, you could rent as many DVDs as you wanted per month for a fixed flat fee.
This obsoletes the traditional renting services with no due dates and late fees. This subscription model became a huge step for Netflix and the company gained 1 million subscribers by the start of 2003.
Shifting from DVDs to Netflix Streaming
Netflix always invested their time and money in the future. When they saw mobile and computers are getting better and better each day and more and more people are accessing the internet daily, they started shifting their customers to streaming subscribers where they can stream a video online.
Netflix is by far the first online player to watch movies and TV shows with 125 million subscribers and 11.7 billion revenue in 2017. As of 2018, Netflix subscribers have increased by 6.96 million and estimated revenue is 4 billion with the increase of 36 percent.
Netflix Other competitors
Netflix isn’t the only streaming company now; it has to compete with other services available on the internet like Amazon Prime, Hotstar, Hulu etc. This increases the marketing expenditure for Netflix in order to stay at the top.
Marketing expenditures primarily include affiliate payments, advertising, and the first-month-free account for every new customer.
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How does Netflix work?
Netflix uses a Content Delivery Network or CDN to transmit and store TV shows and movies. CDN solves a problem of higher latency and bottleneck by utilizing multiple servers to cover many geographic areas of the world.
This enables us to watch online content without slow buffering at the ease of our home. Netflix is gaining its popularity because of the following four elements
• Fixed Reasonable Price
• Compatibility
• Original Quality content
• A huge amount of database for movies and TV shows
Netflix has some traditional business actors worried at a specified point. The way it’s changing our entertainment industry and TV, People moved from linear TV (in which they just watch what is streaming) to On-demand movies/Tv Shows.
Netflix brought together many creators and distributors together on the same platform and finally, with the release of original movies available on the day of release, Netflix started turning movie theater businesses against it.
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How does Netflix make money?
Netflix main source of revenue is by its subscribed users. The company offers 3 different monthly plans for customers based on different quality. These are
Basic Package – Standard Definition Quality or SD
Standard Package – High Definition Quality or HD
Premium Package – Ultra High Definition Quality or UHD
These are the main e packages Netflix offers to a new or existing user. The price of each package differs in each country with other features like Offline viewing, Laptop, TV and smartphone support, and TV shows.
Apart from this, Netflix revenues now include shareholders and movies production firms.
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How much money does Netflix make in a month?
Netflix main source of revenue is streaming subscriptions which usually cost around 8$-14$ per month. This rounds up $950 million per month, according to the report released by Company’s earnings report.
Netflix income or profit is approximately $43million per month because it earns through another medium like DVD rentals services. Netflix spends a huge amount of their money on different projects like TV Shows and movies. Depending upon the show the company spends around $7-8 billion on a specified project.
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Some Amazing facts about Netflix
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Netflix uses Amazon virtualized servers
This sound weird, but it’s true. I mean Apple uses Samsung chips and you never complain. The cost of renting a server is a lot less than having one.
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Netflix services are available in 190 countries
By the end of 2018, Netflix users have increased by 118 million worldwide making it the highest streaming service on the planet.
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Netflix first name was Kibble
Naming a company is the biggest process and requires a lot of attention. The same happened with Netflix, it has various name considered at the start like Luna.com, Directpix.com replay.com and other. Finally, they decided to name it as Kibble.com until they have a better name for the company.
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The third quarter of the world internet is owned by Netflix
During the peak hours, Netflix accounts hold 38% of the world’s internet traffic. Don’t worry, not all of them watch 13 reasons why.
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Blockbuster could have owned Netflix
Netflix was not doing so well at the start because of these innovative things and at some point, they proposed to get acquired by their competitor called Blockbuster.
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Two-minute theory
According to the company’s annual statistical report, a user spends about two minutes deciding what to watch on Netflix. They also think that a subscriber watches two hours of content on their platform daily. It’s a nice 2/2 theory.
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All about the magical menu
There’s a secret menu which enables you to adjust the bit rate of a stream. This will help your video buffer fast. Press Shift+Alt+left+click on Windows and Shift+Option+Click on the MAC to access this menu.
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The flixies
You may have heard of Oscars and Emmys right, Netflix has its own award show named as the flixies. Netflix announced plenty of publicity in 2013, but it didn’t go as planned and the show never came for the second round.
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One more episode for kids
As an adult, we have a habit of watching an entire season in one night. But this is not a scenario for kids. If you’ve logged in as kid, Netflix is designed to show 5-minute videos to let kids sleep and not stay up late. They are the best friend of most parents.
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Conclusion:
If you ask what is the main reason for Netflix’s success? The answer would be very simple, the founder had the ability to look forward and take risks at the huge point.
The founders were also not happy with their business model at the start. They just have the guts to start something innovative for their customers. In 2007, they have noticed that the rental DVD business isn’t the future for customers. Customers want something that is hassle-free. So they came up with the Idea of streaming, and at that time the internet wasn’t common for most people.
Still, they took the risk and provided digitalized services. Their innovative and risk-taking ideas made them one of the best companies in the world as of now. Netflix’s business model is currently in the evolving stage.
The company is spending a huge amount of money by introducing various algorithms for better user experience. It’s safe to assume that there will be surprises in the future.
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