Category: Software


Netflix: A Business Case Study

What is Netflix?

Netflix is an app, as well as an internet TV company that provides movie streaming and even has its own popular series. It was founded by Reed Hasting and Marc Randolph in 1997, and its main headquarters is in Los Gatos, California.

Why Was Netflix Created?

Hastings came up with the idea of starting the company Netflix after he was told that he had to pay overdue fees of $40 for not returning the movie Apollo 13 on time. It was originally a website that just rented DVDs in the mail, and customers would pay per rental.

Netflix has done exactly what its founders wanted, it’s completely disrupted the DVD rental market — see this article about the death of Blockbuster.

When Did Netflix Switch to Mainly Internet Streaming?

Netflix launched the well-known subscription and selling service in 1999, two years after it was founded. However, they did not begin streaming movies until the year 2007, which was the beginning of Netflix as we now know it.

Netflix’s Company Finances

The company’s stock is currently being sold for $143.83 and in the year 2013 the company made $4.3 billion in revenues with 48 million worldwide subscribers. By the year 2016 the company had $13.5 billion in assets alone, which an increase of almost $10 billion.

Netflix’s Business Advantages

Netflix is now a brand name that is known worldwide, they created a service that people loved and then they perfected it to create an even bigger customer base. They are the market leaders when it comes to online streaming services for movies and television shows.

Netflix not only carries hundreds of fantastic movies and television shows that satisfy viewers on a daily basis, but they have also come out with their own original shows that viewers can only watch on their service.

They provide the feature of remembering what you were watching and allowing you to pick up where you left off, while also creating recommendations based on what you have already viewed in the past.

Viewers can discover new movies on Netflix easier because Netflix actually makes an effort to know what its viewers like watching. They provide excellent viewer service by paying attention to the movies that their viewers enjoy and basing their recommendations off of them.

Netflix’s Business Disadvantages

Though Netflix has several business perks, things such as price can be one of their business disadvantages. It is now possible for people to stream movies online without ever paying anything.

If a viewer can see the same movie for free somewhere else than they will choose to do that, rather than paying to stream the movie. Of course, there is nothing that Netflix can do about this other than make sure their brand and movie quality is more desirable to viewers.

Hollywood, however, has also used Netflix to its advantage by raising movie prices which in turn decreases the profitability of Netflix. Even though Netflix creates its own series as well, those productions are also very costly.

Productions done by Netflix have to be just as high quality as the popular shows that are commonly seen on television, otherwise, no one will be willing to watch them. Productions like those though, cost a lot of revenue.