Introduction to Netflix

Reed Hastings and Marc Randolph founded Netflix in 1997 in Scotts Valley, California. It
started as an online subscription-based DVD rental service company, later it became an
American over the top media services provider. With the headquarters located in Los Gatos,
California. Netflix has over 117 million members in over 190 countries, people enjoying more
than 140 million hours of TV shows and movies per day, including documentaries, feature films
and original series. Netflix has 3500 employees working.

Hastings on Netflix’s goals in its early days: “We were targeting people who just bought DVD
players. At the time, our goal was just to get our coupon in the box. We did not have too much
competition. The market was underserved, and stores didn’t carry a wide selection of DVDs at
the time.”

Netflix is over 20 years old. It launched its first DVD rental and sales website in 1998. Whereas
the year of digital distribution started from 1999. “Netflix made its initial public offering in 2002
at $15 per share. Although the share price dipped a year later to slightly below $5 a share, shares
have since jumped to over $250. (Source: Netflix).” In 2005, Netflix had 3500 films. Netflix
introduced streaming later in 2007. In 2006, Netflix offered a $1 million prize to whoever could
increase the accuracy of their recommendation system by 10%. In addition, they had $1 billion
worth of online distribution rights. In 2013, Netflix had five original series. The same year, they
roughly had 700 original TV shows in their catalog. In 2014, Netflix net revenue was up to $1
billion. Later in 2016, Netflix was streaming worldwide. On top of all, they have plans to release
80 original films in 2018.
Today, Netflix boasts 125 million subscribers and is available in over 190 countries. Thanks to
its HERMES translation platform, Netflix is now able to offer content in over 20 languages.
Industry Analysis:
The internet television and video streaming industry revolutionized the way the world has
revolutionized. The online streaming has made a lot easier for the world to use it and to watch
online movies any time anywhere. This industry is moving very fast and making lives easy. The
video industry has benefited from the technology and the future developments that are occurring
in the mobile devices. With a huge wide spread of adoption of mobile viewing platforms like
tablets, large screen smartphone, and laptops the VOD capitalized on the business opportunities
that has been available by streaming through internet. This is going to be proofed by the
following diagram that how Netflix is streaming all around the world through technologies.

The small number of firms was dominating the industry, but a wide range of diverse companies
had been trying to expand in the industry. Still Netflix managed to form a significant position in
the market. It has a significant portion of market share in the industry.
Hulu is one the major competitors of Netflix followed by Amazon and prime video. They also
provide a range of movies and series online. A research conducted in which it stated that how
many minuets does the people age from 18-34 spent on different platforms.

The results were surprising as Netflix was at top, YouTube and Hulu was behind, which states
that Netflix is most used online streaming for watching online movies and series, followed it. In
the industry Netflix is leading in every aspect as it is giving a tough competition to others.

To proof this point Netflix worked with a strategy, to provide unique content to consumer and to
be number one Hasting decided to go with an agreement. The agreement stated that there would
be exclusive licensing agreement and partnerships to develop original content. It came up with
unique package and began to pursue with an aggressive international expansion strategy which
helped Netflix to achieve its goals.
Netflix Subscription Packages:
Netflix International Expansion
Market share of NFLX with its competitors:

Netflix Vs Competitors Revenue Growth:

Financial Comparison
Category Analysis:
There is a vast category of film genres. Netflix caters everyone of it from adventure to romantic,
fiction to nonfiction, from documentaries to bibliographical. Netflix has given a large scale of
movies and series online. A platform where you could find all the movies from English to Hindi.
The market share of each genre from 1998 -2018 is shown below:

This clearly states that the top most genres that the people like in the market. To specify future
the Netflix has a divided the genres for the movies and original series in two different graphs.
These charts show that what Netflix caters and what genres they are offering. As the category we
choose is mystery, so Netflix provides really less films related to mystery. Mystery is a genre,
which can also come under thriller, as thriller is vast genre, which has many sub genres lined
under it. Mystery is basically solving crimes and deaths. Top 3 mystery Movies and series are the
following:

Now we will talk about the mystery films and series that Netflix offer. Netflix offers total 23458-
genre list. Netflix provides a lot of thriller movies and series with mystery genre. As mystery is a
sub category of thriller, so the Netflix shows it below two category. Mystery genre is a type of
fiction in which a detective, or other professional, solves a crime or series of crimes. It can take
the form of a novel or short story. This genre known as detective or crime novels. The purpose of
a mystery novel is to solve a puzzle and to create a feeling of resolution with the audience.
How Netflix shows the mystery category:
Netflix provides the kids, teenager, and adults with a wide range of options. They make sure that
they attract their people with new and unique series and movies. They never disappoint their
consumers. They have 130 million subscribers and the number is increasing day by day. The
international subscriptions of Netflix are 68.29 million. The reality is that Netflix is a data-driven
company. Saying that Netflix chooses new content based on “whoever they can get a license
with” is a very thin and vague statement. Netflix does need licenses from studios, but they do not
just pick movies and television shows at random.

The analytics at Netflix monitor and collect data on the consumer bases. They see what and why
the consumers are interested in the category and with the analytical analysis they make sure to
provide the consumer and recommend them with those offers and movies. Every subscriber is
provide options with the type of movies and series he watch. Netflix lists those by the previous
shows watched on Netflix.

The mystery category is not on top 10 categories the people watch and is because everyone has
its own interest. Still Netflix provides with good and consumer choice list. They do have a vast
range of mystery genre movies and shows, as well as original series.
To make sure to keep in the buzz the Netflix needs to release an original Netflix series with a
female protagonist n it. As the world is developing the consumers are loving the way the women
are coming television and playing new challenging role that have grabbed the attention of the
consumers. The wonder women (7.5) and gone girl (8.1) with a very good imdb rating. If Netflix
comes up with an original mystery series based on women, will eventually help them grow more.
But with a powerful story line as their cash flow is going in negative flow.
Conclusion:
Netflix is one the strong and innovative idea business running in the industry. In 2013, Netflix
launched its first three original series, House of Cards, Hemlock Grove, and Orange is the New
Black. The streaming service pulled in 31 primetime Emmy nominations for its original shows.
The company predicts a year-over-year revenue growth of 39.8% by Q1 2018, and projects it
will have 123 million subscribers by that time as well. Two-thirds of all Netflix users now share
their accounts with others. On average, there were 2.5 viewers for every Netflix account. Despite
huge profits, Netflix’s spending strategy is resulting in negative cash flow. The company’s 2017
free cash flow was minus $2.0 billion. The majority of that is due to the company’s aggressive
spending on new original content, which it hopes to make up for in new subscriptions.
Consequently, Netflix carries a large amount of debt. The company is reportedly $4.8 billion in
debt, with $15.7 billion allotted to future commitments with studios.

Despite heavy debts and spending more than it is bringing in, Netflix carries a market value of
$151 billion as of May 2018 – more than Disney and Comcast. By the end of 2017, Netflix
increased its subscriber base to around 118 million people worldwide.

According to multiple sources, Netflix plans to spend $8 billion on new content in 2018. The
company also plans to spend $2 billion to market its service and content. 2018 is going to be
Netflix’s biggest year yet for original content. The company is set to release 700 original TV
shows as well as 80 original films in 2018.The company’s original content strategy is about more
than just volume. Netflix’s original programming has received over 430 award nominations and
72 awards given. House of Cards holds 29 of those awards. Therefore, Netflix needs to be
careful as they are already facing negative cash flows.
Recommendations:
 Netflix needs to release a series with female as antagonist in a mystery genre. As it will
help them attract attention of the consumers.
 New series with Old and renowned actors being featured in it.
 Need to launch Netflix in China, Korea as they can get more subscribers and can help in
generate profit.
 As Mystery is itself a very broad category, they should see what kind of mystery does
attract the consumer and come up with series of that type.
Key Challenges:
 No more subscribers left in USA.
 Negative Cash flows.
Appendix
References
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