Netflix is the world’s leading internet entertainment service with over 109 million

members in over 190 countries enjoying more than 125 million hours of TV shows and

movies per day, including original series, documentaries, and feature films. Members

can watch as much as they want, anytime, anywhere on nearly any internet-

connected screen. Members can play, pause, and resume watching all without

commercials or commitments.
 190 countries
109 million users

Unlimited Access

100% of the time

History
Wilmot Reed Hastings Jr. - Founder (born 10/8/60)

▪ Graduated in 83’ w/ a degree in

mathematics only to join the Peace Corps,
teaching high school math in Swaziland
▪ Returned home & earned masters in
computer science from Stanford in 88’
▪ He later stated that his experiences in
Africa helped hone his entrepreneurial
skills & risk taking abilities
Early Career - Obtaining Funds to Build NETFLIX empire

▪ Quit his first job as a Software developer for “Adaptive Technology” in

91’ & programmed one of the earliest debugging tools software
▪ Founded a company called Pure Software which doubled its’ revenue
each year its first four years, and went public in 95’ before merging
with another tech company “Atria” combining to form Pure Atria in
96’
▪ Hastings found being the CEO of such a booming company daunting
and ultimately sold to Rational Software for 70 million in 97’’
 Marc Randolph- Co Founder/ First CEO (Left Company in 2002)

- Veteran tech entrepreneur

- Executive Producer of Netflix Inc. since 98’
- Served as CEO from 97’-98’
- Responsible for content, features, customer
interface & communications as well as
research & analysis of Netflix
- Randolph proposed idea of mailing DVD’s; a
new video format that could store hours of
data in a CD instead of bulky VHS tapes
Genesis of Netflix

- August 29, 1997: Reed Hastings & Marc Randolph finalized

partnership on new start-up Netflix, conceived as a media rental
service by mail to customers providing the comfort of endless
entertainment without ever having to leave your home
- April 14, 1998: Netflix launches the first DVD rental and sales website,
NetFlix.com w/ just 30 employees, the 925 titles available the first day
were so well received the website needed to expand its bandwidth
within the first 48 hours of operation
 Early Policies, Rates & Plans

- Rates: 7 day DVD rentals for $4, plus shipping

- Discs could be kept longer for an additional fee
- New DVDs were offered for sale at discount of
up to 30 percent
- Customers could decide to purchase rentals by
having the balance charged to their credit card
- Late September 1999: Netflix.com launches
subscription service, “Marquee Program” offering
unlimited movie rentals without late fees or due
dates to members for $15.95 a month
Beginning Of Marketing & Promotions

- Conception of Netflix coincided w/ release of DVD player from Taiwan,

although a pricey new gadget it was thought to be the future of home
entertainment & Netflix had a wide selection of titles for the customers
viewing pleasure
- Earliest promotional venture was with “Toshiba America” to offer
three free DVD rentals to purchasers of new Toshiba DVD players
bought in the many booming electronics retailers across the country
Acquisition of Major Content & Introduction of New Feature

- December 7, 2000: Revenue sharing

agreements were reached with Warner
Home Video and Columbia Tri-Star.
- February 2000: Netflix introduces
CineMatch, a new feature that compares
rental patterns among its customers and
looked for similarities in taste, using
member ratings, and complex algorithms to
recommend titles to customers whose
profiles are similar
Fortune 500

- May 29, 2002: Netflix launches its Initial Public Offering on NASDAQ
under the ticker “NFLX” W/ 600,000 members in the U.S
- January 15, 2007: Netflix announces it will launch online streaming
services to all their subscribers in the United States
- September 22, 2010: Netflix announces it will expand its streaming
services to the international market (starting with Canada). Streaming
services now available on all Microsoft, Sony and Apple products
Netflix Timeline (1997-2010)
NETFLIX Availability Across the World
Making Entertainment Available Everywhere… Almost
Economics
 Early Economics
▪ Netflix co-founder Reed Hastings invested $2.5 million in seed money back in 1997.
▪ A luxury products group, Groupe Arnault, invested $30 million in the company back in 1999.
▪ In 2000, Netflix offered themselves to be acquired by Blockbuster for $50 million, but they
declined.
▪ Two years later in May 2002, Netflix went public and sold 5.5 million shares of common
stock for $15.00/share.
▫ This lead the company to bring in $82.5 million.
▫ A month later, the company sold another 825,000 shares of stock for the same price
which made the company an extra $12 million.
▪ In 2003, the company turned a profit for the first time. The company generated $6.5 million
in profit.
 Today

▪ In 2016, Netflix earned $8.83 billion in revenue.

▫ The company took in $186.7 million in profit.
▫ Profits increased 56% from 2015.
▫ This was primarily due to Netflix adding their services to 130 more countries;
which brought them to having over 90 million customers worldwide.
▪ Netflix’s revenue grows at a rate of 24%; by 2020 they are projected to have $20 billion in
revenue
▪ As of November 14, Netflix’s share price is $195.71 per share. The highest it has ever been was
$300/share back in July of 2011.
▪ Although Netflix has had increasing profits since 2003, they also have increased their
spending every year.
 How Does Netflix Spend Their Money?

▪ In 2016, Netflix spent over $5

billion on production for their
original programming for
shows like Stranger Things and
Luke Cage.
▫ They are expected to
spend over $6 billion
dollars for 2017.
▪ The company has stated that
they will continue to increase
their budget for their original
content in upcoming years
 The Get
Down
costed $120
million to
produce
their
two-part
Orange is the New Black first season.
costs Netflix $50 million per
season House of Sense8
Cards costed $108
costed $60 million a
million per season to
season, but
produce
they have
since before it
decided to was
cancel it. cancelled.
 How Does Netflix Spend Their Money?

▪ Netflix also spends a large amount of

money every year on licensing
agreements with television networks and
film studios.
▫ For example, back in 2011 the
company spent $45 million to add the
series Lost to their site. They also paid
$26 million for Scrubs and $12 million
for Desperate Housewives just to
stream those shows for that year.
Netflix’s original content
has brought in millions
of viewers which results
in an increase of
subscriptions, which
ultimately means there
has been an increase in
profits.
Debt
- As of July of 2017, Netflix has accumulated more than $20 billion in
debt.
- $15.7b comes from content streaming obligations
- $4.8b comes from total gross debt
- Netflix’s chief of content Ted Sarandos claimed that the company
predicted early on that Disney and Fox would eventually pull their
content from the site which is why they began borrowing money to
produce their own original content
- Sarandos claimed that the company’s plan to move out of debt was by
decreasing their number of high-priced licensing deals, and making 50
percent of the site’s content their own
Product
Line
- Netflix offers 1,157 TV shows and 4,593 movies in the US
- Amount of movies and shows varies by each of the 190 countries
streaming Netflix, with the US having the most content
- % based on countries popular genres
- Morocco only has 3.37% of the shows and 2.57% of the movies that are
streamed in the US
Notable Netflix Originals

House of Cards And select seasons of:

Hemlock Grove Arrested Development
Orange is the New Black Star Wars: The Clone Wars
Narcos Trailer Park Boys
Stranger Things Dragons
Daredevil Black Mirror
A Series of Unfortunate Events
13 Reasons Why
The Defenders
The Unbreakable Kimmy Schmidt
Fuller House
The Ranch
Dear White People
Glow
Disjointed
Bojack Horseman
Big Mouth
Titles Leaving Netflix

- Fox struck a deal with Hulu

- Disney wants their own streaming service

American Dad My Name is Earl

Better Off Ted Prison Break

Raising Hope How I Met Your Mother

Malcolm in the Middle Futurama

Family Guy Bones

Netflix Actors/Actresses

- Jonah Hill/Emma Stone in “Maniac”- 350K per episode

- Kevin Spacey in “House of Cards”- 500K per episode
- Alexis Bledel/Lauren Graham in “Gilmore Girls”- 750K per episode
- Chelsea Handler in “Chelsea”- 10M per year
- Adam Sandler makes 15M per movie and an extra 5M to produce each film
with his own company, Happy Madison Productions
- Chris Rock is making 40M for 2 comedy specials
DVD Rental

- Renting out DVDs since 1998

- About 90,000 titles to choose from
- More titles and cheaper than streaming
- Streaming starts at $7.99 for standard definition and viewing on 1 screen
- $10.99 for 2 screens in high definition
- $13.99 for 4 screens and 4K video
- DVD rental starts at $4.99 for 2 DVD rentals per month
- $7.99 for unlimited DVD rentals per month
- $11.99 for unlimited DVD rentals per month but you get to keep 2 at a time
Philanthropy
 REED HASTINGS AS A PHILANTHROPIST

NETWORTH : $1.43 Billion dollars

SOURCE OF WEALTH: Netflix

FUNDING AREAS: Education,

Immigration Reform
Netflix & Give Back

In January 2016 Reed Hastings announced a

$100 million philanthropy called “The
Hastings Fund” philanthropy which would
focus on bettering children’s education

Hastings served on the California State

Board of Education and is a board member of
several educational organizations
 Before his $100 million donation…

In 2006, he donated $1 million in Start up funds to Beacon Education

Network to open up new charter schools in Santa Cruz County.

Hastings works towards providing students of color "exceptional

post-secondary educational experiences."
 He released the statement:

“Currently, too many children do not have

access to amazing schools. Our aim is to
partner with communities to significantly
increase the number of students who have
access to rich and holistic educational
experiences.”
“The Mind Is A Terrible Thing To Waste”

The first two gifts from his fund will go to the United Negro College Fund and to
Hispanic Foundation of Silicon Valley, totaling $1.5 million, to support black and Latino
college education.

The United Negro College Fund, also known as the UNCF is the most effective minority
education organization.

They have helped more than 445,000 students graduate from college. Each year, the
organization awards more than $100 million in scholarship money to more than 10,000
minority students at over 1,100 institutions
The initiative says it is "specifically focused on billionaires"
In September 2012, Hastings
and his wife Patty Quillin signed
The Giving Pledge.

They promised donate half of

their families wealth to a charity
through The Giving Pledge.

He doesn't appear on Forbes' Billionaires List, and his public

stock holdings are in the multi-million range.
▪ The Giving Pledge does not specify how participants will donate
their money, but the Hastings and his wife have been active in
educational philanthropy and politics with a specific focus on
charter schools.
▪ From 2000- 2004 Hastings served as the President of the
California State Board of Education
Hastings and Immigration Reform

Hastings and his wife have been involved with FWD.us, "an organization
started by key leaders in the tech community to promote policies to keep
the United States and its citizens competitive in a global economy." The
outfit is interested in issues like immigration reform, as well as education
reform.
Future
Future: Debt and Content Loss

The biggest concern for Netflix heading into the future is their loss of content to competing
streaming services, which contributes to their massive debt.

Disney has announced that at the end of 2018, it will pull all of its content from Netflix and
launch their own exclusive streaming service.

Hulu has agreed to deals with many programs (many from Fox) that once were available on
Netflix, resulting in their removal from Netflix.

Netflix is currently $21.9 billion in debt and their relationships with both their customers and
the studios (not their own) are worsening.
Future: Spending and Rate Hike

Netflix said recently that they plan on spending over $8 billion this coming year alone on
original content, which includes investments in 80 new Netflix original movies.

This far exceeds other online streaming competition.

Something that will help in contributing to the debt and continued spending is the spike in
pricing to $11.99. That’s over 100 million subscribers paying $2 more a month than they
previously did.

The increase brings them closer to their competitor, HBO’s $15 per month rate.
Future: Newer Content

Netflix recently acquired Millarworld Comic label. They plan on continuing to produce
comic/superhero based tv shows and movies.

Their goal is to become more of a studio than just a streaming service. They are ramping up
their efforts to begin new original series.

There has been a sharp growth in the amount of anime programs (original and unoriginal)
being added to Netflix’s library, as well as indie movies.

Hulu and Amazon are gaining serious ground on Netflix as far as subscribers.

They are currently committed to spending $20 billion more on future projects total, despite
being in debt.
Future: Netflix Originals and the Trajectory of the Industry

As we see the shift from streaming services offering a wide array of programs on their sites to
a growingly more specific, original content-based service, we are seeing a change in the way
television will be watched.

We all can see how people are beginning to inch away from regular cable television and
exclusively subscribing to streaming services.

But now, we are starting to see a new era. The services’ commitment to original exclusive
content looks like old school tv networks with exclusive shows, just online through streaming
instead of through cable time schedules.
Future

“ If one had to predict what the industry will look like in five years, one might say there will be
a set of online channels with the expectation that consumers will subscribe to all or most of
them. At $15 a month each, that suggests consumers will take four or five of them instead of a
normal monthly cable bill. Netflix is investing to be the ‘must subscribe’ channel in that
world.”

-Harvard Business Review, Oct. 2017

Future: Popular Content

Here are just a few of many notable shows that Hulu has stolen from Netflix:
This is Us NYPD Blue The Bernie Mac Show Black-ish Fresh Off the Boat Will and Grace
30 Rock Bob’s Burgers Futurama X Files American Dad Bones Wilfred
Family Guy It’s Always Sunny in Philadelphia

Notable Netflix Original Shows:

House of Cards Hemlock Grove Orange is the New Black Narcos Stranger Things
Daredevil
A Series of Unfortunate Events 13 Reasons Why The Defenders The Unbreakable Kimmy Schmidt
Fuller House The Ranch Dear White People Glow Disjointed Bojack Horseman Big
Mouth
As well as select seasons of:
Arrested Development Star Wars: The Clone Wars Trailer Park Boys Dragons Black Mirror
Future: House of Cards

One issue Netflix now faces that they must figure out a solution to quickly is how they will
recover from the Kevin Spacey sexual assault cases.

Kevin Spacey, after being accused by numerous former and current coworkers (some even at
the House of Cards set) for sexually assaulting them, has been suspended from the series he
has starred in. They must try to continue without the main character.

House of Cards has been a staple series in the Netflix original programs and has had one of
the heaviest followings.
Future: Stranger Things

One show they will ride into the future on is Stranger Things. The series’ massive popularity,
millennial following, and incredibly young cast is pivotal for their future.

One of the most talked about shows in years, Stranger Things has been considered the best
produced show Netflix has created.
Future: Stranger Things’ Cast

Stranger Things will be the service’s keystone series heading into the future. Anticipation is already mounting for its
third season after the late October 2017 season 2 release.

The season 2 release garnered 3.2 million new subscribers in quarter 3 of 2017, up from the average of 2 million per
quarter as well as a 19% increase in company shares.

The stars of the show have rapidly become some of the most famous teenage actors and actresses in the world.
Main characters by amount of Instagram followers as of 11/13/17:
Millie Bobby Brown (Eleven, age 13): 7.7 million
Gaten Matarazzo (Dustin, age 15): 4.2 million
Finn Wolfhard (Mike, age 14): 5.1 million
Caleb McLaughlin (Lucas, age 16): 2.6 million
Noah Schnapp (Will, age 13): 3.4 million
Natalia Dyer (Nancy, age 20): 1.9 million
Charlie Heaton (Jonathan, age 23): 1.8 million
Joe Keery (Steve, age 25): 2.6 million
Future

Netflix is very confident and satisfied with their current position despite debt, networks like
Disney and Fox splitting, and even growing streaming services like Roku gaining ground.

“Latin America has been a rocket ship for us. Western Europe is growing nicely. We’re just
entering Asia. We have so much growth ahead of us. We’re focused on ‘How do we get
people in Korea to love us as much as they do in Kansas?’”

-Ted Sarandos, Netflix chief of content

Competition
Netflix, Hulu and amazon video compete on selection

Hulu

● $7.99/ month or $11.99/month to eliminate commercials

● Over 3,500 series and movies (includes hulu originals such as
handmaids tale,chance, difficult people, etc.)
● Subscribers also have the ability to create 6 individual profiles
● Downside only one screen can be watched at a time
● Add ons hbo, showtime and cinemax for an extra cost
Amazon Prime

● $8.99/month or $99/year
● More content than netflix, Amazon prime includes music, unlimited
photo storage,kindle reading, eligible two day shipping
● Includes 17,000 titles
● The company does seem to offer the broadest range of TV shows,
including original content from all its competitors, Netflix’s “Orange is
the new black”, Hulu’s “Handmaid’s Tale”
Streaming Service Market Share (American Households)
Netflix 36%
Amazon 13%
Hulu Plus 6.5%
YouTube Red

● Monthly subscription service from YouTube that removes ads from

all videos
● $10/month. Available in the U.S, Australia, New Zealand, Korea and
Mexico
● Benefits- you get a free monthly Google Play Music subscription
ALSO offline viewing and listening to videos with the screen off
● YouTube Red original “series and films” include
● “12 Deadly days”
● “A Trip to Unicorn Island”
● “Alexander IRL”
Bundle Deals
T-mobile and Netflix
● If you’re currently on or sign up for T-Mobile ONE tax inclusive voice
plan, then you can get Netflix at no cost
● You have to have two or more lines to be eligible for this deal
● Includes: up to 2 screens to stream at the same time
● Access to unlimited movies and TV shows on your laptop,TV, phone,
or tablet
Optimum and Netflix

● SHOWTIME and Netflix for 1 yr with triple play

● Triple Play for $69.99 a month
● Even More Channels. Even More Speed. Even more entertainment. Including
SHOWTIME and Netflix for $139.99
Commercials