Written By Payal Goyal
Do you know the age of Netflix? It’s 22 years old.
What started as a DVD rental business by Reed Hasting and Marc Randolph in 1997, Netflix has since become the world’s largest TV and movie studio with more subscribers than all of cable TV channels in the United States.
Netflix is built on a single growth metric and, this is what has made it stand apart from the crowd. The main objective of the business has remained the same, right from the beginning: to decentralize entertainment and unbundle premium TV content from the big sharks, like well-known cable channels.
A lot of people still think that most of Netflix’s success was pure luck, but the truth is that Netflix’s secret weapon was, in fact, a keen understanding of their market. In 1997, Blockbuster was the undisputed king in the market, and people considered Netflix nothing more than a convenient platform for renting DVDs.
But DVD rentals was never Netflix’s endgame. Rather it was a way to make a prominent presence in an insanely competitive market.
In 1997, Netflix launched a video library of more than 900 titles with a 7-day maximum rental policy. Within a few months, the video library expanded to 3,100 titles. By 2000, Netflix’s catalog reached 5,200 titles. Around this time, Netflix introduced an early subscription model: $15.95/month.
By the end of 2006, Netflix had more than 6.3 million subscribers and finally they had started generating more consistent profit, generating more than $80 million in 2006.
Netflix’s way of optimization is completely different from that of cable TV. Cable TV channels always calculate the audience based on how many visitors a TV show has, but Netflix follows a complete opposite direction as they calculate how many movies or TV shows a viewer has watched. This approach has allowed Netflix to remain focused on how to increase the user’s engagement and improve its core “Movie Watched” metric through the Cinematch algorithm.
2007 was a very crucial time for Netflix. Although, it saw great success in DVD business, the company took a great risk in launching its first streaming product.
The technology that they required to implement their new vision didn’t exist yet, but Netflix invested more than $40 million in research and development in 2007.
Despite a few hiccups along the way, Netflix continued to grow and succeed.
To continue to stay relevant, Netflix finally entered the world of original content with its political drama “House Of Cards.” The show received positive reviews and cemented Netflix’s role in content creation.
In 2018, Netflix spent almost $8 billion on content, an increase of $2 billion in 2017.
To gain new subscribers in overseas markets, Netflix established a mutually beneficial agreement with the local cellular and cable network operators in each regional market.
Netflix is able to provide quality streaming in as many as 190 countries through its use of CDN. This CDN is known as Open Connect and can handle tens of terabits per second of simultaneous peak traffic.
When it comes to providing a seamless experience by the mobile app and website, Netflix says that the Open Connect CDN is equipped with a smart algorithm which keeps monitoring the shows popular in each geolocation, and caches the content automatically at the local level so that it can improve the streaming and viewing experience and negate the buffering experience.
What makes Netflix an attractive streaming service is its user-friendly interface. It allows users to line up shows they are interested in. Below the queue, they can find TV shows and movies based on their genre. Netflix is also tailored to each user’s personal tastes based on watch history using algorithms. They have also added offline downloading as an option.
However, Netflix is not the only streaming service around. Tight competition from its competitors HULU and Amazon Prime which has caused a hike in bidding for show rights. Therefore, Netflix has become more focused on producing its own content which has been getting a great deal of attention.
Netflix is ahead of its competitors and that’s why it boasts a higher number of subscriptions.
Payal is a Content Consultant at Enuke Software, a pioneering Blockchain and Mobile App Development Company in the USA. Payal is passionate about the start-up ecosystem, Crypto world, entrepreneurship, latest tech innovations, and all that makes this digital world. This article is neither sponsored nor paid and any views expressed in it are by the author and not those of the Stony Brook Independent.