Netflix, Inc.Â is an AmericanÂ technology and media services providerÂ andÂ production companyÂ headquartered inÂ Los Gatos, California. Netflix was founded in 1997 byÂ Reed HastingsÂ andÂ Marc RandolphÂ inÂ Scotts Valley, California. The company’s primary business is its subscription-basedÂ streaming serviceÂ which offers online streaming of a library of films and television series, including those produced in-house.Â As of April 2020, Netflix had over 193Â million paid subscriptions worldwide, including 73Â million in the United States.Â It is available worldwide except in the following: mainland China (due to local restrictions), Syria, North Korea, and Crimea (due to U.S. sanctions). The company also has offices in France, United States, United Kingdom, Brazil, the Netherlands, India, Japan, and South Korea.Â Netflix is a member of theÂ Motion Picture AssociationÂ (MPA). Today, the company produces and distributes content from countries all over the globe.
Netflix’s initial business model includedÂ DVDÂ sales and rental by mail, but Hastings abandoned the sales about a year after the company’s founding to focus on the initial DVD rental business.Â Netflix expanded its business in 2007 with the introduction of streaming media while retaining the DVD and Blu-ray rental business. The company expanded internationally in 2010 with streaming available in Canada,Â followed by Latin America and the Caribbean. Netflix entered the content-production industry in 2013, debuting its first seriesÂ House of Cards.
Since 2012, Netflix has taken more of an active role as producer and distributor for both film and television series, and to that end, it offers a variety of “Netflix Original” content through its online library.Â By January 2016, Netflix services operated in more than 190 countries.Â Netflix released an estimated 126Â original seriesÂ and films in 2016, more than any other network or cable channel.Â Their efforts to produce new content, secure the rights for additional content, and diversify through 190 countries have resulted in the company racking up billions in debt: $21.9Â billion as of September 2017, up from $16.8Â billion from the previous year.Â $6.5Â billion of this is long-term debt, while the remaining is in long-term obligations.Â In October 2018, Netflix announced it would raise another $2Â billion in debt to help fund new content.Â On July 10, 2020, Netflix became the largest entertainment/media company by market cap.
Marc RandolphÂ andÂ Reed HastingsÂ founded Netflix on August 29, 1997 inÂ Scotts Valley, California. Randolph worked as a marketing director for Hastings’ company,Â Pure Atria.Â Randolph had co-founded MicroWarehouse, a computer mail-order company;Â Borland InternationalÂ later employed him as vice president of marketing. Hastings, a computer scientist and mathematician, sold Pure Atria toÂ Rational Software CorporationÂ in 1997 for $700Â million in what was then the biggest acquisition inÂ Silicon ValleyÂ history. The two came up with the idea for Netflix when commuting between their homes in Santa Cruz and Pure Atria’s headquarters in Sunnyvale while waiting for government regulators to approve the merger,Â although Hastings has given several different explanations for how the idea came about.
Hastings invested $2.5Â million in startup cash for Netflix.Â Randolph admired the fledglingÂ e-commerceÂ companyÂ AmazonÂ and wanted to find a large category of portable items to sell over theÂ InternetÂ using a similar model. Hastings and Randolph considered and rejectedÂ VHS tapesÂ as too expensive to stock and too delicate to ship. When they heard about DVDs, first introduced in the United States on March 24, 1997,Â they tested the concept of selling or renting DVDs by mail by mailing a compact disc to Hastings’ house inÂ Santa Cruz. When the disc arrived intact, they decided to take on the $16Â billionÂ home-videoÂ sales and rental industry.Â Hastings is often quoted saying that he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy ofÂ Apollo 13, but he and Randolph designed this apocryphal story to explain the company’s business model and motivation.
Netflix launched as the world’s first online DVD-rental store, with only 30 employees and 925 titles available – almost the entire catalogue of DVDs at the time,Â – using the pay-per-rent model, with rates and due dates similar to those of itsÂ brick-and-mortarÂ competitor,Â Blockbuster.
Membership fee, Blockbuster acquisition offer, growth start
Netflix introduced the monthly subscription concept in September 1999,Â and then dropped the single-rental model in early 2000. Since that time (seeÂ Technical details of Netflix), the company has built its reputation on the business model of flat-fee unlimited rentals without due dates, late fees, shipping and handling fees, or per-title rental fees.
In 2000, when Netflix had just about 300,000 subscribers and relied on the U.S. Postal Service for the delivery of their DVDs, they were losing money and offered to be acquired byÂ BlockbusterÂ for $50Â million. They proposed that Netflix, which would be renamed as Blockbuster.com, would handle the online business, while Blockbuster would take care of the DVDs, making them less dependent on the U.S. Postal Service. The offer was declined.
While they experienced fast growth in early 2001, both theÂ dot-com bubbleÂ burst and theÂ September 11 attacksÂ occurred later that year, affecting the company badly and forcing them to lay off one-third of their 120 employees. However, sales of DVD players finally took off as they became more affordable, selling for about $200 around Thanksgiving time, becoming one of that year’s most popular Christmas gifts. By early 2002, Netflix saw a huge increase in their subscription business.
Netflix initiated anÂ initial public offeringÂ (IPO) on May 29, 2002, selling 5.5Â million shares ofÂ common stockÂ at the price ofÂ US$15.00 per share. On June 14, 2002, the company sold an additional 825,000 shares of common stock at the same price. After incurring substantial losses during its first few years, Netflix posted its first profit during the fiscal year 2003, earning US$6.5Â million profit on revenues of US$272Â million. In 2005, 35,000 different films were available, and Netflix shipped 1Â million DVDs out every day.
Randolph, a dominant producer and board member for Netflix, retired from the company in 2004.
Netflix was sued in 2004 for false advertising in relation to claims of “unlimited rentals” with “one-day delivery”.
Video on demand introduction, declining DVD sales, global expansion
For some time, the company had considered offering movies online, but it was only in the mid-2000s that data speeds and bandwidth costs had improved sufficiently to allow customers to download movies from the net. The original idea was a “Netflix box” that could download movies overnight, and be ready to watch the next day. By 2005, they had acquired movie rights and designed the box and service, and were ready to go public with it. But after discovering YouTube, and witnessing how popular streaming services were despite the lack of high-definition content, the concept of using a hardware device was scrapped and replaced with a streaming concept instead, a project that was completed in 2007.
Netflix developed and maintains an extensive personalized video-recommendation system based on ratings and reviews by its customers. On October 1, 2006, Netflix offered aÂ $1,000,000 prizeÂ to the first developer of a video-recommendationÂ algorithmÂ that could beat its existing algorithm Cinematch, at predicting customer ratings by more than 10%.
In February 2007, the company delivered its billionth DVD,Â and began to move away from its original core business model of DVDs, by introducingÂ video on demandÂ via the Internet. Netflix grew as DVD sales fell from 2006 to 2011.
Another contributing factor for the company’s online DVD rental success was that they could offer a much larger selection of movie titles to choose from than Blockbuster’s rental outlets. But when they started to offer streaming content for free to its subscribers in 2007, it could offer no more than about 1000 movies and TV-shows, just 1% compared to its more than 100,000 different DVD titles. Yet as the popularity kept growing, the number of titles available for streaming was increasing as well and had reached 12,000 movies and shows in June 2009. One of the key things about Netflix was that it had a recommendation system known as Cinematch, which not only got viewers to remain attached to the service, by creating a switching cost, but it also brought out those movies which were underrated so that customers could view those movies too from their recommendations. This was an attribute that not only benefited Netflix but also benefited its viewers and those studios which were minor compared to others.
In January 2013, Netflix reported that it had added two million United States customers during the fourth quarter of 2012, with a total of 27.1Â million United States streaming customers, and 29.4Â million total streaming customers. In addition, revenue was up 8% to $945Â million for the same period.Â That number increased to 36.3Â million subscribers (29.2Â million in the United States) in April 2013.Â As of September 2013, for that year’s third quarter report, Netflix reported its total of global streaming subscribers at 40.4Â million (31.2Â million in the United States).Â By the fourth quarter of 2013, Netflix reported 33.1Â million United States subscribers.Â By September 2014, Netflix had subscribers in over 40 countries, with intentions ofÂ expanding their services in unreached countries.Â By October 2018, Netflix’s customer base reached 137Â million worldwide, confirming its rank as by far the world’s biggest online subscription video service.
Early Netflix Original content
Netflix has played a prominent role inÂ independent filmÂ distribution. Through its divisionÂ Red Envelope Entertainment, Netflix licensed and distributed independent films such asÂ Born into BrothelsÂ andÂ Sherrybaby. As of late 2006,Â Red Envelope EntertainmentÂ also expanded into producing original content with filmmakers such asÂ John Waters.Â Netflix closed Red Envelope Entertainment in 2008, in part to avoid competition with its studio partners.
Entertainment dominance, presence, and continued growth
Netflix has been one of the most successfulÂ dot-com ventures. In September 2002,Â The New York TimesÂ reported that, at the time, Netflix mailed about 190,000 discs per day to its 670,000 monthly subscribers.Â The company’s published subscriber count increased from one million in the fourth quarter of 2002 to around 5.6Â million at the end of the third quarter of 2006, to 14Â million in March 2010. Netflix’s early growth was fueled by the fast spread ofÂ DVD playersÂ in households; in 2004, nearly two-thirds of United States homes had a DVD player. Netflix capitalized on the success of the DVD and its rapid expansion into United States homes, integrating the potential of the Internet and e-commerce to provide services and catalogs that bricks-and-mortar retailers could not compete with. Netflix also operates an online affiliate program which has helped to build online sales for DVD rentals as well. The company offers unlimited vacation time for salaried workers and allows employees to take any amount of their paychecks in stock options.
By 2010, Netflix’s streaming business had grown so quickly that within months the company had shifted from the fastest-growing customer of theÂ United States Postal Service‘sÂ first-class serviceÂ to the largest source of Internet streaming traffic in North America in the evening. In November, it began offering a standalone streaming service separate from DVD rentals.Â On September 18, 2011, Netflix announced its intentions to rebrand and restructure its DVD home media rental service as an independent subsidiary called Qwikster, separating DVD rental and streaming services.Â Andy Rendich, a 12-year Netflix veteran, was to be CEO of Qwikster. Qwikster would carry video games whereas Netflix did not.Â However, in October 2011, Netflix announced that it would retain its DVD service under the name Netflix and would not, in fact, create Qwikster for that purpose.
In April 2011, Netflix had over 23Â million subscribers in the United States and over 26Â million worldwide.Â In July 2011, Netflix changed its prices, charging customers for its mail rental service and streaming service separately. This meant a price increase for customers who wanted to continue receiving both services.Â On October 24, Netflix announced 800,000 unsubscribers in the United States during the third quarter of 2011, and more losses were expected in the fourth quarter of 2011. However Netflix’s income jumped 63% for the third quarter of 2011.Â Year-long, the total digital revenue for Netflix reached at least $1.5Â billion.Â On January 26, 2012, Netflix added 610,000 subscribers in the United States by the end of the fourth quarter of 2011, totaling 24.4Â million United States subscribers for this time period.Â On October 23, however, Netflix announced an 88% decline in profits for the third quarter of the year.
In April 2012, Netflix filed with theÂ Federal Election CommissionÂ (FEC) to form aÂ political action committeeÂ (PAC) called FLIXPAC.Â PoliticoÂ referred to the PAC, based inÂ Los Gatos, California, as “another political tool with which to aggressively press a pro-intellectual property, anti-video-piracy agenda”.Â The hacktivist groupÂ AnonymousÂ called for aÂ boycottÂ of Netflix following the news.Â Netflix spokesperson Joris Evers indicated that the PAC was not set up to support theÂ Stop Online Piracy ActÂ (SOPA) and theÂ PROTECT IP ActÂ (PIPA), tweeting that the intent was to “engage on issues likeÂ net neutrality,Â bandwidth caps,Â UBBÂ andÂ VPPA“.
In February 2013, Netflix announced it would be hosting its own awards ceremony,Â The Flixies.Â On March 13, 2013, Netflix announced a Facebook implementation, letting United States subscribers access “Watched by your friends” and “Friends’ Favorites” by agreeing.Â This was not legal until theÂ Video Privacy Protection Act of 1988Â was modified in early 2013.
Rebranding and wider international expansion
In April 2014, Netflix approached 50Â million global subscribers with a 32.3% video streaming market share in the United States. Netflix operated in 41 countries around the world.Â In June 2014, Netflix unveiled a global rebranding: a new logo, which uses a modern typeface with theÂ drop shadowingÂ removed, and a new websiteÂ UI. The change was controversial; some liked the new minimalist design, whereas others felt more comfortable with the old interface.Â In July 2014, Netflix surpassed 50Â million global subscribers, with 36Â million of them being in the United States.
Following the launch ofÂ DaredevilÂ in April 2015, Netflix director of content operations Tracy Wright announced that Netflix had added support forÂ audio descriptionÂ (a narration track that contains aural descriptions of key visual elements for the blind or visually impaired), and had begun to work with its partners to add descriptions to its other original series over time.Â The following year, as part of a settlement with theÂ American Council of the Blind, Netflix agreed to provide descriptions for its original series within 30 days of their premiere, and addÂ screen readerÂ support and the ability to browse content by availability of descriptions.
At the 2016Â Consumer Electronics Show, Netflix announced a major international expansion of its service into 150 additional countries. Netflix promoted that with this expansion, it would now operate in nearly all countries that the company may legally or logistically operate in. A notable exception was China, citing the barriers of operating Internet and media services in the country due to its regulatory climate. Reed Hastings stated that the company was planning to build relationships with local media companies that could serve as partners for distributing its content in the country (with a goal to concentrate primarily on its original content), but stated that they were in no hurry, and could thus take “many years”.
Also in January 2016, Netflix announced it would beginÂ blockingÂ virtual private networks, or VPNs.Â At the same time, Netflix reported 74.8Â million subscribers and predicted it would add 6.1Â million more by March 2016. Subscription growth has been fueled by its global expansion.Â By the end of the year, Netflix added a feature to allow customers to download and play select movies and shows while offline.
In February 2017, Netflix signed aÂ music publishingÂ deal withÂ BMG Rights Management, where BMG will oversee rights outside of the United States for music associated with Netflix original content. Netflix continues to handle these tasks in-house in the United States.Â On April 17, 2017, it was reported that Netflix was nearing 100Â million subscribers.Â On April 25, 2017, Netflix announced that it had reached a licensing deal in China with theÂ Baidu-owned streaming serviceÂ iQiyi, to allow selected Netflix original content to be distributed in China on the platform.Â TheÂ Los Angeles TimesÂ stated: “Its series and movies account for more than a third of all prime-time download Internet traffic in North America.”
On August 7, 2017, Netflix acquiredÂ Millarworld, the creator-owned publishing company of comic book writerÂ Mark Millar. It is the first ever company acquisition in Netflix’s history. Netflix plans to leverage Millar and his current and future work for future original content. Chief content officer Ted Sarandos described Millar as being a “modern-dayÂ Stan Lee“.Â The following week, Netflix announced that it had entered into an exclusive development deal withÂ Shonda RhimesÂ and her production companyÂ Shondaland.
In November 2017, Netflix announced it has signed an exclusive multi-year deal withÂ Orange Is the New BlackÂ creatorÂ Jenji Kohan.Â The following month, they signedÂ Stranger ThingsÂ director-producerÂ Shawn LevyÂ and his production companyÂ 21 Laps EntertainmentÂ to what sources say is a four-year, seven-figure deal.
On January 22, 2018, the company crossed $100Â billion in market capitalization, becoming the largest digital media and entertainment company in the world, bigger than every traditional media company except forÂ AT&T,Â ComcastÂ andÂ DisneyÂ and the 59th largest publicly traded company in the US S&P 500 Index.
On March 2, 2018, Netflix stock price surged to a new all-time high of $301.05 beating its 12-month price target of $300.00, and finishing the session with a market capitalization of $130Â billion putting it within shouting distance of traditional media giants like Disney ($155Â billion) and Comcast ($169Â billion). The milestone came a day after British satcaster Sky announced a new agreement with Netflix to integrate Netflix’s subscription VOD offering into its pay-TV service. Customers with its high-end Sky Q set-top box and service will be able to see Netflix titles alongside their regular Sky channels.
In July 2018, it was announced that Netflix has inked a deal with top Hollywood awards strategist Lisa Taback to acquire her independent LT-LA consulting firm and move her in-house at the streaming giant. The deal gives her the title VP Talent Relations, and she will lead the companyâ€™s talent relations and awards teams. It also means she will provide her services exclusively to Netflix.
On August 16, 2018, Netflix announced a three-year overall deal withÂ black-ishÂ creatorÂ Kenya Barris. Under the deal, Barris will produce new series exclusively at Netflix, writing and executive producing all projects through his production company, Khalabo Ink Society.
On August 27, 2018, Netflix signed a five-year exclusive overall deal with international bestâ€“selling authorÂ Harlan Coben. Under the multi-million pact, Netflix will work with Coben to develop 14 existing titles and future projects.Â On the same day, the company inked an overall deal withÂ Gravity FallsÂ creatorÂ Alex Hirsch.
According to Global Internet Phenomena Report Netflix consumes 15% of all Internet bandwidth globally, the most by any single application.
In November 2018,Â Paramount PicturesÂ signed a multi-picture film deal with Netflix as part ofÂ Viacom‘s growth strategy, making Paramount the first major film studio to sign a deal with Netflix.Â A sequel toÂ Awesomeness Films‘Â To All the Boys I’ve Loved BeforeÂ was released on Netflix under the titleÂ To All the Boys: P.S. I Still Love YouÂ as part of the agreement.
In February 2019, it was announced thatÂ The HauntingÂ creatorÂ Mike FlanaganÂ had joined frequent collaborator Trevor Macy as a partner inÂ Intrepid Pictures, and that the duo had signed an exclusive overall deal with Netflix to produce television content.Â 
In April 2019, it was announced that Netflix was seeking to purchaseÂ Grauman’s Egyptian TheatreÂ from theÂ American CinemathequeÂ to use as a special events venue,Â Later on May 29, 2020, it was announced that Netflix will acquire the theater and invests in some renovations of it.
In early August 2019, Netflix negotiated an exclusive multi-year film and television deal withÂ Game of ThronesÂ creators/showrunnersÂ David BenioffÂ andÂ D.B. WeissÂ reportedly worth US$200Â million.Â As a result of their commitments to Netflix, Benioff and Weiss withdrew from an earlier agreement with Disney to write and produce aÂ Star WarsÂ film series.
On September 30, 2019, In addition to renewingÂ Stranger ThingsÂ for aÂ fourth season, Netflix announced they had signed the seriesâ€™ creatorsÂ The Duffer BrothersÂ to a nine-figure deal for additional films and televisions shows over multiple years.
On November 13, 2019, Netflix andÂ NickelodeonÂ entered into a multi-year content production agreement to produce several original animated feature films and television series based on Nickelodeon’s library of characters, in order to compete withÂ Disney‘s new streaming serviceÂ Disney+, which had launched the day before. This agreement expanded on their existing relationship, in which new specials based on the past Nickelodeon seriesÂ Invader ZimÂ andÂ Rocko’s Modern LifeÂ (Invader Zim: Enter the FlorpusÂ andÂ Rocko’s Modern Life: Static ClingÂ respectively) were released by Netflix.Â Glitch TechsÂ was the first series to be released as part of the new agreement. New projects planned under the team-up include a music project featuringÂ Squidward TentaclesÂ from the animated television seriesÂ SpongeBob SquarePants, and films based onÂ The Loud HouseÂ andÂ Rise of the Teenage Mutant Ninja Turtles.
On February 25, 2020, Netflix formed partnerships with six Japanese creators to produce an original Japanese anime project. This partnership includes manga creator group CLAMP, mangaka Shin Kibayashi, mangaka Yasuo Ohtagaki, novelist and film director Otsuichi, novelist Tow Ubutaka, and manga creator Mari Yamazaki.
During the COVID-19 lockdown in 2020, Netflix acquired 16 million new subscribers, which almost doubles the result of the final months of 2019.
On July 30, 2020, it was revealed that Netflix has invested inÂ Black MirrorÂ creatorsÂ Charlie BrookerÂ andÂ Annabel Jonesâ€™ new production outfit Broke And Bones in a first-of-its-kind deal for the streamer in the UK, which could ultimately see it take full control of the company for around $100M.
For the fiscal year 2018, Netflix reported earnings ofÂ US$1.21Â billion, with an annual revenue ofÂ US$15.8Â billion, an increase of approximately 116% over the previous fiscal cycle. Netflix’s shares traded at over $400 per share at its highest price in 2018, and its market capitalization reached a value of overÂ US$180Â billion in June 2018. Netflix ranked 261 on the 2018Â Fortune 500Â list of the largest United States companies by revenue.Â Netflix was announced to be the number one bestÂ stockÂ in the 2010s, with a total return of 3,693%.
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Netflix’sÂ video on demandÂ streaming service, formerly branded asÂ Watch Now, allows subscribers to stream television series and films via the Netflix website on personal computers, or the Netflix software on a variety of supported platforms, includingÂ smartphonesÂ andÂ tablets,Â digital media players,Â video game consolesÂ andÂ smart TVs.Â According to aÂ NielsenÂ survey in July 2011, 42% of Netflix users used a standalone computer, 25% used theÂ Wii, 14% by connecting computers to a television, 13% with aÂ PlayStation 3Â and 12% anÂ Xbox 360.
When the streaming service was first launched, Netflix’s disc rental subscribers were given access at no additional charge. Subscribers were allowed approximately one hour of streaming per dollar spent on the monthly subscription (a $16.99 plan, for example, entitled the subscriber to 17 hours of streaming media). In January 2008, however, Netflix lifted this restriction, at which point virtually all rental-disc subscribers became entitled to unlimited streaming at no additional cost (however, subscribers on the restricted plan of two DVDs per month ($4.99) remained limited to two hours of streaming per month). This change came in a response to the introduction ofÂ HuluÂ and toÂ Apple‘s new video-rental services.Â Netflix later split DVD rental subscriptions and streaming subscriptions into separate, standalone services, at which point the monthly caps on Internet streaming were lifted.
Netflix service plans are currently divided into three price tiers; the lowest offersÂ standard definitionÂ streaming on a single device, the second allowsÂ high definitionÂ streaming on two devices simultaneously, and the “Platinum” tier allows simultaneous streaming on up to four devices, andÂ 4KÂ streaming on supported devices and Internet connections. The HD subscription plan historically cost US$7.99; in April 2014, Netflix announced that it would raise the price of this plan to $9.99 for new subscribers, but that existing customers would be grandfathered under this older price until May 2016, after which they could downgrade to the SD-only tier at the same price, or pay the higher fee for continued high definition access.
In July 2016, a Netflix subscriber sued the company over the price increases, alleging he was told by a Netflix customer support representative in 2011 that they would pay the same price in perpetuity as long as they maintained their subscription continuously.
On November 30, 2016, Netflix launched an offline playback feature, allowing users of the Netflix mobile apps on Android or iOS to cache content on their devices in standard or high quality for viewing without an Internet connection. The feature is primarily available on selected series and films, and Netflix stated that more content would be supported by the feature over time.Â Netflix will partner with airlines to provide them with its mobile streaming technology. This will start in early 2018 as part of an effort to get airlines to provide better in-flight Wi-Fi.
In 2018, Netflix introduced the “Skip Intro” feature which allows customers to skip the intros to shows on its platform. They do so through a variety of techniques including manual reviewing, audio tagging, and machine learning.
In August 2010, Netflix reached a five-year deal worth nearly $1Â billion to stream films fromÂ Paramount,Â LionsgateÂ andÂ Metro-Goldwyn-Mayer. The deal increased Netflix’s annual spending fees, adding roughly $200Â million per year. It spent $117Â million in the first six months of 2010 on streaming, up from $31Â million in 2009.
On July 12, 2011, Netflix announced that it would separate its existing subscription plans into two separate plans: one covering the streaming and the other DVD rental services.Â The cost for streaming would be $7.99 per month, while DVD rental would start at the same price. The announcement led to panned reception among Netflix’s Facebook followers, who posted negative comments on its wall.Â Twitter comments spiked a negative “Dear Netflix” trend.Â The company defended its decision during its initial announcement of the change: