Netflix

For the algorithm competition, see Netflix Prize. For the song, see Netflix (song).
Netflix Inc.
Type Public
Traded as NASDAQ: NFLX
Founded August 29, 1997 (1997-08-29)[1]
Scotts Valley, California, U.S.
Headquarters Los Gatos, California, United States
Area served Worldwide (except for Mainland China, Crimea, North Korea and Syria)
Founder(s) Reed Hastings
Marc Randolph
Key people Reed Hastings (CEO)
Ted Sarandos (Chief Content Officer)
Industry Streaming media
Products Video streaming, online DVD and Blu-ray Disc rental
Revenue Increase US$6.77 billion (2015)[2]
Operating income Decrease US$305 million (2015)[2]
Net income Decrease US$122 million (2015)[2]
Total assets Increase US$10.20 billion (2015)[2]
Total equity Increase US$2.22 billion (2015)[2]
Employees 3,500 (2015)[2]
Website www.netflix.com
Alexa rank Increase 36 (April 2016)[3]
Registration Required
Users 81 million (total)
46 million (United States)[4]
Current status Active

Netflix is a global provider of streaming movies and TV series. Netflix started as an American DVD-by-mail service in 1998, and began streaming in 2007.[5] Netflix expanded with streaming to Canada in 2010[6] and now serves over 190 countries.[7] Netflix's first widely advertised original series was House of Cards, which debuted in 2013, and Netflix now produces hundreds of hours of original programming around the world.[8] The company was established in 1997 and is headquartered in Los Gatos, California.

As of April 2016, Netflix reported over 81 million subscribers worldwide, including more than 46 million in the U.S.[4]

History

Netflix headquarters in Los Gatos.

Netflix was founded in 1997 in Scotts Valley, California by Marc Randolph[9][10] and Reed Hastings, who previously had worked together at Pure Software. Randolph was a co-founder of MicroWarehouse, a computer mail order company; and was later employed by Borland International as vice president of marketing. Hastings, who once worked as a math teacher, had founded Pure Software, which he had recently sold for $700 million. Hastings invested $2.5 million in startup cash for Netflix.[11] Randolph initially had the idea to start a company that sold something over the Internet, but just didn't know what.[12] The idea of Netflix came to Hastings when he was forced to pay $40 in overdue fines after returning Apollo 13 well past its due date.[13] He also remained a producer and a member of the board of directors for a large period of time until finally retiring in 2004 from Netflix.[14] The Netflix website was launched on April 14, 1998[15] with only 30 employees and 925 works available for rent through a traditional pay-per-rental model (50¢US per rental U.S. postage; late fees applied).[16] Netflix introduced the monthly subscription concept in September 1999,[17] and then dropped the single-rental model in early 2000. Since that time, 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.

Netflix logo used from 2000 to 2014

In 2000, Netflix was offered for acquisition to Blockbuster for $50 million; however, Blockbuster declined the offer.[18] Netflix initiated an initial public offering (IPO) on May 29, 2002, selling 5.5 million shares of common stock at the price of 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 fiscal year 2003, earning US$6.5 million profit on revenues of US$272 million. In 2005, 35,000 different film titles were available, and Netflix shipped 1 million DVDs out every day.[19]

Netflix developed and maintains an extensive personalized video-recommendation system based on ratings and reviews by its customers. On October 1, 2006, Netflix offered a $1,000,000 prize to the first developer of a video-recommendation algorithm that could beat its existing algorithm, Cinematch, at predicting customer ratings by more than 10%.[20]

Netflix envelope

In February 2007, the company delivered its billionth DVD[21] and began to move away from its original core business model of mailing DVDs by introducing video on demand via the Internet. Netflix grew as DVD sales fell from 2006 to 2011.[22][23]

Netflix has played a prominent role in independent film distribution. Through the division Red Envelope Entertainment, Netflix licensed and distributed independent films such as Born into Brothels and Sherrybaby. As of late 2006, Red Envelope Entertainment also expanded into producing original content with filmmakers such as John Waters.[24] Netflix closed Red Envelope Entertainment in 2008, in part to avoid competition with its studio partners.[25][26]

Netflix has been one of the most successful dot-com ventures. A September 2002 article from The New York Times said that at the time, that Netflix mailed about 190,000 discs per day to its 670,000 monthly subscribers.[27] The company's published subscriber count increased from one million in the fourth quarter of 2002 to around 5.6 million at the end of the third quarter of 2006, to 14 million in March 2010. Netflix's growth has been fueled by the fast spread of DVD players in households; as of 2004, nearly two-thirds of U.S. homes had a DVD player. Netflix capitalized on the success of the DVD and its rapid expansion into U.S. homes, integrating the potential of the Internet and e-commerce to provide services and catalogs that brick and mortar retailers could not compete with. Netflix also operates an online affiliate program which has helped to build online sales for DVD rentals. The company offers unlimited vacation time for salaried workers and allows employees to take any amount of their paychecks in stock options.[28]

By 2010, Netflix's streaming business had grown so quickly that within months the company had shifted from the fastest-growing customer of the United States Postal Service's first-class mail service to the biggest source of Internet traffic in North America in the evening. In November of that year, it began offering a standalone streaming service separate from DVD rentals.[29] On September 18, 2011, Netflix announced its intentions to rebrand and restructure its DVD home media rental service as an independent subsidiary company called Qwikster, totally separating the DVD rental and streaming services.[30][31][32] Andy Rendich, a 12-year veteran of Netflix, would have been appointed the CEO of Qwikster. The new service would carry video games whereas Netflix did not.[33] 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.[34]

On October 24, 2011, Netflix announced it lost 800,000 subscribers in the U.S. during the third quarter of 2011 and more subscriber losses were expected in the fourth quarter of 2011. Despite the losses, earnings for Netflix jumped 63 percent for the third quarter of 2011.[35][36] On January 26, 2012, Netflix said it added 610,000 subscribers in the U.S. by the end of the fourth quarter of 2011, totaling 24.4 million U.S. subscribers for this time period.[37]

In April 2012, Netflix filed with the Federal Election Commission (FEC) to form a political action committee (PAC) called FLIXPAC.[38] Politico referred to the Los Gatos, California-based PAC as "another political tool with which to aggressively press a pro-intellectual property, anti-video-piracy agenda."[38] The hacktivist group Anonymous called for a boycott of Netflix following the news.[39] Netflix spokesperson Joris Evers indicated that the PAC was not set up to support the Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA), tweeting that the intent was to "engage on issues like net neutrality, bandwidth caps, UBB and VPPA."[40][41]

On December 24, 2012, at around 1:00 p.m. Eastern Time, a number of Amazon Web Services servers crashed, affecting numerous services including Netflix "instant streaming". The outage lasted more than 20 hours.[42][43]

In February 2013, Netflix announced it would be hosting its own awards ceremony, The Flixies.[44] On March 13, 2013, Netflix announced it would add a Facebook sharing feature to the Netflix interface, letting subscribers in the U.S. see lists of content "Watched by your friends" and "Friends' Favorites" once they agree to share.[45] This was not legal until the 1988 Video Privacy Protection Act was modified at the beginning of 2013.[46]

On July 14, 2015, at the close of trading, Netflix did a 7-for-1 stock split by giving all shareholders an additional six shares of stock, effectively dropping the stock price to $100.[47]

In January 2016 Netflix announced it would begin blocking virtual private networks (VPN)[48]

Subscriber base history

On February 25, 2007, Netflix delivered its billionth DVD.[49] In April 2011, Netflix had over 23 million subscribers in the United States and over 26 million worldwide.[50] By 2011, the total digital revenue for Netflix reached at least $1.5 billion.[51] On October 23, 2012, however, Netflix reported an 88% decline in third-quarter profits.[52] In January 2013, Netflix reported that it had added two million U.S. customers during the fourth quarter of 2012 with a total of 27.1 million U.S. streaming customers, and 29.4 million total streaming customers. In addition, revenue was up 8% to $945 million for the same period.[53][54] That number increased to 36.3 million subscribers (29.2 million in the U.S.) in April 2013.[55] As of September 2013, for that year's third quarter report, Netflix reported its total of global streaming subscribers at 40.4 million (31.2 million in the U.S.).[56] By the fourth quarter of 2013, Netflix reported 33.1 million U.S. subscribers.[57] By September 2014, Netflix had subscribers in over 40 countries, with intentions of expanding their services in unreached countries.[58]

In April 2014, Netflix approached 50 million global subscribers with a 32.3% video streaming market share in the United States. Netflix operated in a total of 41 countries around the world.[59] In June 2014, Netflix unveiled a redesigned version of its logo (using a modified typeface, and removing the drop shadowing and red background of the previous logo) and website UI. The change was controversial; some liked the new minimalist design, whereas others felt more comfortable with the old interface.[60] In July 2014, Netflix surpassed 50 million global subscribers, with 36 million of them being in the United States.[61]

In January 2016, Netflix reported 74.8 million subscribers and forecasted it would add 6.1 million more by March 2016. Subscription growth has been fueled by its global expansion.[62]

Services

Netflix is a subscription-based film and television program rental service that offers media to subscribers via Internet streaming and via US mail.

Internet video streaming

In addition to its disc-rental service, Netflix separately offers an Internet video-streaming service which gives Internet-connected devices access to Netflix's library of online content, and allows numerous individuals to take advantage of one individual's subscription by insuring they login to their subscribing profile while on the non-subscriber's computer. The two libraries differ markedly, with the disc library having more film titles available,[63] while the streaming library has more Netflix original content. According to a 2013 report by Sandvine, Netflix is the biggest source of North American downstream web-traffic, at 32.3%, and registered 28.8% of aggregate traffic.[64]

When the streaming service first launched, Netflix's traditional rental-disc 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 of Hulu and to Apple's new video-rental services.[65] Subsequently, as it became clear that the disc-rental and Internet streaming markets were distinct, Netflix split DVD rental subscriptions and streaming subscriptions into separate, standalone services, at which point the monthly caps on Internet streaming were lifted.[66] Currently, Netflix's Internet video streaming subscription rates range from $7.99 to $11.99 a month, including a free one-month trial. In May 2016, all subscribers will pay a minimum of $9.99 for a streaming subscription.[67]

Until October 10, 2014, Netflix did not officially support playback on Linux PCs, although the Linux-based Roku devices are supported. It is possible to connect the Roku device, game console, or Blu-ray Disc player to a Linux PC (or directly to the computer monitor) with an adapter. It is also possible to run Windows and Netflix in a virtual machine such as Virtualbox or QEMU. In a TechRepublic interview in August 2010, Netflix's VP of Corporate Communications stated that available Silverlight plugins for Linux, such as Moonlight, do not support the PlayReady DRM system that Netflix requires for playback.[68] Netflix does support the Android operating system, which uses a forked version of the Linux kernel. There is an unofficial Netflix app based on Wine that allows users to watch Netflix's streaming content on Linux without installing Windows in a virtual machine. Pipelight, an add-on for Firefox based on the Netflix-Desktop project, allows Netflix playback through Linux Native web browsers by connecting to the Silverlight plug-in running on a Wine base.[69] However, on October 10, 2014 the required DRM plugins to play Netflix's HTML 5 videos became available for Chrome users running Ubuntu 12.04 or 14.04.[70] Maximum HD resolution via Google Chrome is 720p.[71]

According to a survey by Nielsen in July 2011, 42% of all Netflix users make use of a stand-alone computer to connect to the service, 25% do so by using the Wii, 14% by connecting their computers to a television set, 13% make use of a PlayStation 3 and 12% use an Xbox 360.[72] The selection of available titles is based upon the user's IP address. For most users, this corresponds to the user's physical location. However, it means that, for example, a user in Canada who accesses the Internet through a U.S.-based router-connection will see the selection available to U.S. users.

History

On October 1, 2008, Netflix announced a partnership with Starz Entertainment to bring more than 2,500 new films and television shows to "Watch Instantly" as part of a service called Starz Play.[73]

In August 2010, Netflix reached a five-year deal worth nearly $1 billion to stream films from Paramount Pictures, Lions Gate Entertainment and Metro-Goldwyn-Mayer. The deal increased the amount Netflix was spending on streaming films annually, adding roughly $200 million per year. It spent $117 million in the first six months of 2010 on streaming, up from $31 million in 2009.[74]

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.[75] The cost for streaming would be $7.99 per month, while DVD rental would start at the same price. The announcement led to a flurry of negative reception amongst Netflix's Facebook followers, who posted negative comments on the company's wall.[76] Twitter comments also spiked a "Dear Netflix" trend with generally negative comments.[76] The company defended its decision during its initial announcement of the change. "Given the long life we think DVDs by mail will have, treating DVDs as a $2 add-on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs", Netflix wrote on its blog. "Creating an unlimited-DVDs-by-mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs-by-mail offering."[75]

In a reversal, Netflix announced in October 2011 that its streaming and DVD-rental plans would remain together under the Netflix brand.[77]

On September 1, 2011, Starz announced it would remove its films from Netflix streaming on February 28, 2012. Since the agreement was strictly for streaming film titles, DVD rentals through Netflix were not affected.[78] However, around that same time, it was announced that Netflix would, in 2013, assume the pay-TV rights to films from DreamWorks Animation (those output rights were then held by HBO).

Disc rental

Example of a Netflix DVD rental of Kill Bill. Discs are returned in the same envelopes they are sent to customers.

In the United States, the company provides a monthly flat-fee service for the rental of DVD and Blu-ray Discs. A subscriber creates an ordered list, called a rental queue, of films to rent. The films are delivered individually via the United States Postal Service from an array of regional warehouses. As of March 28, 2011, Netflix had 58 shipping locations throughout the U.S.[79] The subscriber can keep the rented disc as long as desired, but there is a limit on the number of discs (determined by subscription level) that each subscriber can have on loan simultaneously. To rent a new film, the subscriber must mail the previous one back to Netflix in a metered reply mail envelope. Upon receipt of the disc, Netflix ships the next available disc in the subscriber's rental queue.

Netflix offers several pricing tiers for DVD rental of one to three DVDs at a time. Subscribers with accounts in good standing can upgrade to plans offering up to eight DVDs at a time. Gift subscriptions are also available. On November 21, 2008, Netflix began offering its subscribers access to Blu-ray Discs for an additional fee. In addition to its film rental service, Netflix formerly sold used discs. The purchase was delivered via the same system and billed using the same payment methods as rentals. This service was discontinued at the end of November 2008.[80]

On January 6, 2010, Netflix reached an agreement with Warner Bros. Pictures to delay rentals of new releases for 28 days from their retail release, in an attempt to help studios sell more physical media at retail outlets. Similar deals with Universal Studios and 20th Century Fox were reached on April 9, 2010.[81][82][83] In 2011, Netflix split its service pricing so that customers can decide whether they want to pay for online streams, access to DVDs by mail, or both. Currently, Netflix's disc rental subscription rates range from $7.99 to $19.99 a month, including a free one-month trial and unlimited exchanges of DVDs.

Qwikster

On September 18, 2011, Netflix CEO and Co-Founder Hastings said in a Netflix blog post that the DVD section of Netflix would be split off and renamed Qwikster, and the only major change would be separate websites for the services.[84] The new service was to also carry video games for an additional charge, whereas the previous Netflix did not.[33] Netflix subscribers who wanted DVDs by mail would have had to use a separate website to access Qwikster.

On October 10, 2011, following negative reaction from customers, Hastings cancelled the planned Qwikster service and said the DVD-by-mail service would remain a part of Netflix.[85]

Profiles

In June 2008, Netflix announced plans to eliminate its online subscriber profile feature.[86] Profiles allow one subscriber account to contain multiple users (for example, a couple, two roommates, or parent and child) with separate DVD queues, ratings, recommendations, friend lists, reviews, and intra-site communications for each. Netflix contended that elimination of profiles would improve the customer experience.[87] However, likely as a result of negative reviews and reaction by Netflix users,[88][89][90] Netflix reversed its decision to remove profiles 11 days after the announcement.[91] In announcing the reinstatement of profiles, Netflix defended its original decision, stating, "Because of an ongoing desire to make our website easier to use, we believed taking a feature away that is only used by a very small minority would help us improve the site for everyone," then explained its reversal: "Listening to our members, we realized that users of this feature often describe it as an essential part of their Netflix experience. Simplicity is only one virtue and it can certainly be outweighed by utility."[92]

Five profiles

Netflix introduced a "Profiles" feature on August 1, 2013 that permits accounts to accommodate up to five user profiles, associated either with individuals or themes of their choosing (e.g., "Date Night"). "Profiles" effectively segregates the viewing habits of each profile category (e.g., family member) so that each profile will receive individualized suggestions and the ability to add its own favorite titles. This is important, according to Todd Yellin, Netflix's vice president of product innovation, because, "About 75 percent to 80 percent of what people watch on Netflix comes from what Netflix recommends, not from what people search for".[93] Moreover, Mike McGuire, a vice president at Gartner, said: "profiles will give Netflix even more detailed information about its subscribers and their viewing habits, allowing the company to make better decisions about what movies and TV shows to offer".[93] Additionally, the profiles feature lets users link their Facebook accounts, and thus share their individual viewing history and receive recommendations from friends.[93][94] (Netflix added Facebook integration in March after lobbying Congress to change an old video law.[94]) Neil Hunt, Netflix's chief product officer, told CNNMoney: "profiles are another way to stand out in the crowded streaming-video space", and, "The company said focus-group testing showed that profiles generate more viewing and more engagement".[95]

Hunt says Netflix may link profiles to specific devices, in time, so a subscriber can skip the step of launching a specific profile each time s/he logs into Netflix on a given device.[96]

Critics of the feature have noted:

In response to both concerns, however, users can refine future recommendations for a given profile by rating the shows watched and by their ongoing viewing habits.[96][97]

Products

Netflix revealed a prototype of the new device called "The Switch" at the 2015 World Maker Faire New York. "The Switch" allows Netflix users to turn off lights when connected to a smart home light system. It also connects to users' local networks to enable their servers to order takeout, and silence ones phone at the press of a button. Though the device hasn't been patented Netflix released instructions, on their website, on how to build it at home (DIY). The instructions cover both the electrical structure and the programming processes.[98][99]

Programming

Original programming

House of Cards logo

In March 2011, Netflix began acquiring original content for its popular subscription streaming service, beginning with the hour-long political drama House of Cards, which debuted on the streaming service in February 2013. The series was produced by David Fincher, and stars Kevin Spacey.[100] In late 2011, Netflix picked up two eight-episode seasons of Lilyhammer and a fourth season of the former Fox sitcom Arrested Development.[101][102] Netflix announced that it would release the supernatural drama series Hemlock Grove in early 2013.[103]

In February 2013, DreamWorks Animation and Netflix agreed to produce a new animated series called Turbo FAST, based on the movie Turbo, which premiered in July of that year.[104][105] In March 2013, Netflix announced it signed on The Wachowskis and J. Michael Straczynski to write and executive produce their new scifi series, Sense8.[106] It debuted on June 5, 2015. In mid-2013, Netflix revealed that it holds the option to produce another season of Arrested Development, but a confirmed schedule was not released.[107]

Orange is the New Black logo

Orange Is the New Black debuted on the streaming service in July 2013.[108] It is Netflix's most-watched original series.[109][110] House of Cards, Lilyhammer, Hemlock Grove and Orange Is the New Black were each renewed for an additional season, with scheduled 2014 returns.[111] In February 2016, Orange is the New Black was renewed for a fifth, sixth and seventh season.[110]

In November 2013, Netflix and Marvel Television (a subsidiary of The Walt Disney Company) announced a five-season deal to produce live action series focused on four Marvel superheroes: Daredevil, Jessica Jones, Iron Fist and Luke Cage. The deal involves the release of four 13-episode seasons that culminate in a mini-series called The Defenders. The programs are planned for a 2015 debut.[112][113][114] In addition to the Marvel Television deal with Netflix, Disney announced that the television series Star Wars: The Clone Wars would release its sixth and final season exclusively on Netflix, as well as all five prior seasons and the Clone Wars feature film. The new content was released on Netflix's streaming service on March 7, 2014.[115]

In April 2014, Netflix signed Arrested Development creator Mitch Hurwitz and his production firm The Hurwitz Company to a multi-year deal to create original projects for the service.[116]

Film and television library

Netflix currently has exclusive "pay TV window" deals with major and mini-major studios (the "pay TV" deals in essence, give Netflix exclusive streaming rights and are not distinct from the distribution rights held by traditional pay television services, which are also effectively prohibited from obtaining first-run linear television rights with these deals). As of 2014, films featured on "Watch Instantly" service in the United States include recent releases from Relativity Media (and its subsidiary Rogue Pictures),[117] as well as titles from DreamWorks Animation (DreamWorks Animation began streaming its films in 2013 after the expiration of HBO's previous deal with the studio),[118] Open Road Films[119] (Netflix's contract with Open Road Films will expire after 2016, at which time Showtime will assume pay television rights[120]), FilmDistrict,[121] The Weinstein Company,[122][123] Sony Pictures Animation,[124] and Walt Disney Studios (including Walt Disney Pictures, Walt Disney Animation Studios, Disneynature, Pixar, Lucasfilm and Marvel Studios), among others.

Epix (one of the first traditional pay television channels to launch a Netflix-style streaming service) signed a five-year streaming deal with Netflix in which for the first two years, first-run as well as back catalog content from Epix was exclusive to Netflix (Epix films will come to Netflix 90 days after they premiere on Epix. The exclusivity clause ended on September 4, 2012, when Amazon signed a deal with Epix to distribute its rights to its Amazon Video streaming service.[125] These include films from Paramount Pictures, Metro-Goldwyn-Mayer and Lionsgate).[126][127]

On September 1, 2011, Starz ceased talks with Netflix to renew its streaming deal. As a result, Starz's library of films and series were removed from the Netflix streaming service on February 28, 2012. Titles that are available on DVD were not affected and can be acquired from Netflix by this method.[128] However, select films that have previously been seen on Starz continue to be available on Netflix under license from their respective television distributors. For instance, certain Revolution Studios films shown on Netflix are under license from Lionsgate/Debmar-Mercury. Netflix can also negotiate to distribute animated films from Universal Studios that HBO declines to acquire rights, such as The Lorax and ParaNorman.[129]

Netflix's "Watch Instantly" also holds rights to back-catalog titles to films from among other distributors, Warner Bros., Universal Pictures, Sony Pictures Entertainment, 20th Century Fox, and Walt Disney Studios. Netflix also holds current and back-catalog rights to television programs under license by Disney–ABC Television Group, DreamWorks Classics, Kino International, Warner Bros. Television, 20th Television, Hasbro Studios, Saban Brands and CBS Television Distribution. The streaming service also held current and back-catalog rights to television programs distributed by NBCUniversal Television Distribution, 20th Century Fox Television, Sony Pictures Television, as well as select shows from Warner Bros. Television. Netflix also previously held the rights to select titles from the Criterion Collection, but those were pulled from the streaming library when Criterion titles were added to Hulu's Hulu Plus streaming library.[130]

On August 23, 2012, Netflix and The Weinstein Company signed a multi-year output deal for releases from Weinstein's RADiUS-TWC unit.[131] On December 4, 2012, Netflix and Disney announced an exclusive multi-year agreement for the first-run U.S. subscription television rights to Walt Disney Studios' animated and live-action films. New titles from Walt Disney Pictures, Walt Disney Animation Studios, Pixar, Marvel Studios and Disneynature will be available on Netflix beginning in 2016 (assuming the rights from Starz, making Disney the first major film studio not to distribute its films via a traditional pay television service). However, classic titles such as Dumbo, Pocahontas, and Alice in Wonderland immediately became available on the service.[132] Direct-to-video new releases were made available in 2013.[133][134]

On January 14, 2013, Netflix signed an agreement with Time Warner subsidiaries Turner Broadcasting System and Warner Bros. Television to distribute content from Cartoon Network, Warner Bros. Animation, and Adult Swim, as well as TNT's revival of the drama Dallas beginning in March 2013. The streaming rights to Cartoon Network and Adult Swim programs came not long after the expiration of Viacom's rights deal to allow Netflix access to stream programs from Nickelodeon and Nick Jr. (which were subsequently assumed by Amazon Video).[135]

In Canada, Netflix has pay TV rights (approximately eight months after theatrical release) to films from Paramount, DreamWorks Animation and 20th Century Fox. In 2015, it will assume pay TV rights to films from Disney (including Walt Disney Pictures, Disneynature, DreamWorks Studios, Lucasfilm, Marvel Studios, Pixar, and Walt Disney Animation Studios which are currently held by The Movie Network/Movie Central.[136]

Opinion web blogger Felix Salmon wrote that by 2014, Netflix couldn't "afford the content that its subscribers most want to watch"[137] and lost several contracts for streaming movies, to the point where, according to journalist Megan McArdle, "its movie library is no longer actually a good substitute for a good movie rental place".[138]

Device support

This is a list of devices that are compatible with Netflix streaming services,[139] including Blu-ray Disc players, tablet computers, mobile phones, high-definition television (HDTV) receivers, home theater systems, set-top boxes, and video game consoles

Product Manufacturer Device type Supported regions High definition support Audio support Subtitles Notes
Roku SD Roku Set-top box United States[140] No
Roku - HD, HD-XR, XD, XDS Roku Set-top box United States[140] 720p channel store
Roku LT Roku Set-top box US, Canada, UK/Ireland[140] 720p channel store
Roku 2 HD Roku Set-top box US, Canada, UK/Ireland[140] 720p channel store
Roku 2 - XD and XS Roku Set-top box US, Canada, UK/Ireland[140] 1080p[141] channel store
Roku 3 Roku Set-top box US, Canada, UK/Ireland[140] 1080p Yes channel store
Roku 4 Roku Set-top box US, Canada, UK/Ireland[140] 4K Yes channel store
BD300 LG Blu-ray Disc player
BD640 LG Blu-ray Disc player 1080p No
BD-P2500/P2550 Samsung Blu-ray Disc player No[142]
BD-P1590 Samsung Blu-ray Disc player [142]
BD-P1600, BD-P3600, BD-P4600 Samsung Blu-ray Disc player 720p No[142]
LH50 Series LG Smart TV All Netflix Regions 1080p Dolby Digital 5.1 Yes LG TV Application Store
BD370 LG Blu-ray Disc player
Xbox 360 Microsoft Video game console All Netflix Regions[143] 720p[144] Dolby Digital 5.1 Yes
Xbox One Microsoft Video game console Argentina, Australia, Austria, Belgium, Brazil, Canada, Colombia, Denmark, Finland, France, Germany, Ireland, Israel, Mexico, Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States[145] 4K[146] Dolby Digital Plus 5.1 Yes
Nexus Player Asus Set-top box US, Canada, Australia 1080p Stereo Yes
PlayStation 3 Sony Video game console All Netflix regions[147] 1080p[141] Dolby Digital 5.1 Yes
PlayStation 4 Sony Video game console All Netflix regions[147] 1080p Dolby Digital 5.1 Yes
PlayStation Vita Sony Handheld game console United States, Canada, and Latin America[148] No Yes[149]
Wii Nintendo Video game console All Netflix regions[150] No Yes
Wii U Nintendo Video game console All Netflix regions[151] 1080p Stereo Yes[152]
Nintendo 2DS Nintendo Handheld game console No Yes
Nintendo 3DS Nintendo Handheld game console United States and Canada[153] No Yes 3D video support[154]
TiVo S3, HD, HD XL, Premiere, Roamio TiVo Digital video recorder 720p
WD TV Live Plus Western Digital Set-top box 720p
WD TV Live Gen 3 (2011) Western Digital Set-top box 1080p[141] Dolby Digital + Yes
WD TV Play Western Digital Set-top box 1080p
Apple TV (2nd generation) Apple Set-top box All Netflix Regions[155] 720p Yes
Apple TV (3rd generation) Apple Set-top box All Netflix Regions[155] 1080p Dolby Digital 5.1 Yes
Apple TV (4th generation) Apple Set-top box All Netflix Regions[155] 1080p Dolby Digital 5.1 Yes
Boxee Box D-Link Set-top box United States 720p
Chromecast Google Digital media receiver US, Canada, Brazil, UK, Netherlands, Nordics, Germany, Switzerland, Belgium.[156] 1080p[157] 5.1 audio Yes
Amazon Fire TV Stick Amazon Digital media receiver Certain services may not be available outside the U.S.[158] 1080p[158] Dolby Digital Plus certified, audio pass through up to 7.1[158]
YouView YouView Set-top box 1080p Dolby Digital 5.1 Yes
Rock-Box Strong Australia Digital media receiver Australia 1080p Yes
MPT Strong Australia Digital media receiver/Set-top box Australia 1080p Yes
AN4 Strong Australia Digital media receiver/Set-top box Australia 1080p Yes
AN4M Strong Australia Digital media receiver Australia 1080p Yes
WeTek Core WeTek Set-top box 4K Stereo Yes

Sales and marketing

Netflix.com attracted at least 194 million visitors annually by 2008, according to a Compete.com survey. This is about five times the number of visitors to Blockbuster.com.[159]

During the first quarter of 2011, sales and rentals of packaged DVDs and Blu-ray Discs plunged about 20%, and the sell-through of packaged discs fell 19.99% to $2.07 billion, with more money spent on subscription rentals than in-store rentals.[160]

In July 2012, Netflix hired Kelly Bennett – who had previously been at Warner Bros. for almost a decade as the Vice President of Interactive, Worldwide Marketing – to become its new chief marketing officer. This also filled a vacancy at Netflix that had been empty for over six months when their previous CMO Leslie Kilgore left in January 2012.[161]

International expansion

Availability of Netflix, as of Jan. 2016:
  Available
  Not available
2010 The company first began offering streaming service to the international market on September 22, 2010 to Canada."[162]
2011 Netflix announced its plans to launch streaming service in Latin America,[163]
2012 Netflix started its expansion to Europe in 2012, launching in the United Kingdom and Ireland on January 4.[164] By September 18 it had expanded to Denmark, Finland, Norway and Sweden.[165]
2013 The Netherlands was the only country that Netflix expanded to in 2013, though, as the company decided to slow expansion in order to control subscription costs.[166]
2014 Netflix is available in Austria, Belgium, France, Germany, Luxembourg, and Switzerland.[167]
2015 Expansion to Australia and New Zealand, Japan,[168][169][170] Italy, Portugal, and Spain.[171]
2015-2016 Netflix announced expansion into Asia by launching in Pakistan, Hong Kong, Singapore, South Korea, and Taiwan in early 2016, and the Philippines and Southeast Asia in the near future.[172] Netflix announced it had become available everywhere worldwide outside of Mainland China, Syria, North Korea and the Ukrainian territory of Crimea at the Consumer Electronics Show in January 2016.[173][174]

Competitors

Netflix's success was followed by the establishment of numerous other DVD rental companies, both in the United States and abroad. Walmart began an online rental service in October 2002 but left the market in May 2005. However, Walmart later acquired the rental service Vudu, in 2010.[175]

Blockbuster Video entered the U.S. online market in August 2004, with a US$19.95 monthly subscription service. This sparked a price war; Netflix had raised its popular three-disc plan from US$19.95 to US$21.99 just prior to Blockbuster's launch, but by October, Netflix reduced this fee to US$17.99. Blockbuster responded with rates as low as US$14.99 for a time, but, by August 2005, both companies settled at identical rates.[176] On July 22, 2007, Netflix dropped the prices of its two most popular plans by US$1.00 in an effort to better compete with Blockbuster's online-only offerings.[177] On October 4, 2012, Dish Network scrapped plans to make Blockbuster into a Netflix competitor.[178] (Dish bought the ailing Blockbuster, LLC in 2011 and will continue to license the brand name to franchise locations, and keep its "Blockbuster on Demand" video streaming service open.)[179]

In 2005, Netflix cited Amazon.com as a potential competitor,[180] which until 2008, offered online video rentals in the United Kingdom and Germany. This arm of the business was eventually sold to LoveFilm; however, Amazon then bought LoveFilm in 2011.[181] In addition, Amazon now streams movies and television shows through Amazon Video (formerly Amazon Video On Demand and LOVEFiLM Instant).[182]

Redbox is another competitor that uses a kiosk approach: Rather than mailing DVDs, customers pick up and return DVDs at self-service kiosks located in metropolitan areas. In September 2012, Coinstar, the owners of Redbox, announced plans to partner with Verizon to launch Redbox Instant by Verizon by late 2012.[183] In early 2013, Redbox Instant by Verizon began a limited beta release of its service,[184] which was described by critics as "No netflix killer"[185] due to "glitches [and] lackluster selection."[186]

CuriosityStream, a premium ad-free, subscription-based service launched in March 2015 similar to Netflix but offering strictly nonfiction content in the areas of science, technology, civilization and the human spirit, has been dubbed the "new Netflix for non-fiction".[187]

Hulu Plus, like Netflix and Amazon Prime Instant Video, "ink[s] their own deals for exclusive and original content", requiring Netflix "not only to continue to attract new subscribers, but also keep existing ones happy."[188]

Netflix and Blockbuster largely avoid offering pornography, but several "adult video" subscription services were inspired by Netflix, such as SugarDVD and WantedList.[189][190]

In Australia, Netflix competes with several local streaming companies, most notably locally operated services Presto, Stan and Quickflix.[191] In Scandinavia, Netflix competes with Viaplay, HBO Nordic and CMore Play. In Southeast Asia, Netflix competes with Astro On the Go, Sky on Demand, Singtel TV, HomeCable OnDemand, and iflix.[192] In New Zealand, Netflix competes with local streaming companies including Television New Zealand (TVNZ), Mediaworks New Zealand, Sky Network Television, Lightbox, Neon and Quickflix. In Italy, Netflix only competes with Infinity (Mediaset), Sky Online and TIMvision. In South Africa, Netflix competes with ShowMax.[193]

Time Warner

In a 2010 New York Times interview, Time Warner CEO Jeffrey Bewkes downplayed Netflix as a threat to more traditional media companies. Bewkes told the newspaper, "It's a little bit like, is the Albanian army going to take over the world? I don't think so." At the same time, he recognized that the company's DVD service may have contributed to a decline in DVD sales, and regarding the industry's willingness to make special deals with Netflix in the future, he added "this has been an era of experimentation, and I think it's coming to a close."[194] Bewkes later refined his position, stating during a 2011 conference call that "things like Netflix are welcome additions to the infrastructure. They can monetize value for companies like Warner that maybe there wasn't – in terms of efficiency for older product, wasn't as available before[…]Our view of Netflix has been very consistent. I've tried at times to be humorous about it, sometimes to make a point."[195]

Awards

On July 18, 2013, Netflix earned the first Primetime Emmy Award nominations for original online-only web television programs at the 65th Primetime Emmy Awards. Three of its web series, Arrested Development, Hemlock Grove and House of Cards, earned a combined 14 nominations (nine for House of Cards, three for Arrested Development and two for Hemlock Grove).[196] The House of Cards episode "Chapter 1" received four nominations for both the 65th Primetime Emmy Awards and 65th Primetime Creative Arts Emmy Awards, becoming the first webisode of a television series to receive a major Primetime Emmy Award nomination: David Fincher was nominated in the category of Outstanding Directing for a Drama Series.[196][197] "Chapter 1" joined Arrested Development's "Flight of the Phoenix" and Hemlock Grove's "Children of the Night" as the first webisodes to earn Creative Arts Emmy Award nomination, and with its win for Outstanding Cinematography for a Single-Camera Series, "Chapter 1" became the first webisode to be awarded an Emmy.[198][199] Fincher's win for Directing for a Drama Series made the episode the first Primetime Emmy-awarded webisode.[200]

On December 12, 2013, the network earned six Golden Globe Award nominations, including four for House of Cards.[201] Among those nominations was Wright for Golden Globe Award for Best Actress – Television Series Drama for her portrayal of Claire Underwood, which she won at the 71st Golden Globe Awards on January 12. With the accolade, Wright became the first actress to win a Golden Globe for an online-only web television series. It also marked Netflix' first major acting award.[202][203][204] House of Cards and Orange is the New Black also won Peabody Awards in 2013.[205]

On July 10, 2014, Netflix received 31 Emmy nominations. Among other nominations, House of Cards received nominations for Outstanding Drama Series, Outstanding Directing in a Drama Series and Outstanding Writing in a Drama Series. Kevin Spacey and Robin Wright were nominated for Outstanding Lead Actor and Outstanding Lead Actress in a Drama Series. Orange is the New Black was nominated in the comedy categories, earning nominations for Outstanding Comedy Series, Outstanding Writing For A Comedy Series and Outstanding Directing For A Comedy Series. Taylor Schilling, Kate Mulgrew and Uzo Aduba were respectively nominated for Outstanding Lead Actress in a Comedy Series, Outstanding Supporting Actress in a Comedy Series and Outstanding Guest Actress in a Comedy Series (the latter was for Aduba's recurring role in season one, as she was promoted to series regular for the show's second season).[206]

Finance and revenue

2010

In 2010, Netflix's stock price increased 219% to $175.70 and it added eight million subscribers, bringing its total to 20 million. Revenue jumped 29% to $2.16 billion and net income was up 39% to $161 million.[207]

2011

In April 2011, Netflix was expected to earn $1.07 a share in the first quarter of 2011 on revenue of $705.7 million, a huge increase compared to the year-earlier profit of 59¢ on revenue of $493.7 million, according to a survey of 25 analysts polled by FactSet Research.[208]

At their peak, in July 2011, Netflix shares were trading for $299. Following the customer dissatisfaction and resulting loss of subscribers after the announcements by CEO Hastings that streaming and DVD rental would be charged separately, leading to a higher price for customers who wanted both (on September 1), and that the DVD rental would be split off as the subsidiary Qwikster (on September 18), the share price fell steeply, to around $130.[209][210] However, on October 10, 2011, plans to split the company were scrapped. The reason being that "two websites would make things more difficult", he stated on the Netflix blog. On November 22, Netflix's share tumbled, as share prices fell by as much as 7%.[211] By December 2011, as a consequence of its decision to raise prices, Neflix had lost over 75% of its total value from the summer.[212][213] Describing their business model as "broken", Wedbush downgraded Netflix's stock rating to "underperform", the equivalent of sell.[214]

2014

In May 2014, Netflix increased the fee for UK subscribers by £1.[215] The price increase took effect immediately for new subscribers, but will be delayed for two years for existing members. Netflix applied similar increases in the United States (an increase of $1) and the Eurozone (an increase of €1). According to Forbes,[216] "Netflix can add roughly $500 million in annual incremental revenues in the U.S. alone by 2017 with this move" and "roughly $200–$250 million in incremental revenues from price changes in international markets". However, Reuters' Felix Salmon is critical about Netflix's financial future, noting that "any time that Netflix builds up a profit margin, the studios will simply raise their prices until that margin disappears".[217]

2016

In April 2016, Netflix announced it would be ending a loyalty rate in certain countries for subscribers who were continuously subscribed before price rises.[218]

Legal issues and controversies

Technical details

Cultural effects

The rise of Netflix has affected the way audiences watch televised content. Neil Hunt, Netflix's chief product officer, believes that Netflix is a model for what television will look like in 2025. He points out that because the Internet allows users the freedom to watch shows at their own pace, an episode does not need cliffhangers to tease the audience to keep tuning in week after week, because they can just binge straight into the next episode.[219] Netflix has allowed content creators to deviate from traditional formats that force 30 minute or 60 minute timeslots once a week, which it claims gives them an advantage over networks. Their model provides a platform that allows varying run times per episode based on a storyline, eliminates the need for a week to week recap, and does not have a fixed notion of what constitutes a "season". This flexibility also allows Netflix to nurture a show until it finds its audience, unlike traditional networks which will quickly cancel a show if it is unable to maintain steady ratings.[220]

Netflix has strayed from the traditional necessary production of a pilot episode in order to establish the characters and create arbitrary cliffhangers to prove to the network that the concept of the show will be successful. Kevin Spacey spoke at the Edinburgh International Television Festival about how the new Netflix model was effective for the production of House of Cards, "Netflix was the only company that said, 'We believe in you. We've run our data, and it tells us our audience would watch this series." Though traditional networks are unwilling to risk millions of dollars on shows without first seeing a pilot, Spacey points out that in 2012, 113 pilots were made, 35 of those were chosen to go to air, 13 of those were renewed, and most of those are gone now. The total cost of this is somewhere between $300–$400 million, which makes Netflix's deal for House of Cards extremely cost effective.[221] Netflix's subscription fee also eliminates the need for commercials, so they are free from needing to appease advertisers to fund their original content, a model similar to traditional pay television services such as HBO and Showtime.

The Netflix model has also affected viewers' expectations. According to a 2013 Nielsen survey, more than 60% of Americans admitted to binge-watching shows and nearly eight out of 10 Americans have used technology to watch their favorite shows on their own schedule.[222] Netflix has successfully continued to release its original content by making the whole season available at once, acknowledging changing viewer habits. This allows audiences to watch episodes at a time of their choosing rather than having to watch just one episode a week at a specific scheduled time; this effectively gives its subscribers freedom and control over when to watch the next episode at their own pace. Netflix has capitalized on these habits by automatically playing the next episode in the series, removing the 15-second wait times of content on other streaming services. The structure that allows convenient viewing of episodes as well as the intent to provide content of quality comparable to some broadcast and cable television programs in effect, often results in the viewer being hooked into the program by the time the next episode starts.[223]

See also

References

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