Netflix, Inc. is an American subscription streaming service and production company. Launched on August 29, 1997, it offers a film and television series library through distribution deals as well as its own productions, known as Netflix Originals.
The company is ranked 115th on the Fortune 500 and 219th on the Forbes Global 2000. It is the second largest entertainment/media company by market capitalization as of February, 2022. In 2021, Netflix was ranked as the eighth-most trusted brand globally by Morning Consult. During the 2010s, Netflix was the top-performing stock in the S&P 500stock market index, with a total return of 3,693%.
Netflix is headquartered in Los Gatos, California, in Santa Clara County, with the two CEOs, Hastings and Ted Sarandos, split between Los Gatos and Los Angeles, respectively. It also operates international offices in Asia, Europe and Latin America including in Canada, France, Brazil, Netherlands, India, Italy, Japan, South Korea and the United Kingdom. The company has production hubs in Los Angeles,Albuquerque,London,Madrid, Vancouver and Toronto. Compared to other distributors, Netflix pays more for TV shows up front, but keeps more “upside” (i.e. future revenue opportunities from possible syndication, merchandising, etc.) on big hits
Netflix Launch as a mail-based rental business (1997–2006)
On August 29, 1997, Marc Randolph and Reed Hastings founded Netflix in Scotts Valley, California. Hastings, a computer scientist and mathematician, was a co-founder of Pure Atria, which was acquired by Rational Software Corporation in 1997 for $700 million, then the biggest acquisition in Silicon Valley history. Randolph had worked as a marketing director for Pure Atria after Pure Atria acquired a company where Randolph worked. He was previously a co-founder of MicroWarehouse, a computer mail-order company as well as vice president of marketing for Borland International. Hastings and Randolph came up with the idea for Netflix while carpooling between their homes in Santa Cruz, California and Pure Atria’s headquarters in Sunnyvale.Patty McCord, later head of human resources at Netflix, was also in the carpool group. Randolph admired Amazon.com and wanted to find a large category of portable items to sell over the Internet using a similar model. Hastings and Randolph considered and rejected selling and renting VHS tapes 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, they tested the concept of selling or renting DVDs by mail by mailing a compact disc to Hastings’s house in Santa Cruz. When the disc arrived intact, they decided to enter the $16 billion home-video sales and rental industry. 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 of Apollo 13, a claim since repudiated by Randolph. Hastings invested $2.5 million in cash from the proceeds of the Pure Atria sale into Netflix. Netflix.com launched as the first DVD rental and sales site in 1998 with only 30 employees and 925 titles available—almost the entire catalogue of DVDs at the time. Randolph and Hastings met with Jeff Bezos, where Amazon.com offered to acquire Netflix for between $14 and $16 million. Fearing competition from Amazon, Randolph at first thought the offer was fair but Hastings, who held a major 70% of the company, turned it down on the plane ride home
On April 4, 2006, Netflix filed a patent infringement lawsuit in which it demanded a jury trial in the United States District Court for the Northern District of California, alleging that Blockbuster LLC‘s online DVD rental subscription program violated two patents held by Netflix. The first cause of action alleged Blockbuster’s infringement of copying the “dynamic queue” of DVDs available for each customer, Netflix’s method of using the ranked preferences in the queue to send DVDs to subscribers, and Netflix’s method permitting the queue to be updated and reordered. The second cause of action alleged infringement of the subscription rental service as well as Netflix’s methods of communication and delivery. The companies settled their dispute on June 25, 2007; terms were not disclosed.
Netflix Transition to streaming services (2007–2012)
In January 2007, the company launched a streaming media service, introducing video on demand via the Internet. However, at that time it only had 1,000 films available for streaming, compared to 70,000 available on DVD. The company had for some time 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, Netflix had acquired movie rights and designed the box and service. But after witnessing how popular streaming services such as YouTube were despite the lack of high-definition content, the concept of using a hardware device was scrapped and replaced with a streaming concept.
In February 2007, Netflix delivered its billionth DVD, a copy of Babel to a customer in Texas. In April 2007, Netflix recruited Anthony Wood, one of the early DVR business pioneers, to build a “Netflix Player” that would allow streaming content to be played directly on a television set rather than a PC or laptop. While the player was initially developed at Netflix, Reed Hastings eventually shut down the project to help encourage other hardware manufacturers to include built-in Netflix support
Development of original programming (2013–2017)
In February 2018, Netflix acquired the rights to The Cloverfield Paradox from Paramount Pictures for $50 million and launched on its service on February 4, 2018, shortly after airing its first trailer during Super Bowl LII. While the film was critically panned, analysts believed that Netflix’s purchase of the film helped to make the film instantly profitable for Paramount compared to a more traditional theatrical release, while Netflix benefited from the surprise reveal. Other films acquired by Netflix include international distribution for Paramount’s Annihilation and Universal’s News of the World and worldwide distribution of Universal’s Extinction, Warner Bros.’ Mowgli: Legend of the Jungle, Paramount’s The Lovebirds and 20th Century Studios’ The Woman in the Window.
In March 2018, Sky UK announced an 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 April 2018, Netflix pulled out of the Cannes Film Festival, in response to new rules requiring competition films to have been released in French theaters. The Cannes premiere of Okja in 2017 was controversial, and led to discussions over the appropriateness of films with simultaneous digital releases being screened at an event showcasing theatrical film; audience members also booed the Netflix production logo at the screening. Netflix’s attempts to negotiate to allow a limited release in France were curtailed by organizers, as well as French cultural exception law—where theatrically screened films are legally forbidden from being made available via video-on-demand services until at least 36 months after their release
Expansion into international productions (2017–2020)
In November 2017, Netflix announced that it would be making its first original Colombian series, to be executive produced by Ciro Guerra. In December 2017, Netflix signed Stranger Things director-producer Shawn Levy and his production company 21 Laps Entertainment to what sources say is a four-year deal. In 2017, Netflix invested in distributing exclusive stand-up comedy specials from Dave Chappelle, Louis C.K., Chris Rock, Jim Gaffigan, Bill Burr and Jerry Seinfeld.
In February 2018, Netflix acquired the rights to The Cloverfield Paradox from Paramount Pictures for $50 million and launched on its service on February 4, 2018, shortly after airing its first trailer during Super Bowl LII. Analysts believed that Netflix’s purchase of the film helped to make the film instantly profitable for Paramount compared to a more traditional theatrical release, while Netflix benefited from the surprise reveal. Other films acquired by Netflix include international distribution for Paramount’s Annihilation and Universal’s News of the World and worldwide distribution of Universal’s Extinction, Warner Bros.’ Mowgli: Legend of the Jungle, Paramount’s The Lovebirds and 20th Century Studios’ The Woman in the Window. In March, the service ordered Formula 1: Drive to Survive, a racing docuseries following teams in the Formula One world championship
Expansion into gaming, Squid Game, decline in subscribers (2021–present)
In March 2021, Netflix earned the most Academy Award nominations of any studio, with 36. Netflix won seven Academy Awards, which was the most by any studio. Later that year, Netflix also won more Emmys than any other network or studio with 44 wins, tying the record for most Emmys won in a single year set by CBS in 1974. On April 8, 2021, Sony Pictures Entertainment announced an agreement for Netflix to hold the U.S. pay television window rights to its releases beginning in 2022, replacing Starz and expanding upon an existing agreement with Sony Pictures Animation. The agreement also includes a first-look deal for any future direct-to-streaming films being produced by Sony Pictures, with Netflix required to commit to a minimum number of them. On April 27, 2021, Netflix announced that it was opening its first Canadian headquarters in Toronto. The company also announced that it would open an office in Sweden as well as Rome and Istanbul to increase its original content in those regions
The first volume of Stranger Things 4 logged Netflix’s biggest premiere weekend ever for an original series with 286.79 million hours viewed. This was preceded by a new Stranger Things interactive experience hosted in New York City that was developed by the show’s creators.
On June 23, 2022, Netflix announced its second round of layoffs in two months, laying off 300 more employees as part of the company’s plan to trim costs amid lower than expected subscriber growth. The layoffs represented approximately 2 percent of the workforce and spread across the company globally
Historical financials and membership growth
Netflix grants all employees extremely broad discretion with respect to business decisions, expenses, and vacation—but in return expects consistently high performance, as enforced by what is known as the “keeper test.” All supervisors are expected to constantly ask themselves if they would fight to keep an employee. If the answer is no, then it is time to let that employee go. A slide from an internal presentation on Netflix’s corporate culture summed up the test as: “Adequate performance gets a generous severance package.” Such packages reportedly range from four months’ salary in the United States to as much as six months in the Netherlands.
The company offers unlimited vacation time for salaried workers and allows employees to take any amount of their paychecks in stock options.
About the culture that results from applying such a demanding test, Hastings has said that “You gotta earn your job every year at Netflix,” and, “There’s no question it’s a tough place…There’s no question it’s not for everyone.” Hastings has drawn an analogy to athletics: professional athletes lack long-term job security because an injury could end their career in any particular game, but they learn to put aside their fear of that constant risk and focus on working with great colleagues in the current moment
In March 2021, Netflix announced that it would work to reach net zero greenhouse gas emissions by the end of 2022, while investing in programs to preserve or restore ecosystems. The company stated that it would cut emissions from its operations and electricity use by 45 percent by 2030. Due to the COVID-19 pandemic and lack of content production, Netflix had a 14 percent drop in emissions in 2020. In 2021, Netflix bought 1.5 million carbon credits from 17 projects around the world
Further information on Netflix original programming: Lists of Netflix original television series (both current, and ended), original films, and stand-up comedy specials
Further information on Netflix international offerings: Lists of Netflix exclusive international distribution programming
A “Netflix Original” is content that is produced, co-produced, or distributed by Netflix exclusively on their services. Netflix funds their original shows differently than other TV networks when they sign a project, providing the money upfront and immediately ordering two seasons of most series.
Over the years, Netflix’s output has ballooned to a level unmatched by any television networks and streaming services. According to Variety Insight, Netflix produced a total of 240 new original shows and movies in 2018, then climbed to 371 in 2019, a figure “greater than the number of original series that the entire U.S. TV industry released in 2005.” Netflix’s total budget allocated to production increased annually, reaching $13.6 billion in 2021 and projected to hit $18.9 billion by 2025, a figure that once again overshadowed any of its competitors