Netflix History

The Company
A. Netflixs History
The company Netflix was established in August 1997 by Reed Hastings and Marc Randolph
in the Scotts Valley of California. The firm was established with the initiative to sell or rent
DVDs to the public over the internet. The two founded had initially took part in the
establishment of other companies prior to the formation of Netflix.1 Reed Hastings had
previously worked at Pure Software which he helped in establishing while Randolph was a cofounder of MicroWarehouse which deals with order of computer mails and later moved to
Borland International where he served as the companys Vice president in charge of marketing.
The idea of establishing Netflix first came to Hastings at a time when he was forced to pay
overdue fine of $40 after failing to return Apollo 13 in time.
The website of the company was launched in the in the month of August 29th 1997 with about
30 permanent employees and 925 works that were available for renting through the old model
known as pay-per-rental model. In 1999, the company introduced the concept of monthly
subscriptions and proceeding to drop the single-rental model in the year 2000. From then, the
company has managed to build its reputation on the business model known as the flat-fee
unlimited rentals with no due dates, shipping, late fees and per title rental fees. The headquarters
of the company is currently located in Los Gatos in California, United States and serves several
1 Company profile of Netflix. January 4, 2015. Accessed February 24,

2015http://www.fundinguniverse.com/company-histories/netflix-inc-history/
countries all over the world. The Mission Statement of the company is stated as follows,2 "Our
core strategy is to grow our streaming subscription business domestically and globally. We are
continuously improving the customer experience, with a focus on expanding our streaming
content, enhancing our user interface and extending our streaming service to even more Internetconnected devices, while staying within the parameters of our consolidated net income and
operating segment contribution profit targets."
B. Leadership
Reed Hastings is the founder and CEO of Netflix company which he also co-founded in
1997. Reed is first founded Pure Software in 1991 which was a company dealing in making tools
for software development. He is the known to be an active educational philanthropist who has
served on the Board of Education of California State between 2000 and 2004. Currently, he is
involved on the board of several educational organizations such as Pahara, KIPP, Dreambox
Learning and CCSA. He has further served as the board member of Facebook and Microsoft.
Hastings acquired a BA from Bowdoin College in 1983 and an MSCS in Artificial Intelligence
from Stanford University in 19883. Reed also served as a math teacher in the Peace Corps in
Swaziland. He is a family man who is married with two children. These qualities and experience
make him to be in a better position to manage the company as well as foresee its future growth.
C. Which of the five generic strategies?
2 1997-1998 Mission statement for Netflix Company. Created in 1997.Accessed

February 24, 2015 http://netflixcompanyprofile.weebly.com/
3 2005-2007. The Companys top management. Accessed on February 24, 2015.
http://ir.netflix.com/management.cfm
Of the five possible business strategies, Netflix is applying focused differentiation strategy
owing to the kind of products that it is dealing with and the target market base. The company has
succeeded in the creation of a niche for themselves in the online movie distribution industry that
has seen it edge out some of its perceived rivals such as Blockbuster and Wal-Mart. They have
further diversified their product line to cater for all social groups in the countries in which they
target in their vibrant marketing strategies4.
D. Products and services
Internet video streaming
Netflix offers an internet video streaming service that is in a position to allow internetconnected devices to gain access to the online library content of the company. At the time when
this service was launched, the early rental-disc subscribers were allowed access to the new
service at no cost so as to motivate them to continue accessing the services. Those who had
subscribed for this service were given approximately one hour of streaming per dollar spent on
the monthly subscriptions5. Netflix later divided the DVD rental subscriptions and the streaming
subscriptions into two separate entities at the time when monthly caps on internet streaming were
lifted.
Disc rental
Netflix offers disc rental services in which the discs are returned in the same envelopes in
which they were issued. The company offers a monthly flat-fee service for the rental of its DVD
4 2001-2013. The competitive advantage of Netflix. Accessed on February 24, 2015.
https://zkometani11.wordpress.com/netflix-competitive-advantage/
5 1997-2012: The diverse services by Netflix. Accessed on February 24, 2015.
http://www.reuters.com/finance/stocks/companyProfile?symbol=NFLX.O
and Blu-ray discs in which a subscriber comes up with a list that contains the movies that they
wish to rent. The movies are then delivered individually through the postal services from a range
of regional warehouses. The rented movies can be kept by the subscribers for a long period but
the company puts a limit on the number of movies that each subscriber can lend at any given
time. In order to rent a new movie, the subscribers must mail the previous movies back to the
company in a metered reply mail envelope. After the movies have been received by the company,
they ship the next available disc in the subscribers rental list.

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The Company

1 Company profile of Netflix. January 4, 2015. Accessed February 24,

2 1997-1998 Mission statement for Netflix Company. Created in 1997.Accessed

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