Matthew Schiff
Netflix Logo, Courtesy of Netflix (1)
Corporate Headquarters (2)
100 Winchester Circle
Los Gatos, California 95032
(408) 540-3700
Executives (3)
Reed Hastings, Founder and CEO (3)
Kelly Bennett, Chief Marketing Officer (3)
Jonathan Friedland, Chief Communications Officer (3)
David Wells, Chief Financial Officer (3)
Neil Hunt, Chief Product Officer (3)
Ted Sarandos, Chief Content Officer (3)
History (4)
Original form of Netflix distribution, Courtesy of CNN (5)
Netflix streaming on devices besides computers, Courtesy of CNN (5)
In 1997, Reed Hastings and Marc Randolph, two software engineers, created the company Netflix. At first, the company offered online movie rentals and then moved to a subscription based service, offering unlimited movie rentals for a monthly fee. In 2002, Netflix became a publicly traded company on Nasdaq under “NFLX.” By 2005, the number of Netflix subscribers rose to 4.2 million. With this large increase, Netflix became even more high tech and started offering instant streaming for subscribers to watch movies and shows instantly on their computers. By the end of 2010, Netflix partnered with electronic companies such as Xbox 360, Apple and Blue-ray players to bring streaming to other internet connected devices.
In 2011, Netflix started to launch streaming in other countries such as Canada, Latin America and parts of Europe. Netflix started to produce original content in 2013 and within a year was nominated for 31 Primetime Emmys, winning seven. The shows that captured the nominations for Netflix were “House of Cards,” “Orange Is the New Black” and “The Square.” Netflix is now viewable in over 60 countries with over 69 million subscribers watching over 100 million hours of video content (6).
Financial (7)
Netflix Streaming Subscribers (Millions), Courtesy of The Motley Fool (10)
Netflix Stock over 3 Months, Courtesy of Google Finance (12)
Over the past year, Netflix’s operating income has been up and down but ended this quarter (Q3) at $74 million. This is much lower than their previous year ending at $110 million with a forecast of $81 million for next year. Global membership increased by 3.62 million users with now 69.17 million online users. Netflix’s over-forecast for the amount of domestic new users was partially due to the high involuntary churn. They believe this was driven by the transition to chip-based debit and credit cards. At the rate new users are subscribing, this will be Netflix’s fourth consecutive year adding 6 million users in the US. Internationally, Netflix has added 2.74 million new users this quarter, up 700,000 from the previous year (9). Most recently, Netflix has increased their prices in the US which will help improve their ability to create and offer high quality content. Their pricing plans are now offered in 3 different options: Standard-definition, 1 screen sharing for $7.99 which was their original pricing. The second option is high-definition, 2 screen sharing for $9.99 which is $1 from the previous price. The final option is an ultra-high definition, 4 screen sharing for $11.99. To date, Netflix’s total streaming revenue is $1.581 billion and projected to be at $1.667 billion by the end of 2015. Most recently, Netflix’s stock has split, closing at $702.60 a share. Shareholders got an additional 6 shares, making the new shares starting to trade at $100.37. Since then, their stock has rose $25 to date. With 51% of all internet users subscribed to Netflix, this stock price is expected to increase and will not slow down (11).
Distribution
Map of countries with Netflix, Courtesy of Netflix (14)
In 2010, Netflix finally went “global” and started streaming in Canada. Within the next two years, Netflix launched throughout Latin America, the Caribbean, and some parts of Europe such as the United Kingdom, Ireland, and the Nordic Countries. As of October 22, 2015, Netflix became available in Italy, Portugal, and Spain (13). By 2017, Netflix will have produced their first original Italian series, Suburra (15). To date, Netflix is now available in over 60 countries and continues to grow with plans to take over Asia by 2016 (6).
Courtesy of Virgin America (17)
Aside from your classic viewing platforms such as iPads, TV’s and laptops, Netflix is now available 35,000 feet in the air. On September 29, 2015, Netflix and Virgin America, a “low-fare, upscale airline known for offering next generation entertainment and connectivity,” came together and now offer guests the ability to stream their favorite Netflix content, free of charge (16).
Content (9)
Narcos, Courtesy of Netflix (18)
As cord cutting becomes a major issue in the television industry, Netflix has no worries with losing subscribers. With over 69 million subscribers and more than 50% of internet users subscribed to Netflix, they have nothing to worry about. These high numbers are mostly due to their wide variety of media and their original content. In 2013, Netflix produced their two most successful shows, “House of Cards” and “Orange Is the New Black.” Within a year, these two shows scored Netflix 7 Primetime Emmys. Now in 2015, Netflix is hopeful of another award, but this time, with their first original feature film. “Beasts of No Nation,” debuted on October 16th, 2015, is a “hold onto your seat” war drama starring Idris Elba and Abraham Attah. It is worldwide critically acclaimed and an early Oscar hopeful for Netflix. “Narcos” is Netflix’s latest original series and is taking the world by storm. The series is global in nature with a US and Latin American cast, Brazilian director and shot in Columbia. Besides original content, Netflix users come for the wide array of other movies and series. Within the past two months, Netflix has acquired the rights to four highly-rated major series; “How to Get Away with Murder,” “Colony,” “Zoo,” and “Jane the Virgin.”
Competitors
Netflix’s 2 big competitors, Amazon Prime and Hulu, Courtesy of Live For Films (22)
With Netflix becoming a household name and bringing in over $1 billion annually, it’s no surprise others want to jump onboard this online streaming bandwagon. Competitors like Amazon, Hulu and Time Warner are slowly catching up to Netflix’s speed. For $99 a year, Amazon subscribers can access over 40,000 titles for streaming in addition to the free two-day shipping, Prime Music and Kindle’s Lending Library. Amazon is also dipping into original programming with success from their show “Transparent.” Hulu has now offered commercial-free streaming for $11.99, the same price as Netflix’s highest quality streaming plan (9). In addition to Amazon and Hulu, Netflix believes their biggest competitor is Time Warner’s HBO. Their newest service, HBO Now, is a direct streaming service that houses solely all of HBO’s content for $14.99 a month. HBO has now expanded into Latin America, showing their serious efforts to become recognizable on a global scale (19).
Disney Life, Courtesy of Disney (23)
Smaller, yet steady competitors have also made a dent in the online streaming world. Disney has created a subscription based service aimed at kids. This streaming service, DisneyLife, is only available in the United Kingdom so far but seems to be slowly winning kids over across the pond (20). Nasper’s Showmax is also taking a stab in the race of online streaming. The African based company has started to go global with the help of Samsung Electronics whose agreed to feature Showmax on all of its Smart TVs (21). Luckily, good content is what controls this industry, and Netflix knows what the customers want. Their original content provides customer satisfaction and competitive differentiation. They also are competitively priced with the lowest monthly premium at $8.99.
Overview
Netflix has shown that they are not to be messed with and are here to stay. With their wild success from original shows like “House of Cards” and “Orange Is the New Black,” Emmy nominations and wins, and now potential Oscar nominees with “Beasts of No Nation,” Netflix is not slowing down. With their subscriber count reaching over 69 million and finances looking to be going nowhere but up, Netflix has one of the brightest futures for streaming services.
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Sources
(1) Logo, Netflix Media Center, Retrieved: November 30, 2015
(2) Netflix Headquarters Information, Headquarters Info, Retrieved: November 30, 2015
(3) Officers & Directors, Netflix, Retrieved: November 30, 2015
(4) History Timeline, Netflix Media Center, Retrieved: November 30, 2015
(5) History of Netflix, CNN, Retrieved: November 30, 2015
(6) Company Profile, Netflix, Retrieved: November 30, 2015
(7) Financial Statements, Netflix, Retrieved: November 30, 2015
(8) Stock Split, Netflix Shares at $100, USA Today Money, Retrieved: November 28, 2015
(9) Shareholders Report, Netflix, Retrieved: November 30, 2015
(10) 3 Reasons I Own Netflix Stock, The Motley Fool, Retrieved: November 30, 2015
(11) More than half of Americans watch Netflix, Quartz, Retrieved: November 30, 2015
(12) Netflix Stock, Google Finance, Retrieved: November 29, 2015
(13) Press Releases, Netflix Media, Retrieved: November 30, 2015
(14) Netflix Available in other countries, Netflix Help, Retrieved: November 30, 2015
(15) Suburra, Netflix Media, Retrieved: November 29, 2015
(16) Virgin America Now Streaming Netflix, Virgin America, Retrieved: November 30, 2015
(17) Virigin America Plane, Variety, Retrieved: November 30, 2015
(18) Narcos, Netflix, Retrieved: November 30, 2015
(19) 3 Reasons I Own Netflix Stock, The Motley Fool, Retrieved: November 30, 2015
(20) DisneyLife Taking over Netflix, The Motley Fool, Retrieved: November 30, 2015
(21) Naspers Showmax, Business Finance News, Retrieved: November 30, 2015
(22) Netflix Competitors, Live for Films, Retrieved: November 30, 2015
(23) DisneyLIfe, Disney, Retrieved: November 30, 2015