Corporate Headquarters

100 Winchester Circle

Los Gatos, California 95032

(408) 540-3700

www.netflix.com

Officers and Directors

Company History

In 1997, Reed Hastings and Marc Randolph founded Netflix after previously working together as high ranking software engineers at a company called Pure Software. At the beginning, Netflix was an online movie rental service. Over time Netflix adopted a subscription based model that offered endless movie options for a monthly fee.

 

The new idea proved to be effective, and in 2002, Netflix officially became a publicly traded company under the ticker “NFLX” with 600,000 active members in the United States. In 2005, that number grew to a reported 4.2 million users, which Netflix was able to sustain by introducing their ground breaking streaming service that allowed viewers to watch shows instantly. By the end of 2010, Netflix had become a major player in the technology world by partnering up with top electronics companies such as Microsoft, Apple, and Blue-ray. The reason for this was to enter other market places and reach all possible consumers. That became possible in 2011; Netflix began to stream internationally and entered countries in Europe and Latin America.(3) In 2013, Netflix produced it’s first original series called House of Cards, which became wildly successful and is still on the air today. Since then, Netflix has been nominated for 79 Emmys and has won 13, and is now viewable in over 50 countries and reports over 70 million subscribers.(4)

Finances 

Netflix reported earnings were double what most analyst expected. Impressively, Netflix posted a first-quarter EPS of 6 cents, which is up a full cent per share from the year-earlier period. Revenue came in at $1.96 billion, against 1.57 billion in 2015. Now in over 130 countries, Netflix has over 81 million subscribers.(7) This quarter, net additions amounted to a record 6.74 million shattering the old mark of 5.59 million in 2014 and operating income has been cut almost in half to $47 million vs. 97 million a year ago.  One of the main reasons for the great quarter is because of the rapid membership growth. Netflix reported 6.74 million new members, which 4.51 million are international. US revenue grew 18% and profited $413 million, or had a 35.5% margin compared to a 31.7% margin a year ago. International revenue also improved,  increasing 57% and contributing a loss of $104 million, which was better than expected due to the rapid expansion. In most of the international markets, Netflix is only offered in English and payment methods are extremely limited. Going forward, Netflix will add more local languages and payment options to ensure their international plan becomes as profitable as their United States core.(8)

In 2015, Netflix stock price reached over $702.60 per share, which resulted in splitting the stock and giving shareholders an extra 6 shares lowering the price to $100.37 a share. Today, Netflix closed at $95.90 per share, comparably better than 79.77 a year ago.(9)

 

Global Distribution

International expansion is “vital” for Netflix to grow due to a subscription plateau in the United States. The company plans to be in 200 countries by the end of 2016 and in January announced it was live in more than 190 countries already.

While English is the main language, Netflix added Arabic, Korean, and Chinese to the 17 languages already programed into the system. Netflix is now available on almost every device that can connect to the internet, and provides the best possible stream based on bandwidth. Although the company has still not made money going abroad, the actual service has been receiving high praise from its international consumers. The hopes that the company will eventually become fully “global’ seems to dwindle relying on China and North Korea, but Netflix does not seem to be giving up.(10)

Content

In the next quarter, Netflix will release seven new seasons of original content that will  include shows like Unbreakable Kimmy Schmidt, Bloodline, Grace and Frankie, and Orange is the New Black. Also,the company will release the original films The Do-Over, Special Correspondents, and The fundamentals of Caring, which are set to have stars like Adam Sandler, Ricky Gervais, and Paul Rudd behind the projects. Most importantly, the second quarter marks the beginning of the first talk show on Netflix called Chelsea, starting Chelsea Handler.

This talk show is important because it will abandon the tradition “all episodes at once” model and enter into the realm of nightly streaming. Chelsea will start three nights a week and will be recorded in front of a live audience to compete with other Late Night shows. Lastly, since Netflix is now virtually global, the company has stepped up production of non-English series following the success of last years’s Narcos, which was filmed in both Spanish and English. Netflix plans to release their first french series Marseille on May 5th 2016, and Hibana their first Japanese film in June. These series will give Netflix an edge in non-english countries and will result in a global audience.(8)

Competition

Netflix has become the lead pioneer in streaming companies, but with so much success comes competition. The biggest threat to Netflix seems to be the emergence of Amazon. According to Nielsen, in the fourth quarter of 2014, Netflix had a 36% market share on American households to Amazon’s 13% and Hulu Plus‘s 6.5%.(15)

These numbers could change due to Amazon’s membership offering of $8.99 a month, one dollar less than Netflix sets to make it’s price in may. Amazon only sold Prime memberships for $99 previously, but on April 17th that changed to challenge Netflix. This is important because it could mean a huge loss in market share for Netflix moving forward. The price adjustment comes at a perfect time for Amazon because Netflix plans on raising their subscription fee from $7.99 to $9.99 a month. It should be interesting to see how Netflix reacts.16

Overview

Ultimately, Netflix shows that they are a media powerhouse that looks to make a major impact not only in the United States, but around the world. It will be interesting to see if their experiment in timed streaming will work, and if they can keep Amazon from gaining ground in the marketplace.

Sources

1. theodysseyonline.com accessed April 23, 2016
2. Netflix.com Officers and Directors accessed April 23, 2016
3. Media.Netflix.com  accessed April 23, 2016
4. Bustle.com  accessed April 24, 2016
5. huffingtonpost.com  accessed April 23, 2016
6. techforanyone.com accessed April 24, 2016
7. CNBC.com accessed April 24, 2016
8. Shareholders PDF accessed April 24, 2016
9. yahoo.com  accessed April 24, 2016
10. Media.Netflix.com Netflix around the world accessed April 24, 2016
11. Help.Netflix.com  accessed April 24, 2016
12. Twitter.com accessed April 24, 2016
13. N/A
14. Youtube.com accessed April 24, 2016
15. Investorpedia.com accessed April 24, 2016
16. Geekwire.com accessed April 24, 2016
17. techradar.com accessed April 24, 2016