AIB Featured Business – Netflix
As the largest subscription television and movie streaming service in the world, Netflix is now a household name in the entertainment industry. While many may think it’s been an overnight success, in reality it has been 17 years since the Netflix website officially launched in 1998. Founded by former co-workers Reed Hastings Jr and Marc Randolph, the business idea was inspired by Hastings’ frustration over late fees at their local video store.
Netflix began as a mail order business for DVD rentals, but in 1999 switched to a monthly subscription model which included digital distribution possibilities. In 2007, Netflix began streaming services in the US and by 2010 had expanded outside of North America. In 2011 the company began to offer original content, which has been a key to their ongoing success. The company has also brokered exclusive deals with big name movie studios such as Warner Bros, DreamWorks and Pixar. Today, Netflix provides on-demand streaming media to more than 60 countries around the world, and has more than 65 million subscribers globally.
In March 2015 it was Australia’s turn. Within four months of the launch, the company had obtained an 8% market share of the subscription TV market. Netflix has also remarkably grown the subscription TV market by up to 30% since it launched in Australia and now it is estimated that one in three households in Australia have some form of TV subscription. Netflix has lured customers with low cost options and great content, but the company’s main competitor in Australia, Foxtel, continues to hold the lion’s share of the market across Australia.
Netflix places an important focus on quality rather than quantity, ensuring content is carefully curated to provide the best range of shows and movies for their customer base. As a result, the company’s programming costs have increased relative to the sharp rise in subscriptions. The company estimates programming costs will reach more than $4 billion over the next 12 months as part of a strategy to retain and grow their market share globally. To feed this growth, Netflix’s marketing budget for 2016 is expected to reach nearly $1 billion to build content-driven excitement to drive new sign-ups.
Besides being arguably the most successful pay-tv company in the world, Netflix is also well known as an employer of choice, with an unlimited vacation policy and unlimited parental leave policy for permanent workers. According to Chief Talent Officer for Netflix, Tawni Cranz, these policies were instigated on the basis that people perform better at work when they’re not worrying about home.
What do you think?
Are you a Netflix subscriber? What do you think about the growth of the company in Australia? Join the conversation and leave your comments below.
This article was written by Ellenor Day-Lutz on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources have been used to prepare this article: Wikipedia, Bloomberg, Forbes, TechCrunch, Netflix, CNET , Business Insider, Roy Morgan Research