Netflix is a media-services provider developed by Marc Randolph and Reed Hastings. The primary business of the company is subscription-based streaming OTT service, through which it offers online streaming of television programs and films, including programs produced in-house.
The company operates through three reportable segments namely Domestic Streaming, International Streaming, and Domestic DVD. Revenue from the domestic streaming segment comes from subscribers in the US; whereas revenue from the international streaming segment come from members outside the US for only streaming content. Revenue from the domestic DVD segment comes from monthly membership fees for services such as DVD-by-mail. Using the Netflix streaming software, subscribers can instantly watch content through any Internet-connected device that offers the Netflix app. These include smart TVs, game consoles, streaming media players, set-top boxes, smartphones, and tablets.
Netflix – OTT Video Service User Penetration Rate (%), 2014 – 2019
On April 14, 1998, Netflix.com website was launched. Before the launch of this site, movie lovers would have to physically go video stores to get a movie to watch at home. However, with the advent of Netflix, and the Internet, of course, one could browse the virtual aisles on Netflix, rent a movie, pay for shipping through the site’s e-commerce platform. In two to three business days, the desired DVD sealed in a red envelope would arrive by postal service. The renter was required to return the DVD via mail in the same packaging after seven days. Customers mostly rented for a monthly fee as they could watch as many movies as the liked. The total number of DVDs in their possession at any one time was based on the subscription plans.
In 2007, the company began offering subscribers the option of streaming some of its movies and television shows directly to their homes via the Internet in the US, and began providing service to other countries 2010 onwards.
Netflix has become the world’s TV service and video store and has over 151 million subscribers across almost every country in the world. The company employs more than 7,100 people currently out of which 6,900 works in the streaming segment. These employees helped in a generation of more than US$ 11 billion in revenue in 2017 and reported net sales of US$ 15.7 billion in 2018, which proved to be the most successful year to date. Netflix is worth around US$ 135 billion, which is more than most of its major media rivals.
With the growing trend and preference for subscription video-on-demand (SVoD) service, the company is expected to continue to witness a lucrative growth rate in terms of revenue in the years to come.
In 2017, Netflix, Inc. was ranked as 7th, among various Internet-based companies in the world. In 2018, Netflix was the highest rated TV network in the US. Moreover, the company was awarded in 23 Primetime Emmy awards in 2018.
In October 2018, according to Global Internet Phenomena Report published by Sandvine, Netflix takes up to 15% of the global downstream bandwidth. The downstream bandwidth value goes up in the US as it accounts for 19.1%.
In July 2019, Netflix appointed Jackie Lee-Joe as chief marketing officer (CMO)
Netflix – Quarterwise Revenue, in Million, Q1 2017 – Q2 2019
Netflix – Number of Paid Members, in Million, Q4 2017 – Q2 2019
Netflix gained popularity throughout the world, and its members also increased. As of the 2nd quarter of 2019, Netflix membership grew by 2.7 Mn that is a total of 151.56 Mn paid memberships, with 60.10 Mn Netflix members in the US alone.
Netflix – User Account Sharing (%), as of 2015
Netflix – Paid memberships at end of period, as of 31st December, 2016 – 2018
In 2018, Netflix had 80.7 Mn paid members across the globe, which increased by 39.6% as compared to 2017.
Netflix has the largest share of global video streaming traffic. In comparison, YouTube has 21.3% of the traffic, Amazon Prime Video 5.7%, Facebook Video 3.4%, and Hulu 0.4%.
Average streaming paid memberships increased by 24% from Q2 of 2018 to Q2 of 2019
Netflix – Comparison of Video Streaming Traffic Share (%)
According to Statista, this percentage of video on demand users are on Netflix. Of the 18 to 29-year-old group, 74% of VoD users are on Netflix. In addition, 78% of 30 to 49 year-olds and 74% of 50 to 64 year-olds use Netflix.
Netflix – VoD User Share (%), as of 2018
Background History of the Company:
1997: Netflix Inc. started as a video rental and distribution company
1999: The company began offering an online subscription service through the Internet
2007: The company began offering subscribers the option to stream some of its movies and television shows directly to their homes through the Internet in the US
2010: Netflix introduced a streaming-only plan which included unlimited streaming service, but no DVDs
2010: Netflix then expanded beyond the US and began offering the streaming-only plan in Canada
2011: The company started unlimited streaming services in Latin America and the Caribbean
2013: Netflix launched its first three original series – House of Cards, Hemlock Grove, and Orange is the New Black
2016: The company became global (except China)
- As of Q2 2019, there are nearly 151.56 Mn paid members
- Average streaming paid memberships increased by 24% and ARPU by 3 % year over year as of Q2 2019
- As of Q2 2019, the global streaming ARPU increased by 9%, and with 12% and 7% ARPU growth in the US and the International segments respectively
- The total number of paid memberships in the US decreased by 0.13 Mn in the 2nd quarter of 2019 and the free trials memberships were 1.58 Mn
- The total number of paid memberships over international market increased by 2.83 Mn in the 2nd quarter,2019 and the free trials were 4.48 Mn
- Cost of marketing activities was US$ 2,369 Mn
- Operating income registered was US$ 1,605.2 Mn
- Net income registered was US$ 1,211.2 Mn
- Cash flows from operating activities was US$ 2,680.4
- Cash flows from investing activities registered was US$ 339.1 Mn
- Cash flows from financing activities was US$ 4048.5 Mn
- Cash, cash equivalents, and restricted cash end of period registered was US$ 3812 Mn
- Non-GAAP free cash flow registered was US$ 3,019.6 Mn
- The revenue from the US was 2,299 million in Q2 2019 whereas the revenue generated over international market was 2,548 million
- Partnered with AT&T for integrating Netflix into AT&T’s new set-top box.
- Netflix, delved into marketing by partnering with best-in-class brands like Coke, Nike, Burger King, and Baskin Robbins to build deep connections with their fans for the launch of “Stranger Things” season 3.
- Netflix is expected to spend US$ 13 Bn on original TV content, and for this amount, the company is expected to release 82 feature films and produce or procure 700 new or exclusively licensed television shows. The company also plans to spend US$ 2 billion to market its service and content.
- In February 2018, Netflix released the first episode of Ricky Gervais’s stand-up comedy. In 2016, Ricky Gervais signed up for two special episodes with Netflix, and the company paid US$ 40 Million in total for the two projects.
- Netflix, being one of the popular companies in the world, spends sizably on marketing, and the company spent US$ 730 Mn in the 4th quarter of 2018
- Netflix is enjoyed in almost every country around the world
- Majority of the adult’s age group from 18 to 54 years old subscribe to the service.
- Our Planet is the highest watched original docu-series through its first four weeks that is 33 Mn households
- I Q2 2019, 40 of the original series, films and specials were nominated for 117 Emmy awards
- A 2016 study found that 58% of Netflix subscribers choose the service because of its cost-effectiveness
- According to survey data from 2017, 54% of US adults were using Netflix, with 23% streaming Netflix daily and 81% streamed on a TV set
- 64% of households have a subscription video-on-demand (SVOD) service from Netflix, Amazon Prime, and/or Hulu
- In 2017, 23% of all adults were streaming Netflix daily, compared to 6% in 2011
- Latin America is Netflix’s largest market, with high growth potential
- Netflix accounts for almost one-third of traffic in the US during primetime
- Netflix has its own awards – the Flixies
- The CEO, Marc Rudolph, first named Netflix Kibble.com, after his dog
- Netflix is the largest contributor of Internet traffic
- A new hire on Netflix starts out at US$ 18 an hour
- Rectangular envelopes are a norm at Netflix
- Netflix was almost purchased for US$ 50 Mn by Blockbuster in 2000
- The most watched show on the US version of Netflix is The Breaking Dad
- Movies that require subtitles are included under special category
- Netflix premium members watched at least one movie per day in 2017
- Globally, Netflix’s members broke a re-watch record by streaming Pirates of the Caribbean: The Curse of the Black Pearl 365 times in 2017
- The most affordable country to subscribe to Netflix is Turkey