Netflixation

last updated 2.20.2011

This is an overview of the Netflix business model, management team, and historical timeline.

About Netflix (from Netflix press releases)

With more than 20 million members in the United States and Canada, Netflix, Inc. [Nasdaq: NFLX] is the world’s leading Internet subscription service for enjoying movies and TV shows. For $7.99 a month, Netflix members can instantly watch unlimited movies and TV episodes streamed over the Internet to PCs, Macs and TVs. Among the large and expanding base of devices streaming from Netflix are Microsoft’s Xbox 360, Nintendo’s Wii and Sony’s PS3 consoles; an array of Blu-ray disc players, Internet-connected TVs, home theater systems, digital video recorders and Internet video players; Apple’s iPhone, iPad and iPod touch, as well as Apple TV and Google TV. In all, more than 200 devices that stream from Netflix are available in the U.S. and a growing number are available in Canada.

Netflix Business Overview

• DVD and Blu-ray Disc rentals-by-mail ~100,000 titles
• Instant streaming of movies & TV shows ~20,000 titles
• Consumer offerings: ~20 million subscribers as of January 2011
  • Subscription plans for consumers:
    • United States (Netflix.com):
      • Unlimited streaming only plan $7.99/mo (new as of 11/22/2010)
      • Unlimited plans tiered on the number of DVDs out at-a-time, starting at $9.99/mo for 1 disc out at-a-time. Add Blu-ray Disc rentals starting at $2/mo more.
      • Limited plan with 1 DVD out at-a-time, limit of two rentals a month for $4.99/mo
      • Last price increase was 11/22/2010.
    • Canada (Netflix.ca): Instant streaming service for $7.99/mo
  • Netflix-enabled devices:
    • HDTVs from LG, Samsung, Sony, etc.
    • gaming consoles: Sony PS3, Microsoft Xbox 360, and Wii
    • Blu-ray Disc players from
    • set-top boxes: Roku, TiVo, BoxeeTV, Sony Google TV
  • How Netflix finds its new subscribers:
    • primarily through word-of-mouth
    • Internet advertising through affiliates, offering a risk-free one-month free trial
    • free one-month free trial included with every Netflix-enabled device
    • average $19.81 in cost per gross subscriber addition

Netflix Management Team

Reed Hastings, Founder & CEO: Fortune's Businessperson of the Year 2010. Need more be said?
 
 

Ted Sarandos, Chief Content Officer: In the media business, content is king. Mr. Sarandos spent most of his career in home video business, so he brings his close ties with the Hollywood studios which is needed make the critical content licensing deals.

Read more at Netflix.com.  In 2009, Mr. Hasting's published the Netflix Freedom and Responsibility culture. Review the 128-chart slideset.

Netflix Historical Timeline (in reverse chronological order)

2011:

• Spring: Netflix announces the introduction one-click remote control buttons on Blu-ray players and internet-connected HDTVs to make its instant streaming service that much easier to use.
• January: Netflix memberships passes the 20 million mark.
   

2010:

• 12/20: Netflix stock (Nasdaq: NFLX) will join the S&P 500 index at the start of the trading day.
• 12/10: Netflix changes CFO from Barry McCarthy to David Wells, VP of financial planning and analysis
• 12/9: Netflix signs content distribution deal with Disney-ABC Television Group.
• 11/22: Netflix offers instant streaming only plan $7.99/mo and increases prices on DVD rentals-by-mail plans. In doing so, Netflix has shifted business model paradigm to "primarily a streaming video company" that also offers DVD rentals-by-mail.
• 11/18: CEO Reed Hastings named Fortune magazine's Businessperson of the Year in November.
• Netflix instant streaming platforms expand to include the iPhone/iPod touch, iPad upon launch in April, and Windows Mobile 7. Netflix is still struggling with Android OS platforms because of challenges in implementing the Digital Rights Management (DRM) to protect the movie content.
   

2009:

• Netflix-enabled devices such as Blu-ray Disc players begin to roll out.
   

2008:

• Netflix sold its stake in Roku.
   

2007:

• December: Upon the launch of the instant streaming set-top box, Mr. Hastings realized that an exclusive Netflix set-top box was not the way to reach the masses through their TVs. The cable and satellite companies would compete fiercely with the Netflix set-top box as it competes with their own set-top devices for on-demand programming. Instead, he believe that Netflix must drop the hardware solution and go the software route, which would be embedded in all kinds of devices (a la the Netflix-enabled devices that debut in late 2009). The Netflix instant streaming enabling software would reside in game consoles, DVD players, TVs, or any box that has potential of connecting to the internet and has adequate computing power to run the Netflix streaming device in software. The set-top box idea was spun off into Roku.
   

2005:

• YouTube demonstrated that you could stream and watch videos instantly. This inspired Mr. Hastings to go instant streaming and drop the harddrive device altogether, so he re-directed his Netflix development team to build another set-top box, this time for instant streaming.
   

2003:

• Netflix revisited with internet distribution business model again with a $300 self-branded set-top box that took 6 hours for a movie to download to its harddrive. The thought was that you could download movies from your Netflix Queue during the night or while you were at work, and it would be ready for playback during your prime viewing hours. While it solved the internet delivery problem, it was far from instant streaming.
   

2002:

• Initial public offering (IPO) of NFLX.
   

 2000:

• Netflix experimented with downloading movies over the internet to a set-top box for playback later. With high-speed internet still in its infancy, the best result from the experiement took 16 hours to download and cost $10 in bandwidth fees. Because the technology was not ready, Netflix resumed its focus on DVD rental-by-mail business.
   

1997:

• Reed Hastings founded Netflix. Started as a DVD rental-by-mail service with with 3 DVDs at-a-time rental for $19.99/mo. All DVD mailings were shipped out from its Northern California headquarters. $40 late fee on a local video store rental inspired his rental.

Netflix Stock

Netflix stock is traded on the Nasdaq exchange under the ticker symbol NFLX. It became a constituent of the S&P 500 index on 12/20/2010. The intra-day price chart is shown below for the current and last four trading days, followed by the 2-year historical price chart. Begin your research at Yahoo Finance.

NFLX 5-day intra-day chart

NFLX 2-year historical