Netflix’s largest individual shareholder is Reed Hastings, co-founder, and former CEO of the company, now Chairperson of Netflix, with a 1.7% stake, valued at over $2.4 billion in February 2023. Other significant individual shareholders comprise Jay C. Hoag, the company’s directors since 1999, and Ted Sarandos, former chief content officer and now Chief Executive Officer of Netflix. Major institutional shareholders comprise The Vanguard Group (7.55% ownership), BlackRock (6.58% ownership), and Capital Research Global Investments (5.84% ownership).
|Products and Services||Netflix offers a subscription-based streaming platform that provides a vast library of movies, TV shows, documentaries, and original content. Subscribers can access the content on a variety of devices, including smart TVs, smartphones, tablets, and computers. The platform also offers features like offline viewing and personalized recommendations.||Netflix’s primary offering is its streaming platform, providing subscribers with a wide range of content genres and original productions. Accessibility on various devices and features like offline viewing enhance the user experience. Personalized recommendations help users discover new content. Netflix caters to a global audience seeking on-demand entertainment.||Subscription-based streaming platform with extensive content library, accessibility on multiple devices, offline viewing capability, personalized recommendations, global appeal for on-demand entertainment.|
|Revenue Streams||Netflix generates revenue primarily from monthly subscription fees paid by its subscribers. The company offers different subscription tiers with varying pricing based on factors like video quality and the number of devices allowed. Additionally, Netflix earns income from licensing its original content to third-party platforms and DVD and Blu-ray rentals (although this is a declining segment).||The primary source of revenue for Netflix is monthly subscription fees paid by its subscribers. Offering various subscription tiers allows the company to cater to different customer preferences and generate revenue accordingly. Licensing original content and DVD/Blu-ray rentals serve as supplementary income streams. Netflix’s diversified revenue sources contribute to its financial stability.||Revenue from monthly subscription fees, varying subscription tiers based on video quality and device allowance, income from licensing original content, supplementary revenue from DVD and Blu-ray rentals, diversified revenue sources ensuring financial stability.|
|Customer Segments||Netflix serves a diverse customer base that includes individuals and families seeking entertainment content. The platform is accessible to viewers of all ages and interests, providing a broad selection of content genres. Netflix also caters to a global audience, with content available in multiple languages.||Customer segments for Netflix encompass individuals and families seeking entertainment content spanning various genres. The platform’s accessibility to viewers of all ages and interests ensures a broad customer base. Netflix’s global reach, with content available in multiple languages, allows it to cater to a diverse international audience.||Individuals and families seeking entertainment content across various genres, accessibility to viewers of all ages and interests, global reach with content available in multiple languages, catering to a diverse international audience.|
|Distribution Channels||Netflix distributes its streaming platform through its official website and mobile apps. Subscribers can access the content on a wide range of devices, including smart TVs, gaming consoles, smartphones, tablets, and computers. The platform relies on the internet for content delivery and does not require physical distribution.||Distribution channels for Netflix include its official website and mobile apps, providing subscribers with access to content on various devices. The platform’s internet-based delivery eliminates the need for physical distribution channels. Netflix ensures widespread accessibility through a digital multi-device approach.||Official website and mobile apps for content access on various devices, smart TVs, gaming consoles, smartphones, tablets, and computers, internet-based content delivery eliminating physical distribution channels, widespread accessibility through a digital multi-device approach.|
|Key Partnerships||Netflix collaborates with various partners to enhance its content offerings and distribution. These partnerships may involve content creators, studios, and production companies for original content production. Additionally, the company may collaborate with telecommunications and internet service providers to offer bundled subscriptions. Netflix also partners with device manufacturers to ensure compatibility with a wide range of devices.||Collaborations with content creators, studios, and production companies enrich Netflix’s content library with original productions. Partnerships with telecom and internet providers expand the platform’s distribution through bundled subscriptions. Collaborations with device manufacturers ensure compatibility with various devices, enhancing the user experience. Netflix’s partnerships strengthen its content and accessibility.||Collaborations with content creators, studios, and production companies for original content, partnerships with telecom and internet providers for bundled subscriptions, collaborations with device manufacturers ensuring compatibility with various devices, strengthening content and accessibility through partnerships.|
|Key Resources||Netflix’s key resources include its extensive content library, its technology infrastructure for content delivery and personalization, its user data for content recommendations, a dedicated workforce for content creation and platform maintenance, and its global brand recognition as a leading streaming service. The company’s content acquisition and production capabilities play a crucial role in its competitiveness.||Key resources for Netflix encompass its vast content library, advanced technology infrastructure for content delivery and recommendation algorithms, valuable user data for personalized content suggestions, a skilled and dedicated workforce for content creation and platform maintenance, and global brand recognition as a prominent streaming service. The company’s content acquisition and production capabilities are central to its competitive advantage.||Extensive content library, advanced technology infrastructure for content delivery and recommendations, valuable user data for personalized content suggestions, skilled and dedicated workforce for content creation and platform maintenance, global brand recognition as a leading streaming service, central role of content acquisition and production capabilities in maintaining competitiveness.|
|Cost Structure||Netflix incurs costs related to content acquisition and production, including licensing fees and original content production expenses. Technology infrastructure maintenance and development, such as content delivery servers and recommendation algorithms, are essential expenses. Marketing and advertising costs promote the platform and its content. Employee salaries and benefits contribute to the company’s content creation and platform management.||Costs associated with Netflix’s operations include content acquisition and production expenses, technology infrastructure maintenance and development for content delivery and recommendations, marketing and advertising expenditures promoting the platform and content, employee salaries and benefits supporting content creation and platform management. The company manages its expenses while ensuring content quality and platform functionality.||Costs related to content acquisition and production (licensing fees, original content production), technology infrastructure maintenance and development for content delivery and recommendations, marketing and advertising expenses promoting the platform and content, employee salaries and benefits for content creation and platform management, cost management to ensure content quality and platform functionality.|
|Competitive Advantage||Netflix’s competitive advantage is built upon its vast and diverse content library, which includes a substantial number of original productions. The company’s technology infrastructure powers personalized content recommendations and reliable content delivery. Global brand recognition as a leading streaming service enhances its customer appeal. Partnerships with content creators and studios reinforce its content offerings. Netflix’s commitment to content acquisition and production ensures its competitiveness in the streaming industry.||Netflix’s competitive edge derives from its extensive and diverse content library, featuring numerous original productions. Advanced technology infrastructure enables personalized content recommendations and reliable content delivery. Global brand recognition enhances customer trust and loyalty. Collaborations with content creators and studios strengthen content offerings. The company’s dedication to content acquisition and production solidifies its position in the competitive streaming industry.||Vast and diverse content library, including numerous original productions, advanced technology infrastructure for personalized recommendations and reliable delivery, global brand recognition fostering trust and loyalty, partnerships with content creators and studios enhancing content offerings, commitment to content acquisition and production ensuring competitiveness in the streaming industry.|
Netflix Board of Directors
Netflix’s board of directors comprises:
Netflix Compensation Structure
Netflix’s executive team compensation structure is based on three main components:
- Cash compensation.
- Stock options.
- Other rewards.
As Marc Randolph, co-founder of Netflix explained, the idea to start a company that would wreck down dominant players like Blockbuster wasn’t the result of a lightning moment.
Rather it happened after considering thousand of business ideas.
For a bit of context, in January of 1997, Randolph was working for a software company that was run by Reed Hastings.
As the company got acquired, Randolph would be unemployed shortly after that.
Both Randolph and Hastings were in the same situation, where the company that was acquiring them was keeping them around for six months to enable a smooth transition after the acquisition.
Thus, in these six months, Randolph and Hastings started brainstorming hundreds of business ideas. Indeed, Hastings and Randolph, which had the habit of carpooling, used that opportunity to brainstorm business ideas.
As they drove each day to their office in the Santa Cruz Mountains in Sunnyvale, the two men brainstormed hundreds of ideas, and for weeks they could not find a really good one to be the object of their next venture.
Among these ideas, Randolph pitched Hastings the idea of video rental by mail.
Hastings was not impressed. Indeed, the business would not be viable considering that, at the time, video rentals came into big cassettes, which were heavy, expensive, and fragile.
Thus, not a feasible idea.
Yet, a couple of months after the idea came to Randolph, Hastings mentioned to him how he had read about this new technology called DVD.
A thin and small flat rounded plastic object. This could easily fit into a small envelope.
They went right on to test the idea. Randolph placed a DVD into a pink gift envelope which he sent to Hastings’ home in Santa Cruz.
The next day, Hastings received the DVD intact and handed it to Randolph.
The CD inside was unbroken, and it had arrived in Hastings’ home in less than 24 hours for the price of a stamp!
That is how they realized their idea might work. And a few months later, Hastings wrote a check for 1.9 million dollars to Randolph to start the company.
After hiring a dozen people, and spending the next six months developing an e-commerce website, finally, on April 14, 1998, Netflix launched.
As Randolph pointed out, at the time, Netflix wasn’t trying to dominate the DVD market, to go against Blockbuster, or to look for a larger market, like streaming.
They were trying to survive.
Indeed, for a year and a half, Netflix struggled to find a business model that would make it viable and scalable.
Later on, the company would change leadership, with Hastings taking over as CEO (still to these days).
Netflix started as a DVD-rental company.
That was the most viable way to start a business that could compete with existing players like Blockbuster. Netflix could have tried to play it bigger.
Netflix had known for years that being a competitive player in the DVD-rental space was “just the beginning of something else.”
In a Wired article entitled “The Netflix Effect” from 2002, Reed Hastings, still current Netflix’s CEO, highlighted:
After its initial investment, Reed Hastings got increasingly involved with the company until he took over as the new CEO.
Already in the early 2000s, Netflix was looking into ways to transition from DVD, which had enabled the initial development of Netflix’s business model, to streaming.
For years, the Netflix executive team had been looking at how streaming was evolving. They thought by the early 2000s this might have been an option.
Yet, they missed the shot for several years. Indeed, it would take longer for the streaming technology to become fully viable.
Yet when it did, it proved quite successful for Netflix’s business model. Indeed, Netflix started to offer streaming options in 2007.
As the NYT announced at the time:
The impending death of the company, with its online system for renting DVDs delivered by mail, was predicted late in 2002, when Wal-Mart said it would enter the business; again last year, when Apple and Amazon announced movie-downloading services; and again last week, after the introduction of a series of products and services intended to bring Internet video to television sets.
The NYT highlighted, back in 2007, how Netflix’s death had been predicted several times (and indeed, the company did go through various near-death experiences in these years). Yet
Yet, as Hastings had highlighted, “DVD is not a hundred-year format; people wonder what will Netflix’s second act be.”
Back then, the NYT remarked:
Netflix is introducing a service to deliver movies and television shows directly to users’ PCs, not as downloads but as streaming video, which is not retained in computer memory. The service, which is free to Netflix subscribers, is meant to give the company a toehold in the embryonic world of Internet movie distribution.
As Netflix announced its streaming service, its shares dropped 6.3 percent, and a JPMorgan Securities analyst downgraded the stock, citing increased competition.
Yet, by 2011, the streaming service execution had successfully been rolled out, with streaming subscribers passing the DVD subscribers.
In 2011, in the US, paid DVD subscribers were over 11 million; in the same period, streaming subscribers had passed 20 million!
In 2009, Netflix’s revenues were over $1.6 billion. By 2011, the number passed the $3.2 billion mark!
Netflix had entered a new era, passed through the transitional business model of DVD subscription services, and tapped into a market expansion strategy, where the streaming segment became many times over the DVD segment.
In 2021, DVD subscriptions had become obsolete, whereas the company generated over $29.5 billion from streaming subscription services!
In a historic speech, in 2013, at the Edinburg International Film Festival, Kevin Spacey summarized well the transition of Netflix, which created the company we know today:
Indeed, back in 2013, Netflix started to implement a new strategy.
The company no longer just aggregated content on top of its platform. It started to develop its own content, and it did that through a series called “House of Cards.”
Kevin Spacey’s speech captured the critical transition that media companies had to undergo to survive the next wave of media empowered by the Web.
This speech is worth reading because it opened up the way to the Netflix that we know today, and it created a new standard for media companies, where everyone followed the lead set by Netflix.
Like Kevin Spacey highlighted back in 2013:
House of Cards creatively actually follows the model more often employed here in Great Britain.The television industry here has never really embraced the pilot season looked to buy the networks in the United States as a worthwhile effort and now look of course we went out to all the major networks with House of Cards and every single one was interested in the idea but every single one wanted us to do a pilot first.
In short, Kevin Spacey highlighted how the “pilot content model” was broken.
And how, thanks to the Internet, and new waves of content consumption, the habits of hundreds of millions of new consumers, have entirely changed.
He further explained:
And look, it wasn’t out of arrogance that David Fincher and Beau Willimon (the producers of House of Cards) and I were not interested in having to audition the idea.
It was that we wanted to start to tell a story that would take a long time to tell.
We were creating a sophisticated multi-layered story with complex characters who would reveal themselves over time and relationships that would need space to play out.
And the obligation, of course, of doing a pilot from the writing perspective is that you have to spend about 45 minutes establishing all the characters and create arbitrary cliffhangers and generally prove that what you’re setting out to do is network.
Netflix was the only network that said, ‘we believe in you,’ we’ve run our data and it tells us that our audience would watch this series. We don’t need you to do a pilot.
By comparison, last year, 113 pilots were made, 35 of those were chosen to go to air, and 13 of those were renewed, but most of those are gone now.
And this year 146 pilots were shot, 56 have gone to series but we don’t know the outcome of those yet, but the cost of these pilots was somewhere between 300 and 400 million dollars a year.
That makes our House of Cards deal for two seasons look really cost-effective.
Thus, going way beyond the pilot.
This model not only focused more on building the story and the characters, but it looked at creating such a hook for the people watching the series that they wanted to watch it all at once.
Not only this model would be more convenient, eventually, as the cost of developing a few episodes would be much less expensive, in comparison, than that of developing a pilot.
But it would give it a different format. A format that would be more in line with the way consumers approached it.
Indeed, Kevin Spacey explained:
Clearly the success of the Netflix model releasing the entire season of house of cards at once proved one thing: the audience wants the control they want the freedom!
If they want to binge as they’ve been doing on house of cards and lots of other shows then we should let them binge.
I mean I can’t tell you how many people have stopped me on the street and said thanks ‘you sucked three days out of my life.’
And through this new form of distribution, we have demonstrated that we have learned the lesson that the music industry didn’t learn to give people what they want when they want it in the form they want it in at a reasonable price, and they’ll more likely pay for it rather than steal it.
Well, some will still steal it, but I think we can take a bite out of piracy, so I predict that in the next decade or two, any differentiation between these platforms will fall away.
This opened the way to binge-watching, a new and powerful way to distribute content. And Spacey also remarked:
Is 13 hours watched as one cinematic whole any different from a film? do we define film as being something two hours or less? surely it goes deeper than that.
If you’re watching a film on your television is it no longer a film because you’re not watching it in the theater? if you watch TV show on your iPad is it no longer a TV show? The device and the length are irrelevant. The labels are useless except perhaps to agents and managers and lawyers who use these labels to conduct business deals.
But for kids growing up now there’s no difference watching avatar on an iPad or watching YouTube on a TV or watching Game of Thrones on their computer it’s all content it’s just story.
And the audience has spoken they want stories, they’re dying for them they’re rooting for us to give them the right thing and they will talk about it, binge on it carry it with them on the bus and to the hairdresser force it on their friends, tweet, blog, Facebook make fan pages silly gifs and God knows what else about it.
Engage with it with a passion and an intimacy that a blockbuster movie could only dream of.
And all we have to do is give it to them!
The prize fruit is right there shinier and juicier than it’s ever been before. So it’ll be all the more shame on each and every one of us if we don’t reach out and seize it.
And I want to leave you with the words of a man is as any to address the Nexus of Commerce and art Mr. Orson Welles who once said: “I hate television I hate it as much as peanuts.”
This was the start of Netflix’s transition from aggregator/platform to media powerhouse!
In 2013, Netflix became the first streaming platform to win a Primetime Emmy Award with House of Cards. By 2021, most awarded shows were coming from Netflix’s original production!
This transition is critical, and it shows that, for one thing, it takes a decade to roll out a business strategy fully.
- Co-Founding and Idea Generation: The idea to start Netflix, a video rental by mail service, was generated after considering thousands of business ideas by co-founders Marc Randolph and Reed Hastings.
- DVD by Mail Concept: The initial concept was to offer DVD rentals by mail, leveraging the new DVD technology, which could be easily sent in envelopes.
- Struggles and Survival: Netflix faced challenges in finding a viable and scalable business model in its early years but managed to survive and grow.
- Transition to Streaming: Netflix transitioned from DVD rental to streaming services, initially offering streaming options in 2007.
- Creation of Original Content: In 2013, Netflix started producing original content with the series “House of Cards,” leading the way for more media companies to follow suit.
- Binge-Watching and Distribution: Netflix popularized binge-watching by releasing entire seasons of shows at once, changing the way content is distributed and consumed.
- Shift to Media Powerhouse: Netflix transformed from a content aggregator/platform to a media powerhouse, producing and owning a significant portion of its content by 2022.
- Emmy Awards and Critical Acclaim: “House of Cards” marked Netflix’s first Primetime Emmy Award in 2013, and by 2021, most awarded shows were from Netflix’s original productions.
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