Netflix is an American company located in Silicon Valley California that provides video rental and on-demand video streaming services through mail and internet streaming. It was established in 1997 by Marc Randolph and Reed Hastings due to Hastings’ frustration with being charged a late fee for renting a movie. This led to the idea of offering unlimited rentals without any shipping or late fees, which Netflix introduced when they launched their website in April 1998.
In September 2002, The New York Times stated that Netflix had about 670,000 subscribers. By the end of that year, the number of subscribers grew to one million and reached around 5.6 million by 2006, indicating a rapid growth for Netflix. Nevertheless, in autumn 2004, Frank Chavez filed a class action lawsuit against Netflix alleging false advertising claims like providing “unlimited rentals” with “one-day delivery.” However, Netflix strongly denied any wrongdoing related to their advertising statements.
In January 2005, Netflix decided to provide all existing members with a membership renewal offer before January 15th. This offer included an additional bonus of one free month. As a result, a settlement totaling around 4 million dollars was reached. In the same month, the Terms of Use were adjusted and became effective. It was during this time that the term “throttling” was coined, referring to when mail delivery is expedited to such an extent that customers on the “Unlimited” plan cannot return their discs fast enough to receive an adequate number of shipments within a month. Consequently, the cost for delivering these shipments exceeds the subscription fee charged by Netflix.
Various factors limit the profitability of the company. In 2008, a survey found that the Netflix website attracted nearly 194 million viewers. Jeffrey Bewkes, the CEO of Times Warner, acknowledged in a 2010 interview with The New York Times that Netflix’s popularity contributed to declining DVD sales at physical stores. He compared Netflix’s impact to the unlikely scenario of the Albanian army conquering the world. Additionally, Netflix received criticism for not providing support for Linux users and only supporting subscribers using Windows, Microsoft, OS X, iOS, and Android. In August 2010, Netflix acquired streaming rights from MGM, Paramount Pictures, and Lions Gate for $1 billion. This acquisition expanded movie options available to members through their online service.
The company’s financial stability relies on its agreements and contracts with movie studios and premium channels. Additionally, the company achieved global expansion through the launch of its online streaming service in Canada and Latin America in spring 2011. This service was later extended to Europe, Mexico, Central America, and South America. The company also introduced their services in the United Kingdom, Ireland, Sweden, Finland, Norway, and Denmark. In May 2011, Google unveiled a Chrome plugin specifically designed for Linux users to conveniently stream and watch Netflix.
During the summer, Netflix faced a major conflict with its customers when it raised the price for using both internet streaming and DVD-by-mail services. The company also separated these services into separate bills in order to generate more funds for expanding their streaming content. This change angered most of their customers, leading Netflix to decide on splitting the services and introducing a new streaming service called Qwikster.
Netflix decided to maintain their existing name, acknowledging that they had underestimated the popularity of their unified website and service. As a result, the idea of Qwikster was abandoned. Nevertheless, due to the confusion caused by the near-name change and price hike, approximately 800,000 subscribers were lost.
The unexpected decline in customer numbers was a clear indication of the company’s lack of concern for public sentiment and interest, ultimately resulting in a significant financial impact. Netflix serves as an outstanding illustration of how technology is shaping American family dynamics. Subscribers can conveniently stream movies to their computers and TVs, prompting a shift in consumer behavior from seeking entertainment elsewhere to focusing more on individual preferences.
According to a recent article in the New York Times, the digital divide in America is decreasing, giving economically disadvantaged families more access to technology. As a result, these families are spending less time together as a unit, similar to wealthier families. While internet access has benefits for low-income households, it can also bring about challenges. Although not entirely responsible for this shift, Netflix and other technological factors contribute to the decline of traditional community communication methods.
Netflix has had a significant impact on society in terms of both its economic and social aspects. In economic terms, it offers consumers a more affordable option compared to expensive cable services. For a monthly fee between ten and fifteen dollars, users can rent movies and TV shows or stream them online instead of paying high cable prices. On the social front, Netflix’s CEO Reed Hastings openly acknowledged his mistake in a blog post and stressed the importance of providing an explanation to everyone. This acknowledgment was triggered by the company’s decision to separate their DVD delivery service from their online streaming platform, causing a sharp 40% decline in Netflix stocks.
Redbox capitalized on the changes made by Netflix and expanded their customer base. They also used social media to promote their services, highlighting a Facebook page with almost twice as many “likes” as Netflix. While initially ignoring public feedback, Netflix eventually acknowledged their error and tried to please customers by reversing the changes. However, in February, they declared a contract dispute with Starz which led to the removal of streaming movies or TV shows from Walt Disney Studios and Sony Pictures Entertainment. To compensate for this setback, Netflix promised to provide subscribers with new and diverse content. Additionally, they recently appointed Kelly Bennett, formerly a Vice President at Warner Brothers, as their Chief Marketing Officer.
With its groundbreaking technology, Netflix has completely transformed the movie and television viewing experience, revolutionizing how consumers watch and buy films. As a major player in the entertainment industry valued at approximately 12 billion dollars, this company provides a convenient alternative to traditional video rental stores.
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Arango, Tim, and David Carr. “Netflix’s Move Onto the Web Stirs Rivalries.” The New York Times 24 Nov. 2010: n. pag.
Cooper, Charles. “Netflix CEO: I messed up.” CBS News. CBS News, 19 Sept. 2011. Web. 16 Oct. 2012.
Goldfarb, Jeffrey, and Reynolds Holding. “Incentives Play Role in Success of Netflix.” The New York Times 9 May 2011, New York ed.: B2. Print.
Liedtke, Michael. “Redbox’s Golden Opportunity: Higher Netflix Prices.” Bloomberg Businessweek 31 Aug. 2011: n.pag.Web. 16 Oct. 2012.
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Richtel, Matt.“Wasting Time Is New Divide in Digital Era.” The New York Times 30 May 2012, &nbs pNew York ed.: A1.Print.
Stelter,Brian,and Sam Grobart.“Netflix Raises Price of DVD and Online Movies Package by60%.The NewYorkTimes13July
