Image courtesy Netflix Media Center
Netflix is a highly successful online movie rental service. See more DVD pictures.
When Reed Hastings founded Netflix in 1997, his idea didn't make sense to a lot of people. DVD players had only been on the market for a few months, and many families were still using VHS tapes to watch movies. In spite of that, Netflix's movie inventory consisted exclusively of DVDs. Nay-sayers also doubted that people would want to wait for home delivery when video rental stores seemed to be everywhere. Critics wondered whether Netflix's unlimited subscription plans, launched in 1999, would be profitable.
Now, close to 10 years after opening its virtual doors, Netflix has nearly 6.8 million subscribers. [Source: Netflix]. In 2006, its estimated total revenue was more than $1.2 billion [Source: Netflix]. The company's goal is to have 20 million subscribers by 2012 -- that's about 20 percent of the households in the United States [Source: Business Week].
It can be difficult to pinpoint exactly where this success has come from. Some argue that it's the breadth of movies that Netflix offers; its library has around 75,000 different titles. Others contend that Netflix has been successful because it has attracted customers who want to watch a variety of movies rather than just new releases. Only about 30 percent of Netflix rentals are newly-released DVDs, but at most video-rental stores, 70 percent of rentals are new movies. [Source: Business Week].
At the Movies |
This requires DVD stores to continually procure and eventually dispose of or sell lots of copies of the same title, while Netflix is able to purchase fewer new copies and continue mailing out older movies. Netflix circulates 95 percent of its titles every three months. Since some of the titles are more popular than others and are requested more of the time, this translates to 35,000 of the 75,000 titles in circulation every day [Source: Netflix].
There's a lot going on, both on the Netflix Web site and behind the scenes, to allow Netflix to deliver so many movies to so many people. In this article, we'll look into how Netflix delivers discs and decides which movies to recommend to you. We'll also explore the company's competition and the issues it may face in the future.
