A BIT OF NETFLIX'S HISTORY

Netflix was established in 1997 by Reed Hastings and Marc Randolph in Scotts Valley. It had over 139 million paid subscriptions worldwide.

• Netflix was founded on August 29, 1997, in Scotts Valley, California. Two software engineers namely Marc Randolph and Reed Hastings are responsible for founding the world’s leading internet entertainment, Netflix.

• Netflix started at very first in 1997 as a website service. During the time it allowed people to rent DVDs online. So that renter can get them through the mail. While it competed to some extent with TV for people’s entertainment time, it was competing more directly with established video rental stores.

TECHNOLOGY

Netflix adopts pre-fetching and buffering to achieve smooth play-out. TCP provides a buffer, as well as the reliable transmission guarantee for no loss of frame. TCP's bandwidth and congestion control will attempt to use all the available bandwidth between the server and client, fetching content as quickly as possible while being friendly to other (TCP) traffic on the same links. Netflix has a multiple device experience which is called MDX. This allows a controller client to issue commands to a target client. The user authentication scheme used by MDX involves an MDX target to assume the user identify of an MDX controller using data provided by the controller. Controller, target and authentication are the 3 parts involved. Between the controller and the target exists one communication channel and between the target and the authentication server is a MSL communication channel. The Netflix ID cookie and Secure Netflix ID cookie are HTTP cookies issued by the Netflix web site after subscriber login. The Netflix ID cookie is encrypted and identifies the subscriber and analogous to a subscriber’s username. The Secure Netflix ID cookie is tied to a Netflix ID cookie and only sent over HTTPS and analogous to a subscriber’s password. Taking account, the increasing of the consumer’s broadband speed, Netflix started to stream movies on Internet instead of delivering them in subscribers’ mail.

Architecture

Netflix offered access to its service via a public application programming interface (API). This interface allows access to data for all Netflix titles, so that the user could manage his or her movie queue. Content is hosted on a set of Internet-connected storage servers. These servers are connected to a Content Delivery Network, which connects to a local Internet service provider (ISP) to reach end users. Proxy servers’ function as cache stores and store the most requested content. Based on the architecture described, the application is considered over-the-top (OTT) content, which consists of using an ISP to transport IP packets from a content distributor over the Internet.

MARKET

Netflix is an important example of a company that changed their business model and grew exponentially thanks of that. They started with a DVD rental delivery service in US and than they decided to shift to delivering on-demand contents via internet in all the world.

The initial business model of Netflix

When software engineers Reed Hastings and Marc Rudolph founded Netflix in 1997, video rental stores dominated the home entertainment market. They were frustrated because of the customers high fees for late returns. They saw an opportunity to do rentals differently and Netflix started to ship DVDs by mail in April 1998. It was a big challenge in the video-renting market because the VHS dominated the place and only few Americans had a DVD player at that time. Hastings and Rudolph thought if the owners of a DVD player in USA had increased, they would have had a good business. Their vision was right: the revenue from DVD rentals and sales flattens out at around $24 billion in 2006.

From renting DVDs to a subscription model

The first business model was to let people rent videos by selecting it online and having it delivered by mail. After some years, Netflix introduced a subscription model, where customers could rent DVD’s online for a fixed fee per month. Nearly a decade later, they changed their proposition to a streaming service, which changed the way millions of people spend their free time.

The ability to “look as an outsider”

One of the most important reasons thanks to which Netflix revenue grew so much is because the founders had the ability to “look as an outsider” at their business model. They combined several building blocks, by always looking for new ways to solve problems for many customers. For example, in 2007 they saw that the DVD rental business was not profitable enough anymore: people not only want to rent videos, they also want to pay for a large and user-friendly offering. They provided the change and launched one of the most important streaming service in the world. In the following figures, it is illustrated how Netflix’s business model building blocks evolve from past.

CONTENT

Netflix Originals Netflix distributes several original programs, including original series, specials, miniseries, documentaries and films.

Films and television deals

Like many television companies, Netflix has exclusive “pay TV" deals with several studios. Who gives exclusive streaming rights while adhering to structures of tradition pay TV terms.

Video Games

In last year, Netflix announced a service in a streaming video format. Netflix offers an interactive narrative movie with different stories.