Netflix Case Study - How Netflix Became a Multi-Millionaire Company

Founded in 1997, Netflix grew from being an online DVD rental service to becoming the largest video streaming service in the world, both in terms of revenue and number of members, with over 100 million subscribers worldwide and 50 billion dollars in revenue, based on the company’s own figures. What’s even more impressive is that Netflix became one of the most valuable public companies in North America as well as one of the most admired brands in the world while doing all this despite being based in an industry that, at least at first glance, seemed doomed to failure. How did they do it?

Netflix's Early Struggle

The creation of both Netflix and Redbox can be traced back to one man, McDonald's franchise owner Reed Hastings. After sharing a movie with friends, Hastings was frustrated at how long it took to drive to his local video store and then have to wait in line to return it. Since he was already renting DVDs, he wondered why there wasn't an easier way. He found out that they did, in fact, have online ordering available but stopped offering it because no one ever used it. This is where Hastings got his idea for Netflix. He invested $40 million of his own money into founding it and quickly lost all of it because no one else believed in him or understood what he was trying to do!

Growing from $0 to $5m in sales

Between 1998 and 2000, annual revenues grew from $0 to $5m. This is when Netflix went public with their IPO for which they received a valuation of $2.6 billion. In 2002, both sales and profits were up over 250% from 2001 figures at approximately $207 million in sales and nearly $40 million in profits.

What Makes Netflix Special?

Netflix, Inc. has gotten a lot of attention lately. With nearly 12 million subscribers and more than $1 billion in annual revenue, it’s one of only 20 companies with that kind of success in entertainment. So what makes Netflix special?

The rise of House of Cards

In 2012, streaming giant Netflix started to dip its toes into original programming. The first of its shows was House of Cards, a political drama starring Kevin Spacey and Robin Wright. At that time, original shows were still an experimental endeavor for companies like Amazon and Hulu. But that didn’t stop Netflix from committing $100 million to two seasons of House of Cards—and investing an additional $150 million in marketing to let potential subscribers know it was available.

What are the lessons for entrepreneurs?

The lesson for entrepreneurs is that success if you can call it that, isn’t always about following your passion or fixing what you feel is broken. It’s sometimes about finding an opportunity to provide something – entertainment in Netflix’s case – people didn’t know they wanted or needed. Ultimately, never underestimate your customers.