Corporate Success Stories: Netflix
Netflix was founded in 1998 as a DVD rental company, at a time when only 2% of American households owned DVD players.
Published OnJuly 7, 2025Updated OnJuly 27, 2025
Netflix was founded in 1998 as a DVD rental company, at a time when only 2% of American households owned DVD players.
Netflix was founded in 1998 as a DVD rental company, at a time when only 2% of American households owned DVD players. Launching the service was a bold gamble but one that paid off. Within just a few years, 95% of households had DVD players, creating a massive market opportunity. As a result, between 2002 and 2005, Netflix saw its subscriber base grow by 414%, rising from 700,000 to 3.6 million. This rapid growth established Netflix as a market leader and a serious competitor to Blockbuster, the dominant DVD rental company at the time.
Netflix had bigger ambitions to transform the entertainment industry itself. In a bold and risky move, the company chose to disrupt its own business model. In 2007, despite the fact that only 61.7% of U.S. households had internet access, Netflix launched its streaming service, signaling a strategic shift toward digital consumption and the future of home entertainment.
There were five major reasons behind Netflix’s decision to enter the streaming market:
Technology: As the world rapidly transitioned into the digital age, Netflix recognized that being an early mover was essential to securing its position as a future market leader.
Convenience: Netflix aimed to offer a seamless entertainment experience by allowing customers to enjoy their favorite content from the comfort of home, eliminating the need to visit physical stores to rent DVDs.
Accessibility: The goal was to make entertainment available anytime, anywhere. Would give consumers the freedom to watch content on their own terms.
Affordability: By introducing a low-cost, subscription-based model with a simple and stress-free structure, Netflix removed the hassle associated with traditional DVD rentals and late fees.
Personalization: Leveraging user data and algorithms, Netflix was able to recommend shows and movies tailored to each viewer’s preferences, helping users discover new favorites with ease.
Netflix’s transition to streaming was a bold and forward-thinking move, but it came with a host of challenges. These obstacles tested the company’s resilience in its journey to transform the entertainment industry.
When Netflix launched its streaming service in 2007, the library content was limited to around 1,000 titles, as major studios were hesitant to license their premium content to a digital platform.
The few licenses Netflix did acquire were expensive, time-restricted, and non-exclusive, making it difficult to offer a compelling catalog.
At launch, Netflix’s streaming service could only be accessed via Internet Explorer on Windows. Mac users were unable to stream until late 2008.
The streaming quality was inferior to DVD versions, with noticeable reductions in resolution and performance.
Internet infrastructure was still developing, and frequent buffering issues frustrated users, leading to dissatisfaction with the streaming experience.
By 2011, Netflix faced intense competition from emerging players like Hulu, Google TV, Apple TV, and Amazon Prime Video.
Hulu, for instance, matched Netflix’s subscription price of $7.99 but also offered a free selection of previously aired TV shows—bringing a strong USP to the market.
Each competitor introduced unique features and content strategies, eroding Netflix’s early dominance in the streaming space.
Additionally, increased competition led to a surge in licensing costs, as demand for digital content rights grew rapidly.
In 2011, amid a period of economic recession, Netflix restructured its subscription plans.
The company introduced three options: DVD-only, streaming-only, and a combination of both. The pricing changed from $7.99 for either service or $9.99 for both, to $9.99 for each service individually or $15.98 for the combined plan.
This 60% price hike triggered backlash among subscribers, causing many to leave the platform.
As a result, Netflix’s stock price plummeted from $43.54 in mid-July to just $8.91 by late November.
To ensure the success of its streaming service, Netflix implemented several strategic changes that not only helped it survive early challenges but also positioned it as a global industry leader.
Netflix negotiated breakthrough deals with major content providers like Starz and Sony, significantly expanding its streaming library.
It leveraged viewer data to make informed licensing decisions by identifying which content to keep, remove, or acquire. This data-driven strategy helped reduce costs while maintaining a desirable and diverse catalog for subscribers.
This allowed Netflix to transform its limited library into a compelling offer that attracted and retained millions of new subscribers, strengthening its market position against competitors.
In 2008, Netflix began migrating its infrastructure to Amazon Web Services (AWS), completing the transition by 2016. This move allowed for scalable, global delivery.
Netflix also developed its own content delivery network (CDN), Open Connect, which improved video quality and reduced distribution costs. This enabled streaming in over 190 countries worldwide.
Rather than developing its own hardware, Netflix focused on embedding its app across third-party devices, including gaming consoles, smart TVs, and streaming sticks, eliminating user interface fragmentation and enhancing accessibility by late 2009.
These innovations turned around poor streaming quality and accessibility issues, delivering a smooth user experience that set Netflix apart and enabled massive global expansion.
Netflix took its first step into original content by acquiring streaming rights for Breaking Bad from AMC in later seasons, helping to popularize the “Netflix Original” label.
In 2013, Netflix launched its first self-produced original series, House of Cards, with a budget of $3.85 million. The show won 56 awards and became a critical and commercial success.
House of Cards not only validated Netflix’s price increase but also attracted one million new subscribers, setting the stage for a future driven by original programming.
House of Cards not only validated Netflix’s price increase but also attracted one million new subscribers, reversing the customer backlash from the pricing crisis and securing Netflix’s identity as a creator of premium content.
Netflix’s strategic decisions paid off, producing remarkable results:
In 2007, Netflix’s subscriber base increased by 18%, revenue grew by 21%, and net income rose by 36% compared to 2006.
2007 also marked the first time Netflix surpassed $1 billion in annual revenue.
After losing nearly 800,000 subscribers in one quarter and watching its stock price plunge by almost 80%, Netflix reversed the decline by investing in better licensing deals, robust technology, and exclusive original content.
House of Cards alone brought in over one million new subscribers, turning the tide. By the end of 2013, Netflix’s subscriber base rebounded to more than 30 million, restoring investor confidence and proving that its streaming-first model could succeed on a global scale.
For the year ending March 31, 2025, Netflix reported $40.239 billion in revenue, solidifying its position as the world’s leading streaming platform.
Netflix’s journey offers several critical business lessons:
Be willing to disrupt yourself to secure long-term success—even if it means short-term pain.
Prioritize long-term growth over short-term profits.
Communicate clearly with customers and act swiftly to correct mistakes.
Focus on your unique strengths instead of mimicking competitors.
Leverage data and analytics to drive content and product strategy.
Foster a culture of innovation and accountability within your organization.
Move fast but ensure your infrastructure can handle rapidly.
The views and opinions expressed in this blog on Platform01 Consulting’s website are solely those of the respective authors. The information provided in these articles is for general informational purposes only and does not constitute professional advice.