Netflix is an American multinational company created in Scotts Valley in 1997 by Reed Hastings and Marc Randolph belonging to the creative industries sector. It specializes in the distribution and exploitation of cinematographic and television works through a platform dedicated to video-on-demand service. It is headquartered in Los Gatos, California.
| Creation | August 29, 1997 |
|---|---|
| Key dates | August 29, 1997: Creation of Netflix 1999: Start of DVD rental 2002: IPO NASDAQ February 1, 2013: First original series entitled “House of Cards” |
| Founders | Reed Hastings Marc Randolph |
| Key figures | Reed Hastings Marc Randolph Ted Sarandos Greg Peters |
| Legal form | Public limited company |
| Action | NFLX |
| Head office | Los Gatos, California United States |
| Direction | Ted Sarandos and Greg Peters |
| Shareholders | The Vanguard Group (+7.49 percent) (April 8, 2021) Capital Research Global Investors (+6.82 percent) (April 8, 2021) BlackRock (+6.48 percent) (April 8, 2021) |
| activity | Creative Industries |
| Products | Movies Television series |
| Subsidiaries | Netflix International B.V. Netflix Entretenimento Brasil, Ltda. Netflix Entertainment Services India LLP Netflix K.K. Netflix Services Korea Ltd. |
| number of people | 8 600 |
| Website | http://www.netflix.com |
| Capitalization | $70 billion (in June 2022) |
| Equity | US $15,849,248,000 (2021) |
| Turnover | $7.92 billion (Q3 2022) |
| Accounting balance sheet | US$47.56 billion (Q3 2022) |
| Net income | $1.4 billion |
Initially, the company was only present in the commercial exploitation sector through the provision of an online service for the rental and purchase of DVDs delivered to your home. She then offered to rent for a monthly fee.
Its subscription video-on-demand service began in 2007. Since then, the company has embarked on the distribution of a large number of films and television series, original creations to which it devotes increasingly important investments.
In addition, Netflix is the subject of debate as to its legitimacy in this sector of activity, because it comes from the Silicon Valley technopole (Netflix is also one of the so-called “web giants” companies) and not from the historical cradle of American cinema that is the Hollywood district.
In general, the company participates in a change in the methods of consumption and production of audiovisual content increasingly oriented towards delinearization. A pioneer in the subscription video-on-demand sector, Netflix faces competition in France and around the world from other film and television firms, but also from telecommunications and e-commerce.
The expression “Netflix original program”, often used to refer to the content of this platform, does not necessarily mean that the program was produced by Netflix, but that it has been labeled “Netflix Original”, that is to say, distributed exclusively on streaming sites by Netflix, in all or part of the countries where the platform is available. Through the worldwide success of some of its original programs, films or series, Netflix, which also has its own film and animation studios and broadcasts productions from many countries in their original language (such as in 2021, the French series Lupin or the South Korean series Squid Game), continues to increase its number of subscribers worldwide, which, despite a slowdown, exceeded 220 million in 2022, with more than 5000 programs and a new subscription cheaper, but subjecting the viewer to advertising.
Netflix history
The company Netflix (whose name comes from the contraction of the terms “Internet” and “flix”, a colloquial expression of the word “film” in English) was founded in 1997 by Reed Hastings (its current CEO) and Marc Randolph after the former sold his start-up Pure Software, publisher of debugging software, for $ 75 million.
Co-founder Reed Hastings likes to say that the idea to create Netflix came to him following the payment of penalties for not returning a tape early enough when renting it. But its other co-founder says the two entrepreneurs came up with the concept during a car conversation. They initially thought about renting tapes, but because their format made shipments impossible, they turned to the booming DVD format. The company began its monthly subscription DVD rental business in 1999, when the e-commerce sector was still in its infancy.
At the very beginning of the twenty-first century, while it is experiencing financial difficulties, Netflix offers the chain of stores Blockbuster Video to enter its capital up to 49%, which the company refuses by taking the opportunity to launch its own monthly DVD rental offer. In 2002, Netflix was listed on the New York Stock Exchange NASDAQ under the NFLX index, earning $82 million. Co-founder Marc Randolph left the company in 2004. The rental of video-on-demand movies on computers began in 2007 while the service was gradually available on various devices such as set-top boxes, Blu-ray Disc players, game consoles, connected TVs, smartphones and tablets.
In the 2010s, the company underwent significant development. First, geographically, Netflix is expanding the availability of its service worldwide. The geographical expansion of Netflix’s service offering took place first in Canada in 2010, in South America, in the Caribbean, then in English-speaking and Nordic Europe in 2011, in the Netherlands (where the company’s European headquarters have been located since 2016) in 2013, in Western Europe (France, Belgium, Switzerland, Germany, Austria) in 2014, then in Spain, Portugal and Italy as well as Oceania and Japan in 2015 to finally be available worldwide in 2016, except in China. In 2017, Netflix authorized the Chinese company iQiyi to broadcast some of its exclusive content to ensure its presence in China.
Second, the number of Netflix customers continues to grow over the decade, reaching 41.43 million paying subscribers in 2013, 54.48 million in 2014, 70.84 million in 2015, 89.09 million in 2016, 110.64 million in 2017, 139.26 million in 2018, 158.33 million in 2019, to register in 2020 more than 200 million paying subscribers. Finally, the content available on the platform expands during these years. Netflix acquired the rights to several popular hit series, including Star Trek, The Twilight Zone, Twin Peaks and Mad Men in 2011 and Star Wars: The Clone Wars in 2013.
The same year, Netflix, ABC Studios and Marvel Television (subsidiaries of The Walt Disney Company) entered into a partnership for the former to exclusively distribute television series co-produced by ABC Studios and Marvel Television with an initial budget of $ 200 million for sixty episodes featuring the heroes of comic books Daredevil and Jessica Jones from 2015, Luke Cage in 2016, then Iron Fist, the Defenders and Punisher in 2017. The first series exclusively distributed on the platform is the American drama House of Cards broadcast in 2013 (the broadcasting rights were granted to Canal+ in France before Netflix was available in 2014).
At the end of the 2010s, Netflix made a radical change in its distribution strategy and diversified its activities. In 2018, she screened three of her films in preview at the cinema before offering them to her subscribers on the Internet. This new orientation aims to enter the fold of the Academy of Oscars to attract prestigious directors or actors, who wish to participate in films only if they are likely to be awarded. It is also a way for Netflix to soften its relationship with Hollywood and the traditional film industry. In parallel, Netflix launched in 2017, the development and publishing of video games with the first game inspired by the Stranger Things series, Stranger Things: The Game, developed for smartphones, then published in 2019, the game Stranger Things 3: The Game for home consoles.
While in November 2019, French Culture Minister Franck Riester publicly criticizes Netflix for not making significant contributions to French audiovisual production, Netflix inaugurates on January 17, 2020 his first office in Paris, located near the Opera Garnier. The installation coincides with an agreement between Netflix and the French government that involves more support for French productions. 100 million euros should be invested from 2020 for a target of 20 creations per year, compared to 24 over the last six years.
During the first quarter of 2022, Netflix lost 200,000 subscribers worldwide for the first time in more than 10 years. This decrease comes at a time when management planned to earn an additional $2.5 million. Its poor results led to a decline in its share price. This decline in the number of subscribers is explained by the cessation of its activities in Russia in March 2022 which caused it to lose 700,000 subscribers, but also by the group’s difficulties in acquiring new subscribers in all regions of the world. This trend is expected to increase in the second quarter of 2022 as Netflix expects to lose 2 million subscribers during this quarter. Netflix had laid off 175 full-time and contract employees.
Netflix activities
Netflix’s core business is the operation and distribution of films and TV series. It mainly uses the broadcasting of works already released in cinemas or broadcast on television. The company also holds the licenses of content that it distributes exclusively. These, called “Netflix Originals”, represent in 2019 only 8% of the content offered by the platform. By distributing this content, the company negotiates with the production companies the exclusive distribution in all countries and the absence of commercial exploitation on DVD in return for the coverage of production costs. In other cases, Netflix acquires the rights to broadcast content exclusively in markets where it is not already broadcast, earning it the name “Netflix Original” in that market.
Since the launch of its platform, Netflix has offered an offer that differs according to the location of its subscribers. Indeed, the catalog of films and series varies from one country to another, as well as the price of the subscription, under local broadcasting legislation. Thus, in 2016, the United States is in first position with a catalog offering more than 5,700 films and series while Morocco, last on the list, has less than 160. Belgium and France rank in the middle with around 1,850 titles.
There are several reasons for these differences in territorial restrictions, including local preferences that result in a film being able to please in one country, but not in another, licenses shared by several owners who have broadcasting rights, signed agreements allowing some countries to enjoy a film or series before others, and finally the fact that the sale of rights for a film or series is not always possible in some countries and it is then impossible for Netflix to buy the license.
In order to obtain a more extensive catalog, some subscribers circumvent this differentiation of the offer by using a “virtual private network” (or VPN) that makes it possible not to reveal their IP address and to indicate the country of their choice as their place of residence. According to Reed Hastings, the solution to using VPNs would be to offer a single catalog worldwide, in order to then focus on more disturbing and pressing problems, such as piracy.
Since July 2020, Netflix has made the decision to automatically terminate inactive accounts, the goal being to no longer charge subscribers whose account has a period of inactivity of more than 2 years.
In 2021, Netflix acquired the rights to broadcast two sequels to Rian Johnson’s film Knives, again with actor Daniel Craig in the role of the detective. The budget for this project is $400 million.
In 2021, Netflix launches an online store of products derived from its flagship films and series in the United States.
In October 2022, Netflix formalizes the launch of its subscription with advertising for $ 5.99 Canadian or 5.99€ per month. The subscription will be launched in November 2022 and will include 5 minutes of advertising per hour.
Computer game
In 2021, Netflix launches Netflix Games with five mobile games first available only on Android, then for iOS. They are free and exclusively reserved for subscribers, without ads and without in-app purchases. In November 2021, Netflix announces the release of two new games: Asphalt Xtreme and Bowling Ballers. Twenty additional games are announced in June 2022: Reigns: Three Kingdoms, Wild Things, La Casa de Papel, Mahjong Solitaire, Raji, Spiritfarer, Shadow and Bone: Destinies, Poinpy, Immortality, ‘Terra Nile, Before Your Eyes, The Queen’s Gambit Chess, Nailed It! Baking Bash, Hello Kitty Happiness Parade, Lucky Luna, Oxenfree, Desta: The Memories Between, Kentucky Route Zero and Too Hot to Handle.
Economic data
Shareholders of the Netflix company
Netflix’s majority shareholding consists mainly of institutional investors, pension funds and investment funds.
List of major shareholders on November 13, 2021:
| Name | Number of shares | percentage |
|---|---|---|
| The Vanguard Group | 31 506 597 | 7,12 % |
| Capital Research & Management (global investors) | 29 577 402 | 6,68 % |
| Capital Research & Management (international investors) | 19 206 004 | 4,34 % |
| Fidelity Management & Research | 17 424 274 | 3,94 % |
| T. Rowe Price Associates (Investment Management) | 17 204 967 | 3,89 % |
| SSgA Funds Management | 16 112 594 | 3,64 % |
| Capital Research & Management (global investors) | 13 180 745 | 2,98 % |
| East Peak Advisors | 10 500 000 | 2,37 % |
| Icahn Associates Holding | 9 883 482 | 2,23 % |
| BlackRock Fund Advisors | 9 484 681 | 2,14 % |
Management of the Netflix company
Management Team
- Executive Director: Ted Sarandos and Greg Peters
- Director of Human Resources: Jessica Neal
- Marketing Director: Jackie Lee-Joe
- Communications Manager: Rachel Whetstone
- General Counsel, Corporate Secretary: David Hyman
- Chief Product Officer: Greg Peters
- Chief Financial Officer: Spencer Neumann
- Program Director: Ted Sarandos
Board of Directors
- CEO: Jay Hoag
- Members: Richard Barton, Mathias Döpfner, Timothy Haley, Reed Hastings, Leslie Kilgore, Ann Mather, Susan Rice, Brad Smith, Anne Sweeney
- Former members: Rodolphe Belmer
Analysis of the company
Netflix and new forms of consumption
The consumption of subscription video-on-demand being one of the possibilities of delinearized consumption of content (the viewer watches what he wants, when and where he wants, on the medium he wants) in the same way as catch-up television, it makes it possible to watch at any time, unlike consumption by cable. From a sociological point of view, watching content on Netflix contributes to the emergence of a new way of consuming television series. Indeed, the company promotes the practice of binge-watching, which has existed since the 1990s and the development of DVD, by regularly making available to its customers an entire season at once. As a result, the format of television series episodes is modified with possibilities such as skipping the summary of the previous episode as well as the opening and ending credits.
Communication strategies of Netflix
Netflix often uses extraordinary means for its communication. The company covers all media (television, press, cinema, etc.) and non-media (social networks, events) allowing him to communicate, most often on his original content.
First, one of the techniques most used by Netflix within its communication strategy and marketing strategy is the appeal to nostalgia. Indeed, through the choice of its broadcast programs or its own programs, Netflix has been able to take advantage of emerging trends in the audiovisual sector or, more generally, in the arts sector. In the choice of distribution catalog, this influence can be felt in terms of youth content, where today’s 18-25 year old generation can find the content they saw as children.
It is a kind of reminder or a way of using people’s affect to provoke in them a sense of belonging or, at least, closeness. An example is The Magic Bus, and its sequel, distributed exclusively by Netflix. At the level of works signed Netflix, this influence can be felt both from the point of view of the content and the treatment given to the video. This is how we find references to the twentieth century in several programs, such as Stranger Things, Glow, or Les Demoiselles du téléphone.
Secondly, Netflix’s presence in the advertising landscape is reflected in several operations such as print advertising, thanks to which Netflix stands out with bold advertising campaigns. In April 2015, in Paris, in collaboration with the American advertising agency Ogilvy & Mather, Netflix is launching a campaign encouraging the population to circumvent the law to promote its series Better Call Saul. She also uses street marketing through advertising spots placed in public places to persuade passers-by to find out what the series mentioned on the posters is about.
In February 2017, shortly after the release of the “scissors” feature on the Snapchat application, Netflix launched an “out of home” campaign mixing display and social networks, allowing faceswaps (superposition of another person’s head on his own) with the characters of their programs. In Paris, this campaign featured heroes from Netflix’s original programs, including comedian Gad Elmaleh. Finally, Netflix organizes events in public places in order to make its services better known, as in June 2015, in collaboration with the agency Ubi Bene, where an open-air prison was designed to promote the series Orange Is the New Black.
Finally, Netflix employs other means of marketing such as teasing (thanks to its popularity on social media, Netflix can rely on networking sites in the hope of keeping users up to date with the latest information related to their favorite series) and account sharing (even if a person does not have a Netflix account, it is possible that they can borrow a member’s credentials to access the content, which is especially observable among young people, among whom a person who does not have access to the service will adopt more desire to join the community).
In addition, Netflix employs individual recommendation (Netflix’s system being based on algorithms, the company seeks to organize the series displayed in the home interface according to the tastes of each user, through his history, which allows it to develop series that would satisfy consumers expectations) and finally partnerships (the company also partners with other brands such as in 2017 with the Alternative Herbal Health store in San Francisco to distribute twelve cannabis strains inspired by its series).
Technical and human environment
To grow from a DVD rental service to a dynamic provider of offline streaming content in a decade, Netflix has developed and offered innovative solutions in a variety of fields.
Its human resources management policy has new aspects, through the recruitment of highly paid “responsible adults”, the abandonment of the principle of annual evaluation in favor of continuous evaluation and freedom given in activities and unlimited leave at the choice of the employee. Also, Netflix is generous in terms of severance pay.
In addition, the organization of its computer programs is agile, Netflix is at the origin of many tools made available in open source (Nebula, a set of plugins for the Gradle software that allows you to build applications in Java; Aminator, an AMI imaging tool for Amazon Web Services Spinnaker, a multi-cloud deployment tool that integrates with the majority of cloud providers; Chaos Monkey and the Simian Army, a suite of tools to simulate failures in real environments and verify that the computer system continues to work (allowing continuous delivery while guaranteeing the quality of service) to guarantee the quality of experience of its streaming service.
Netflix has established the Open Connect program, a set of partnerships with Internet service providers to deliver its content in the most efficient way. Also, since 2015, the American company has been technically assisted by the CNRS, through the Laboratory of Digital Sciences of Nantes (LS2N) concerning video compression. In March 2017, at the Mobile World Congress in Barcelona, Netflix presented the new video coding tool made at LS2N, which offers high image quality with a bitrate of 100 kilobits per second, 40 times lower than that of high-definition (HD) television, and compatible with most mobile phone networks.
How the platform Netflix works
Netflix’s platform works through a keyword recognition program. Thus, each content is associated with about fifteen keywords to identify and find it. In addition, this operation establishes the content recommendation system on the platform, because each user, by the content he consumes, is associated with keywords. Thus, when a user is recommended for content, it is because it is associated with the same keywords as a user who has viewed it. In addition, content thumbnails change from user to user to determine which ones are most effective at prompting viewers.
In addition, this recommendation system is improved thanks to six other algorithms. The first ranks the most popular content on the user’s homepage, while the second sorts the content that the user might want to see and the third displays content experiencing peaks in popularity according to the periods (Christmas, Valentine’s Day, etc.). Also, the fourth encourages the user to continue watching content that he has begun to see, while the fifth establishes the similarity of content to one of those that the user has seen and the last determines the order in which the content appears on the home page.
In October 2020, Netflix wants to disable the “Are you still here?” which appears when a user chains several episodes on the platform.
Environmental impact and weight in global traffic
Netflix accounts for more than one-third of Internet traffic in the United States, resulting in significant energy consumption coupled with significant greenhouse gas emissions. In fact, the use of video-on-demand services such as Netflix releases about 100 million tons of carbon dioxide each year, or about 0.3% of global emissions, or as much CO2 per year as the Kingdom of Belgium. In addition, unlike other video streaming platforms, Netflix does not provide regular reports on energy consumption, greenhouse gas emissions, or the actual energy mix of its global operations. So far, Netflix has not publicly committed to using renewable energy.
According to the report The Global Internet Phenomena published by the American company Sandvine in 2018, Netflix represents 15% of global Internet traffic, ahead of YouTube (11.35%). The rate is 19.1% of traffic in the United States. Sandvine, however, praises the platform’s compression technology and assures that “Netflix could easily consume three times more volume and 40% of traffic permanently”. In 2019, according to the new Sandvine report, Netflix remains in the lead with 12.60% of incoming internet traffic worldwide, compared to 12.33% for Google, 8.14% for Facebook, 5.42% for Microsoft, 3.65% for Apple and 3.15% for Amazon.
In France in 2018, according to the annual report of the Regulatory Authority for Electronic Communications and Posts (ARCEP) on the state of the Internet, 22.4% of Internet traffic recorded by the four main access providers (Orange, SFR, Bouygues Telecom and Free) was destined for Netflix on that date, compared to 15% of traffic in 2017 and less than 10% in 2016. In June 2020, the platform centralizes around 25% of traffic in France using its own network.
Netflix faces growing competition
With the arrival of Netflix, the frequency of viewing on streaming platforms has greatly increased. According to a study by ComScore, nearly half of people in the United States watch Netflix daily, with the other half playing competing platforms. This compromises the audience for television channels, the fact that the average period for watching Netflix programs coincides with a time slot generally used by the programs. Faced with Netflix’s hegemony in the subscription video-on-demand market, other multinationals in the creative industries, telecommunications and e-commerce sectors are embarking on the distribution and exploitation of films and television series via the Internet. This is particularly the case for multinationals such as Google, Apple, Facebook and Amazon, but also entertainment conglomerates NBCUniversal, WarnerMedia and The Walt Disney Company. In addition, some French television channels offer offers intended to compete with Netflix.
The first offering to compete with Netflix is Hulu, which is a joint service of The Walt Disney Company, 21st Century Fox, NBCUniversal and WarnerMedia founded in 2007. Then, Amazon created its subsidiary Amazon Studios in 2016 and launched a subscription video-on-demand (Prime Video) offer included in its annual subscription to Amazon Prime which has 100 million subscribers in April 2018. Also, Facebook launched in the summer of 2017 the free platform Facebook Watch whose content is adapted to viewing on smartphone screens thanks to their short duration (from ten to thirty minutes).
Facebook’s goal is to earn additional advertising revenue. For its part, Google, through YouTube, started in May 2018 to stream content through a monthly subscription that also includes a subscription to a streaming music service. The Walt Disney Company plans to strengthen its involvement in the subscription video-on-demand sector in the fall of 2019 by launching Disney+, a platform bringing together content from the company’s subsidiaries (Lucasfilm, Marvel Entertainment, 20th Century Fox, National Geographic Channel, etc.).
Faced with growing competition, the streaming platform wants to stay one step ahead and announces a 10% larger investment in 2021 than in 2020. The budget will be allocated to Netflix’s own productions.
On March 16, 2022, Netflix announces the desire to charge its subscribers for sharing passwords for sharing outside the same household.
Reviews
Accusations of transphobia
In October 2021, members of the LGBT+ community have pointed out the inconsistency between the progressive image that the platform wants to give via the high LGBT+ visibility in its series and the spread of transphobic discourses in which it participates by broadcasting a transphobic sketch by comedian Dave Chappelle. Netflix employee Terra Field said via her Twitter account: “What we protest against is the harm this content does to the trans community (especially trans people of color) and VERY specifically to black trans women. People like me don’t get killed. I’m a white woman, my concern is when people write “Tara” on my cup at Starbucks.
Promoting the TERF ideology (which is what we did by offering a platform [to Dave Chappelle]) directly hurts trans people, it is not a neutral act. This is not a two-sided debate. It’s a debate between trans people who want to be alive and people who don’t want us to be.” As a result, she and several others who had spoken on the subject were suspended.
For its part, the company denied having dismissed them because of their position and claimed that these people had tried to attend a meeting to which they were not invited, and stated about the show concerned that it does not tick the box of incitement to hatred or violence, while acknowledging that “distinguishing commentary from hate speech is difficult, especially with stand-up that exists to push boundaries.”
Jaclyn Moore, showrunner of the series Dear White People, announced that she would no longer work with the platform.
Accusations of non-conformity with Islamic and societal values
On September 2022, Netflix received a request from Gulf countries to remove content deemed contrary to “Islamic and societal values.” Gulf countries have threatened the video-on-demand subscription platform with legal action. According to Saudi media, it is the scenes featuring LGBT characters that are accused of “promoting[od] homosexuality”. Netflix is not the only company targeted in these countries. For example, in June 2022, Buzz Lightyear, an animated film from Pixar Studios that features a brief kissing scene between two women, has been banned in the United Arab Emirates. On April 2022, Saudi Arabia asked Disney to remove LGBTQ references from the film Doctor Strange in the Multiverse of Madness and banned their release following Disney’s refusal to comply.
India
In 2022, the platform gave up broadcasting Dibakar Banerjee’s film, which it produced itself, due to pressure from Hindu nationalists.
Abandonment of a Non-binary character and conspiratorial series on the MH 370 aircraft
The sixth season of “Ridley Jones”, a cartoon intended for children of kindergarten age, was abandoned on March 6, 2023, following the appearance of a non-binary character, despite the regrets of its creator Chris Born.
This same month of March 2023, a series talking about the crash of the plane “MH 370” 9 years after its disappearance, was also strongly criticized during its broadcast because its broadcast would promote conspiracy.
A machine to produce addiction … And a new stylistic conformity?
“If Netflix has managed to crush an increasingly tough competition, even to stifle it from the start, it is thanks to its audacity, by offering new content. But this series hypermarket raises questions: does the platform promote the diversity of stories and scenarios or, on the contrary, is this platform just a huge machine for producing conformity? asks the newspaper The Conversation in 2023. The platform tends according to Virginie Martin (Doctor in political science, from the Kedge Business School) to use the power of its algorithms and the methods of neuromarketing and the attention economy by offering the viewer a mixture of thrills and suspense (cliffhanger) which traps him emotionally in an urgent need to know the content of the following episode then those of another series (binge-watching), to the detriment of his sleep.
References (sources)
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