Top5 Secret Points Of Netflix That Help It To Success

Netflix struggled a lot for its success from the beginning. When Netflix started its business, its competitor Blockbuster had 60000 employees and more than 9000 stores all over the world. Whereas if we talk about sales, it easily earned 6 billion dollars annually. On the other hand, Netflix did not even have enough money to buy a piece of furniture for its office.

Fed up with the situation, Netflix wanted to sell its company to Blockbuster. But the CEO of Blockbuster made fun of Netflix and started laughing. History is witness that the Blockbuster which earlier stood like a mountain in front of Netflix. The same Blockbuster was forced to rub its knees. After just a few years, Netflix wiped out the name and trace of Blockbuster and today it is a 280 billion dollar company. In this article, we will know how Netflix achieved this success.

5) Business Idea

This is the year 1997 when the trend of internet business was increasing. Jeff Bezos used to sell books on the internet through Amazon and he was earning a good income. Mark Randolph also wanted to start an internet business but the problem was which business to start. Mark Randolph used to come up with new ideas and share them with his friend Reed Hastings. Mark Randolph had countless ideas from selling pet food to baseball and bat on the internet but Reed Hastings did not like any of these ideas.

Reed Hastings wanted to start a business on the internet for which he would have to find a customer once and then through the same customer he would earn money again and again. This process of sharing ideas continued for several months and then finally both of them understood an idea. Video tapes which were the only means of entertainment in those times. People would go to their nearest Blockbuster store on weekends, spend hours selecting their favorite movie and take it on rent. If the video tape was not returned on time, they had to pay fine.

When he got this idea, Reed Hastings had a fine of $40 which he had to pay to Blockbuster for returning the video tape late. Reed Hastings believed that there was a dire need for change in this industry and the idea of ​​renting movies on the Internet would definitely work. But the problem was that each video cassette was very heavy and posting it could be very costly and the loss of tapes breaking during postage was another problem.

This was a big problem. Now Mark Randolph and Reed Hastings started seeing their new Internet business failing even before it started. After a few weeks, they came to know about DVD technology for the first time through a tech magazine. It was much lighter and cheaper than video cassettes and posting them could also be very cheap. Reed Hastings thought that instead of video tapes, if movies are put on DVDs and given on rent, it will be more profitable and this is where Netflix’s business started.

4) Business Model

Their business model was very simple. They will display a very large collection of DVDs on the website, then on the order of the customers, the DVDs will be delivered to their doorstep. A prepaid return envelope will also be kept in the envelope of the same order, which will make it easy to post the DVD back to the customer. The idea was simple but money was needed to start it and both of them did not have this investment. Somehow they set up a small low budget office. In which cheap folding tables and second hand furniture were put.

Employees were kept on low salary with the promise that if the business worked out, they would be given shares in the business. This small team of Netflix first built a website and then started buying DVDs. After struggling in this way, Netflix was now ready to launch. Before the launch, they gave interviews to many news outlets so that they could get media coverage as soon as the launch happened. On August 29, 1997, at 9:00 am sharp, they made the website public and also installed a bell that would ring on every new order.

3) Sells

The first order was placed by Mark Randolph himself. The Netflix team posted comments on various internet forums and introduced the DVD by mail service. Due to which many customers visited Netflix. Due to heavy traffic, the Netflix website crashed. After this, the Netflix website was made live again with new servers. On the first day itself, Netflix received 137 orders which was much more than their expectations. Because the website was down for many hours due to heavy load, otherwise the orders could have been even more than this.

The first month of Netflix went very well. But things did not turn out as Mark Randolph and Reed Hastings had thought. Because their first month’s sales were $94000 and DVD rental sales were only $11000. Most people were not renting DVDs but were directly buying the entire DVD. They had given customers both options to either purchase a DVD for $25 or rent it for $4. Mark Randolph and Reed Hastings wanted more people to use their rental service. Because this way the same DVD can be rented again and again and as long as it doesn’t get damaged, they will keep making profits.

2) Loss

Mark and Reed had a good idea that initially they were able to sell DVDs only because there was no other competitor in the market. After a few weeks they got a call from Amazon. Jeff Bezos, who was already well established in the online book market, now wanted to capture the DVD market as well. On one hand Jeff Bezos wanted to buy Netflix, which would have given him a readymade business sitting at home. On the other hand Mark and Reed also actually wanted to DVDs give on rent, not sell them.

So they shared the DVD selling part of Netflix with Amazon and kept the rent part with themselves. Now on one hand there was a benefit in this and on the other hand there was a loss too. The loss was that the part of Netflix which was earning, they shared it with Amazon. The benefit was that if they had not shared, Amazon would have set up its own new business which would then have come in direct competition with Netflix. Now Mark and Reed put their full focus on give DVDs on rent. They started a promotional campaign but it failed miserably.

Netflix contacted famous DVD player manufacturing companies Toshiba and Sony and struck a deal with them. The deal was that any customer who buys their DVD will be given a coupon code. With this, they will be able to rent 10 free DVDs. But this promotion failed because the coupon codes on the DVD players were not pasted inside the box but outside the box. That means even if someone did not buy a DVD player, the coupon code was visible to them from outside, due to which Netflix had to give many DVDs for free.

On the other hand, an incident happened in American politics which Netflix wanted to capture but it also happened loss here. The then American President Bill Clinton fell into a love affair with Monica, an intern at the White House, and the secret of this story was revealed. Hearings were going on in the court regarding this matter. Where Bill Clinton’s affair was proved and Bill Clinton was removed from the presidency. At that time the whole of America was looking for the video of this court trial and Netflix took advantage of the opportunity and displayed the video. The arrow had hit the target and Netflix started getting orders.

The company that was writing the President’s video on DVD was the same company that also worked with adult videos. The company wrote the adult video on DVD by mistake and sent it to Netflix and Netflix dispatched it to the customers without checking. When this matter came to light, Netflix apologized to the customers but this time a huge loss had been incurred. The loss was more than the profit that was expected from the promotion. Till now Netflix’s idea of DVDs on rent was not working and all the promotions were failing.

1) Success

Now Mark had an idea which became the secret of Netflix’s success. Till now Netflix was doing the same work as Blockbuster was doing, the only difference was the internet. Blockbuster was doing the same work through physical stores while Netflix was doing this work through internet. Mark came up with the idea of ​​subscription that by taking a monthly fixed amount from the customers, they will be given 4 DVDs. This will ensure that customers will be able to watch the DVD of their choice easily and they will not have to pay late fee charges.

Luckily this idea worked. On the very first day, 90% of the people who saw this promotion subscribed. These were the customers for whom Mark and Reed had worked so hard. Due to subscription, Netflix’s income started increasing rapidly and a single customer started paying them money every month. On the other hand, Netflix’s biggest competitor Blockbuster was running more than 9000 of its stores and due to late fees alone, Blockbuster used to earn 800 million dollars annually. Whereas at that time Netflix was earning only 5 million dollars.

It is said that the biggest hand behind the success of Netflix was its competitor Blockbuster. Because if Blockbuster wanted, it could have defeated Netflix. But Blockbuster’s sluggishness led to their downfall. Blockbuster was taking the internet business very lightly and because they were running their own physical stores, they did not feel the need for a small internet business. Mark and Reed knew that their business could run only till their competitor Blockbuster starts internet service.

Now Mark and Reed made a plan to sell Netflix to Blockbuster. This would give them a good amount of money and they would also be able to work as employees in Netflix. Now they fixed a meeting with the CEO of Blockbuster. At first the CEO of Blockbuster kept quiet and listened to their offer and then asked for their demand. Reed Hastings immediately said 50 million dollars. On hearing this, the CEO of Blockbuster started laughing loudly. Mark and Reed understood very well that Blockbuster had no intention of buying Netflix, so they had to leave empty handed.

Time passed and Netflix’s subscription kept increasing and Blockbuster remained adamant that there is no benefit from internet business. In 2004, Mark and Reed realized that their customers are now taking interest in Netflix. Seeing this, Blockbuster also started internet business. But now it was too late. It took 7 years for Netflix to understand the behavior of its customers. Now Netflix installed such algorithms on its website that customers could see only those movies in which they were interested.

In 2007, Netflix launched video on demand service, that is, streaming of movies on the internet itself, that is, no hassle of DVD, just come and watch the movie and the story ends. For the first time in the world, a streaming site was doing this. With this, Netflix started getting customers from all over the world, even outside America. Now Netflix had gone far ahead of Blockbuster. Blockbuster started taking hasty steps which resulted in loss of business. Like Blockbuster waived off late fees and other charges for its customers. In 2010, Blockbuster was completely in loss.

Blockbuster lagged behind in changing itself with technology and this step became the reason for its loss. Actually, what Blockbuster did is a part of human psychology. When we have a business running, we want it to continue like this and shy away from changing ourselves. While during this time someone else comes and takes advantage of it and fills the gap in the market. Now Netflix had customer experience, due to which more customers started joining them. Today Netflix has 13000 employees spread all over the world. The company’s revenue is more than 280 billion dollars and it does sales of about 19 billion dollars annually.