Reed Hastings founded Netflix in 1997 and launched the first website in 1998 with a 2,000 movie selection.  When it began in 1998, it had two distributions centers and members paid per movie rental, similar to a traditional brick and mortar store.  When the first website was launched, members paid per movie rental, similar to a traditional brick-and-mortar movie rental store.  The unlimited monthly subscription was not added to Netflix until 1999.

Netflix went public on May 29, 2002.  However, Reed Hastings still owns about 7% of the Company and serves as chairman and CEO.  Netflix claimed losses until 2003, but as can be seen from the current Financial Data, it is now posting net income of $67 million.

Netflix currently employees more than 1,900 people at its corporate headquarters and 100 plus shipping centers located throughout the country. 95% of Neflix’s members live within one-day delivery of its shipping centers.  The Company serves about 7.4 million subscribers and now has over 90,000 programs in its library.

Netflix claims that if its members drove to and from a rental store, they would consume 800,000 gallons of gasoline and release more than 2.2 million tons of carbon dioxide emissions annually.

The greatest threat to Netflix is that they do not own their own electronic distribution system.

Cable companies are currently trying to resolve licensing issues with the Film Studios.  If they can ever develop an equitable solution to deliver movies with higher quality, video on demand through the Cable companies would threaten the renting of DVDs.  The advantage cable companies have is that they already own a high bandwidth pipeline directly to the consumer. There is probably little Netflix can do to address this threat besides continuing to strengthen its relationships and contracts with the Film Studios; and develop technology (digital downloading) that will outperform what the Cable companies are capable of through high quality video on demand.

The second big threat is video on demand itself.  Both Amazon and Apple are currently offering digital movies that customers can download and watch on their televisions.  However, to download through Amazon you must own a TiVo and through Apple you must own an Apple TV.  Netflix needs to implement a similar solution while still maintaining the personalization that comes from their Cinematch software. Netflix currently offers about 6,000 movies for instant viewing.  To help facilitate its transition to digital downloading, Netflix has recently announced a partnership with LG Electronics to develop a set-top box that will allow movies to be streamed from the Internet and viewed on the television.

As Netflix attempts to address these challengers with VOD, bandwidth limitations could cripple them before they truly get started. As their subscriber base increases, the number of people downloading HD programs will grow proportionately. A typical HD movie has about 20GB of data. Trying to download the massive amounts of data to millions of users simultaneously may cause unacceptable slowdowns in performance, detracting from the viewing experience and ultimately pushing consumers away.