It is ten years since Netflix announced that it would be offering online streaming to its existing disc by mail subscribers. At the time, few envisaged that online streaming would be any more successful than previous movie download services and some analysts were recommending selling Netflix shares. The rest is history. So what is the future for Netflix now?
On 16 January 2007, Netflix announced that it would be offering its DVD by mail subscribers the option of instantly watching movies on their personal computers.
Netflix planned to launch in a phased rollout over six months, with a library of about 1,000 movies and television series. The amount of viewing was originally limited to six hours of online viewing a month on the entry-level plan, or up to 18 hours for those on the unlimited DVD rental plan, which was $17.99 a month.
“While mainstream consumer adoption of online movie watching will take a number of years due to content and technology hurdles, the time is right for Netflix to take the first step,” said chief executive Reed Hastings.
“Over the coming years we’ll expand our selection of films, and we’ll work to get to every Internet-connected screen, from cell phones to PCs to plasma screens,” he said. “The PC screen is the best internet-connected screen today, so we are starting there.”
It initially worked only on the latest versions of Windows with Internet Explorer. The ‘Watch Now’ feature was described as ‘virtually instant’ with customers able to view video ‘in as little as 30 seconds’.
The New York Times observed that “none of the movie-downloading services have gained much traction with consumers” and “the notion of taking internet video content to television sets remains a work in progress”.
Reed Hastings downplayed the move to avoid undermining the postal subscription business by betting everything online. “The market is microscopic,” he was quoted as saying. “DVD is going to be a very big market for a very long time.”
At the time, Netflix described itself as the world’s largest online movie rental service, offering access to over 70,000 DVD titles to more than six million subscribers.
A decade on, and Netflix has over 83 million paid subscribers worldwide, forecast to exceed 87 million at the end of 2016, with 47 million of them in the United States.
In 2017 Netflix plans to spend around $6 billion on programming and release over 1,000 hours of original productions.
Netflix has a market capitalisation of over $56 billion. Traditional media companies must be wondering how they let Netflix get away. The company makes comparatively small profits, and makes a loss on its international services, investing in the growth opportunity.
Yet Netflix could yet be acquired by an even larger company that simply cannot afford to let it succeed in its global ambitions.