Foresight is a very important quality that the leaders of any company must have in order for their brainchild to be successful. And it was she who at one time helped Netflix defeat its conservative rival of the old school in the face of Blockbusters. She pushed to create advanced algorithms for selecting the right content for any user, taking into account his gender, race, age and taste preferences, forcing hundreds of millions of people to continuously consume films and series. And in the end, it gave Netflix the opportunity to take over the world. Today, the big red letter N and the characteristic sound have already become a conditioned reflex for us that now we will spend time in the close embrace of this largest streaming service. Let's take a look at the history of Netflix and how it works.
People Are Lazy - And You Can Make Money: The Story of Netflix
For a clearer understanding of how Netflix succeeded, let's go back to 1997, USA. The era of VHS cassettes is still in the yard, and the classic ways of watching films or TV shows are cinemas, television, or the ability to rent a cassette on the Blockbusters network. She acted as a monopolist in this environment and her branches were scattered in large numbers in every city throughout the country. Despite the recent introduction of DVDs, DVDs were still something new and less popular in the untrained minds of Americans.
However, at the same time, two forward-thinking friends Reed Hastings, a former member of the Peace Corps, and since 1996 Mark Randolph, a programmer and former head of various mail delivery companies, decide to step into the future, and open a young disc rental company via the Internet - Netflix. According to legend, the idea came to Hastings after he was infuriated by a $ 40 fine for the fact that he expired the video tape with the movie "Apollo 13".
By the way, if you've always wondered what this strange word means, then it consists of two parts Net - from the word Internet, and Flix - an analogue of the word movie, but in the plural. Everything is pretty straightforward and on the surface.
But what did not lie on the surface in 1997 was the potential of Hastings' model for distributing discs over the Internet with home delivery of films. Since, in addition to the problems with the fact that many people were not yet accustomed to DVDs in principle, many businessmen of that time conservatively denied the Internet, completely unaware that the whole world was on the threshold of the digital era, crossing which it would never be the same. It was quite usual for them that the consumer, if he wants to watch a movie, would be comfortable leaving the house and go to rent it, as opposed to going through a computer to some site there, choosing some films there and paying money.
Today, for us, the people of 2020, it sounds insanely stupid, since we know the truth that only Hastings knew then - we are too lazy to go anywhere and do anything. Please bring what I need under the door and leave, I have already paid for everything online. Let's be honest, in our free time our asses always have a date with any soft surface, and we don't really want to interrupt it.
The key to the company's success in the late nineties was formed from several factors. In addition to the already mentioned possibility of renting a disc without leaving home, firstly, Netflix eliminated all the paperwork, since people no longer needed to fill out unnecessary forms for renting a movie, write a receipt, remember the return date, and pay a fine if they didn't get it back in time. After watching the movie, all you had to do was send the disc back.
Second , the disc shipping system ran like clockwork thanks to Randolph's years of experience. Netflix had many branches all over the country and had movies delivered to consumers from nearby branches in no time.
Third , in 1999, the company introduced a $ 9 monthly subscription, and consumers didn't even have to pay for a disc every time. Instead, they got full, unrestricted access to the directory.
And lastly - a rich catalog of films. At the time Netflix opened, their catalog of films numbered 925, which was basically every DVD movie in existence at the time. And while other networks offered what was popular, Netflix offered everything for everyone. Therefore, many call Netflix the savior of auteur cinema of the time, which, due to its commercial failure, could not be found anywhere else except this service. Over time, they only expanded their library, and by the middle of the 2000s, it consisted of about three thousand paintings of different genres, from action films to the most bizarre art house.
Hastings did not go wrong with native speakers. The discs themselves, as a novelty, were still expensive for consumers to buy, but they were much more reliable than cassettes, showed better picture quality, and were also lightweight and did not cause problems with delivery. That is why it was better and more profitable to work with them.
The scheme continued to operate until 2000, when the company's shares began to fall. At the same time, it was almost bought by the same Blockbusters network, but in the end it refused because of the high, in their opinion, price of 50 million, which made it a fatal mistake.
However, Hastings, for all his foresight, was not the only one, and by the beginning of the new century, competitors were trying to master the Internet and offer their own services in this market. Therefore, algorithms went into action
Keep watching ... keep watching ... keep watching ...
After a loss of $ 29.8 million, Netflix introduced the CineMatch system in 2000. This algorithm was designed to compare the tastes of individual consumers in order to recommend films suitable for their preferences to each of them. And he worked much deeper than it might seem. He took films into account, taking into account their genre, year of creation, director, user library [what he ordered and what he plans to order] and the overall rating of films among all users.
Taking these factors into account, the system selected rather interesting recommendations and avoided platitudes. So, for example, when watching "The Matrix" with Keanu Reeves, she would not advise you on "Speed", but let's say conditionally finds 10 more people who, like you rated her at 5/5 and out of 10 people, she discovers that 6 of them gave the same rating, for example "Amelie", the algorithm looks through the libraries of these users and makes a conclusion on this basis with what probability you might like this movie and advises you on it.
But this is conditional, everything actually works on the scale of millions of users with thousands of films, ratings and genres, linking them into different chains of preferences. However, the result is the same - this algorithm was able to recommend a film based not on simple connections a la "since you liked the film with Jackie Chan, watch five other films with Jackie Chan", but rather reproducing to some extent communication between people. CineMacth, as a friend of yours with a passion for various filmmaking experiences, could equally recommend Tarantino's violent films and one night stand comedy.
As a result, 75% of the system selected the right product for Netflix users.
In 2007, Netflix took a step in the direction of evolution, thanks to which we know it today as it is. He abandoned the disk rental model in favor of streaming, which their competitors like Blockbusters could not do.
They could now stream movies and TV series from their sprawling catalog directly to their subscribers' homes in high definition, and users could only sit and watch. DVD as such was not immediately abandoned, but it was clear where everything was going.
In order to provide users with uninterrupted content, the disk delivery offices were redesigned into servers that ensured smooth operation of the system.
In 2009, Netflix gave away a grant to create a new, smarter algorithm that would recommend movies to users with more fidelity than CineMatch. Since then, the algorithms of the service have become more and more advanced and take into account not only your taste preferences, but also gender, race and age, even adjusting your library with posters. Thus, one user will be shown a poster of a series with some actors, and another with others.
But apart from all of the above, Netflix, according to its tradition, continues to flirt with your laziness using various little things. For example, allowing you to skip credits and skip straight to the next episode without stopping, or skip openings to make the viewing experience uninterrupted.
After 2015, the service begins to expand to other countries and comes to Canada, European countries, and as a result, in 2016 it becomes available in 130 countries around the world and operates in 21 languages.
Another important feature of the service is its content, both TV series and films. And if they started with a simple series “House of Cards”, then in 2017 Netflix won its first Oscar for the best short documentary film “White Helmets”.
At the same time, the number of subscribers worldwide reaches an astonishing 100 million. Netflix has contracts with Marvel and Dark Horse Comics to create their own content. And already in 2019, they receive an Oscar for Alfonso Cuaron's film "Roma" and release a full-length animated film "Klaus". Later Martin Scorsese released his "Irishman" exclusively on it.
But all this is just the tip of the iceberg, in general, Netflix has released almost 300 of its films and more than 400 TV series so far. The giant also dictates the quality standards that content producers have to adapt to, and consumers will benefit in the first place. And as an interesting fact, in the future, Netflix and Tesla are planning to launch the streaming service on the dashboard of this brand's cars.
A new streaming era
All Netflix's actions have led people to fear the death of cinemas [especially in the era of the coronavirus pandemic], and large companies are creating their own Netflix counterparts to compete with it in a new area and show their own product on their site. Disney +, HBO Max, Amazon Prime and many other services are already competing for the attention of viewers and filming unimaginable things in order to create their own large fan base.
For example, Disney is preparing TV series based on the Marvel Cinematic Universe and is considering the possibility of releasing its major releases on the streaming service Disney +, HBO Max is preparing to release the long-awaited version of Zach Snyder's Justice League. And all this [and more] thanks to the Netflix model, and the fact that the company once realized how lazy people can make the effort to watch a movie.
The Topic of Article: How did Netflix take over the world?.