Netflix

From Freepedia

Netflix, Inc.
Image:Netflix.png
Type Public
Founded 1997
Location Los Gatos, California, USA
Key people Reed Hastings, Founder and CEO
Industry Electronic commerce
Products Online DVD rental
Revenue $506 million USD (Image:Green up.png$224M FY 2004)
Employees 940 (2004)
Website www.netflix.com

Netflix (NASDAQ: NFLX) is the first and largest major online DVD rental service, offering flat rate rental-by-mail to customers in the United States. By 2005, the service has attracted over three million subscribers, and the company expects the number to reach four million by the end of the year. It has amassed a collection of over 50,000 titles.

Headquartered in Los Gatos, California, the company provides a monthly flat-fee service for rental of supposedly unlimited numbers of DVD movies. Customers each create an ordered list, called a rental queue, of DVDs that they would like to rent. The DVDs are delivered individually by way of the U.S. Postal Service, from an array of regional warehouses (currently 35 or more). Subscribers keep the rented DVD as long as they like, but have a limit on the number of DVD movies they can have checked out at any one time depending on their subscription package. To rent a new DVD, customers return a currently-held one to Netflix via a prepaid mailing envelope. Netflix logs the disc as being returned and ships another disc in the customer's rental queue. Delivery time is dependent on the postal service and the Netflix policy critics label "throttling," which delays shipments to its most frequent users. This policy is outlined in Netflix's terms of use [1]. Netflix claims to serve 90% of its customers with "generally" one business day service. If the received disc is damaged or unplayable for some reason, or if the wrong disc was received, the customer can return it for a replacement or have the next item in their rental queue sent instead. At present (2005), Netflix's most popular plan costs $17.99, which allows a subscriber to check out up to 3 DVDs at once. Other monthly programs with a variety of checkout limits range from US$9.99 to $47.99.

Netflix began in 1998[2] with an online version of a more traditional pay-per-rental model ($4 per rental plus $2 in postage; late fees applied), and did not introduce the monthly subscription concept until late 1999[3]. Various other companies have followed in the US market, but none of the purely online companies appear to approach Netflix in terms of size or revenues. Walmart began an online rental service in 2002, but left the market in May 2005 and now has a cross-promotional arrangement with Netflix. The rental-store giant Blockbuster entered the US online market in August 2004, leading to a price war - Netflix had just raised their flagship 3-disc plan from $19.95 to $21.99 before Blockbuster's launch, but by October had reduced this to $17.99. Blockbuster responded with rates as low as $14.99 for a time, but by August 2005 both companies settled at the (identical) current rates. Blockbuster's subscriber base after one year was roughly a third of Netflix's size; Netflix has also cited Amazon as a potential competitor. Netflix had preliminary plans to expand to Canada and the UK in 2005, but these appear to have been postponed or cancelled as Netflix concentrates on the US market[4].

Contents

Corporate history

Image:Netflix-packaging.JPG Netflix initially offered a service similar to traditional DVD rental shops online until late 1999, fearing that flat-monthly programs might be too radical. However, since launching its subscription service, Netflix has become very successful. Key points of Netflix's success have been its ease-of-use and comprehensiveness. Unlike traditional DVD rental stores, there are no due dates, late fees, shipping or handling, or per-title rental fees. Unlike most online on-demand entertainment services, such as eMusic, the company offerings cover the vast range of DVD movies (and increasingly, television series) with more than 45,000 titles (as of 2005), including titles by major and minor studios (excluding adult movies). Particularly, Netflix has become noted for its extensive collection of documentary films, Japanese anime, and independent films — those usually hard to find in traditional rental shops. Indeed, "some 35,000 different film titles are contained in the 1m DVDs it sends out every day." [5] According to SEC filings, the company had attracted a million subscribers by the fourth quarter of 2002 and two million by the second quarter of 2004. [6]

Furthermore, Netflix has developed and maintained an extensive recommendation system based on rating and reviews by customers, similar to the system at Amazon.com; the company believes this gives it an edge in competing with newcomers like Blockbuster. James Rocchi, a film critic, also known as Mr. DVD, has contributed to reviewing movies. Moreover, the growth has been fueled by the fast spread of DVD players in households; as of 2004, nearly two-thirds of US homes have a DVD player. Netflix also operates an affiliate program which has helped it to build online sales for DVD rentals.

Netflix is an example of the odd situation about copyright issues on the Internet. While it is possible and probably more convenient to download directly movies via the network, license issues and the fear of piracy prevents such a service. While he believes it would not be an instant success because of complications in copyright handling and relatively slow adoption of broadband Internet, Netflix CEO Reed Hastings has said that Netflix will offer limited video on demand by late 2005 with which users can download movies via the Internet and that it may even expand into the video game market.

Netflix has been one of the most successful dot-com ventures. A New York Times article from September 2002 said that, at the time, Netflix mailed about 190,000 discs per day to its 670,000 monthly subscribers. The article estimated that the company therefore distributes 1,500 terabytes of data per day, almost as much data that travels across the entire Internet in one day. Netflix was hit with a consumer class action suit in San Francisco September 2004 for alleged false advertising and other claims related to its DVD deliveries, said the settlement is expected to cost between $3 million and $4 million this quarter. The complaint asserts claims of, among other things, false advertising, unfair and deceptive trade practices, breach of contract as well as claims relating to the Company's statements regarding DVD delivery times. The complaint seeks restitution, disgorgement, damages, and injunction and specific performance and other relief.

After incurring substantial losses during its first few years, Netflix posted its first profit during fiscal year 2003, earning $6.5 million profit on revenues of $272 million. Founded by Reed Hastings, Netflix was incorporated on August 29, 1997 and began operations on April 14, 1998. Netflix initiated an initial public offering (IPO) on May 29, 2002, selling 5,500,000 shares of common stock at the price of $15.00 per share. On June 14, 2002, it sold an additional 825,000 shares of common stock at the same price.

Competitive environment

Netflix's success has also inspired a number of other DVD rental companies, both in the US and elsewhere (details can be found in the online DVD rental article). Wal-Mart, the world's largest retailer, started an online DVD-rental service in October 2002; however, it closed operations in May 2005 and now has a cross-promotional deal with Netflix. Blockbuster, the world's largest store-rental chain, is currently Netflix's major online competitor, launching online rentals in the US in August 2004. This sparked a price war, with Netflix reversing a June 2004 price increase (their 3-disc plan had risen from $19.95 to $21.99) to compete against Blockbuster's $19.95 launch price. Blockbuster countered with a reductions to $17.49 and $14.99, but returned to Netflix levels in August 2005. Currently the two companies have identical pricing for the plans they have in common, with both companies increasingly using their entry-level $9.99 single-disc price for publicity purposes. Full details of Netflix's pricing plans may be found on their website[7].

One major potential competitor that Netflix has previously speculated on[8] is Amazon.com, which operates online rentals in the UK and Germany but has remained coy about any intentions for the US market. Between Blockbuster and potential Amazon competiton, Netflix set aside tentative plans to expand to Canada and the UK in 2005.

Distribution centers

The following is the list of distribution centers, organized alphabetically by state. [9]

STATE Code Address
Alabama Birmingham, Alabama
Arizona PHX Phoenix, Arizona
California Fresno, California
San Francisco, California
SJ PO Box 49021, San Jose, CA 95161-9959
SA PO Box 25010, Santa Ana, CA 92799-5010
West Sacramento, California
Colorado DEN PO Box 5950, Denver, CO 80217-5950
Connecticut Hartford, Connecticut
Stamford, Connecticut
Florida Daytona, Florida
FTL Ft. Lauderdale, Florida
LAKE Lakeland/Tampa, Florida
Orlando, Florida
PO Box 59220, Panama City, FL 32415-9220
TPA Tampa, Florida
Georgia DUL Duluth, Georgia
Hawaii Honolulu, Hawaii
Illinois Bedford Park, Illinois
CHI PO Box 5901, Carol Stream, IL 60197-5901
Indiana Indianapolis, Indiana
Iowa DM Des Moines, Iowa
Kentucky Bowling Green, Kentucky
LOU PO Box 32590, Louisville, KY 40232-2590
Paducah, Kentucky
Louisiana BR PO Box 260231, Baton Rouge, LA 70826-0231
Maine PO Box 9793, Portland, ME 04104
Maryland GAT PO Box 9410, Gaithersburg, Maryland 20898-2410
Massachusetts WOR PO Box 15157, Worcester, MA 01605-0157
Michigan LAN PO Box 30320, Lansing, MI 48909-9885
Minnesota MN PO Box 9473, Minneapolis, MN 55440-8543
Missouri KC PO Box 219788, Kansas City, MO 64121-9788
STL St. Louis, Missouri
Nevada Las Vegas, Nevada
New Hampshire Manchester, New Hampshire
New Jersey NWK PO Box 17699, New Brunswick, New Jersey 08906-7699
New York FLU PO Box 548008, Flushing, NY 11354-8008
NY1 PO Box 5050, White Plains, NY 10602-5050
North Carolina GB Greensboro, North Carolina
North Dakota PO Box 6029, Fargo, ND 58108-6029
Ohio OH1 Cleveland, Ohio
PO Box 8740, Dayton, OH 45401-8740
Oregon SAL P.O. Box 14300, Salem, Oregon, 97309-5019
Pennsylvania PO Box 69050, Harrisburg, PA 17106-9050
PITT PO Box 535304, Pittsburgh, PA 15253-9825
PHIL PO Box 1104, Southeastern, PA 19398-1104 [Philadelphia]
South Carolina COL Columbia, South Carolina
Tennessee Chattanooga, Tennessee
Texas Austin, Texas
Coppell, Texas
HOU Houston, Texas
Vermont White River Junction, Vermont
Virginia Richmond, Virginia
Washington TAC PO Box 11645, Tacoma, WA 98411-6645
PO Box 24000, Spokane, WA 99224-2400
Wisconsin PO Box 3079, Milwaukee, WI 53201-9683

External links

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