Netflix

Netflix 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 ), 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[http://www.dvdfile.com/news/special_report/features/timeline/timeline.htm] 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[http://www.wired.com/wired/archive/10.12/netflix.htmlpg=2]. 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 Video 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[http://www.usatoday.com/money/media/2004-10-17-netflix-dvd-war_x.htm].

=Corporate history=

Netflix initially offered a service similar to traditional DVD rental shops online until late . [http://ir.netflix.com/Edgar.cfm]

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 Video. 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 software 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 The 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 Video, 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[http://www.netflix.com/PressRoomid=5206&hnjr=3].

One major potential competitor that Netflix has previously speculated on[http://arstechnica.com/news.ars/post/20050619-5011.html] 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. [http://www.listology.com/netflix_tracker_reports.cfmreport=centers]

=External links=

*[http://www.salon.com/tech/feature/2002/06/06/netflix/ The Netflix Way ], Salon.com, By Damien Cave, June 6, 2002 *[http://www.npost.com/interview.jspintID=INT00032 Interview with Reed Hastings, Founder of NetFlix], nPost, February 1, 2002. *[http://www.wired.com/wired/archive/10.12/netflix.html The Netflix Effect ], Wired Magazine, By Jeffrey M. O Brien, December 2002 *[http://www.nytimes.com/ref/open/innovations/23NECO-OPEN.html The Packaging of Video on Demand ], The New York Times , by Peter Wayner, September 23, 2002 *[http://www.fastcompany.com/magazine/74/netflix.html 90,000 DVDs, No Shelves ], Fast Company , by Lucas Conley, September, 2003 — how they do it *[http://movierentals.articleinsider.com/61275_dvd_rental_club.html Renting from a DVD Rental Club] *[http://www.hackingnetflix.com/ Hacking NetFlix] - a Blog *[http://netflixfan.blogspot.com/ Netflix Fan] - a Blog *[http://netflix.frogcircus.org/ Netflix Fee Calculator] *[http://netflix.badsegue.org/ Netflix Queue Manager bookmarklet & Greasemonkey script] - sort, shuffle, drag & drop, etc. *[http://www.manuelsweb.com/netflix.htm My Opinion of Netflix] *[http://netflixBuddy.com/ NetflixBuddy.com] - a fan site for underground users *[http://biz.yahoo.com/ap/050519/netflix_wal_mart.html.v=5 Netflix Takes Over Wal-Mart DVD Rentals] *[http://salon.com/ent/feature/2004/06/09/netflix/index.html Confessions of a Netflix Failure], Salon.com, by Dan Kois, June 9, 2004 *[http://www.economist.com/displaystory.cfmstory_id=4149765 Movies to go], The Economist , 9 July, 2005.