Netflix Out-Invests Competition on Film Productions

Netflix was founded in a relatively modest way in 1997. The strategy was to solve the vast inconvenience that consumers suffered when they wanted to rent a movie. At the time, if you wanted to watch a movie at home, it required traveling to one of Blockbuster’s 4,000 locations or some other rental store, picking from a very limited selection and then being forced to make a return trip on a timely basis. The solution: for a small monthly subscription fee, Netflix enabled consumers to select online from a massive inventory of movies on DVD, receive the DVDs by mail and return them any time they wanted in a postpaid envelope. By 2010, Blockbuster was bankrupt and Netflix was a widely-known brand about to enjoy explosive global growth.

Meanwhile, Netflix had something much, much bigger in mind. Founder Reed Hastings wanted to deliver movies online through streaming video, not through the mail. With incredible focus and innovation, he led Netflix to be a world leader in delivering streaming entertainment. At the same time, consumers were benefiting from faster and faster internet download speeds provided by cable and wireless firms. Hastings knew that the boundless power of advancing technologies would continue to make everything better, smaller, cheaper and faster. Hastings made a huge bet, and was vindicated when online subscriptions soared, both in the U.S. and around the world.

Now he’s making an equally innovative gamble—turning Netflix into much more than an advanced subscription and delivery system. He knew that other technology-based firms could operate platforms that deliver entertainment online. So, the big question for the long-run was how could he create true competitive advantage? By creating and delivering unique content of extremely-compelling quality. Netflix completely stunned the entertainment industry by winning the bidding war for “House of Cards,” then paying for the production of a TV show that was a massive, award-winning success. It was the first time that such programming had ever been released without the aid of the usual TV networks and cable operators. Equally innovative was the fact that all 13 episodes were released at once, so that viewers could binge on them all they wanted.

For the future, Netflix is leading once again with its massive $8 billion budget for more than 700 TV shows, comedy programs and movies during 2018 alone. An interesting note: 80 of those shows will be produced in non-English languages focused on international markets. This makes Netflix among the top spenders for original content, among deeply-entrenched names like Disney. The strategy works—with about 120 million subscribers worldwide, Netflix is a soaring success. This still leaves Netflix with hundreds of millions of global broadband users to sign up in the future. Nearly anyone can create a good website with enough time and money, but it takes guts, brains and true innovation to create compellingly irresistible content. In today’s brutally competitive entertainment industry, Netflix is a clear winner.

For the latest analysis of trends and statistics for the entertainment, publishing and film industry, see: Plunkett Research Online, and our a brand-new reference guide: Plunkett’s Entertainment & Media Industry Almanac, 2018 Edition.


Printed Almanac ISBN: 978-1-62831-462-5 | E-book ISBN: 978-1-62831-768-8