Doing This 1 Thing Makes Netflix Unique

In partnership with

I have a group of 4 friends, and they are economical, especially when talking about entertainment like movies. However, they cannot stay without watching Kdramas and other web series.

But what they did later was so and not so great, and Netflix would ban them if it knew 😥So, let me spill our secret for you. They split one premium package and decided to have dedicated days for each 😣 on the same credentials.

So, what I mean here is, why did they only pick Netflix over others? This got me thinking about what strategies Netflix might have used to grab people's attention to make $31.5 billion a year today 😮

Let's see!

Netflix, founded in 1997 by Reed Hastings and Marc Randolph, started as an online DVD rental service. Over time, it grew into the world’s largest subscription-based streaming platform.

Aiming to change how people watched TV shows and movies, the company's real breakthrough came in 2007 when it shifted to online streaming.

Once started with a couple of customers, Netflix has a loyal audience from 190 countries today, making billions in annual revenue. So, what drove this change? Shouldn't it be scared of its competitors like Hotstar+ and Prime Video?

Problem Identified

In the late 90s, movie rentals were inconvenient and expensive. People had to visit physical stores like Blockbuster to rent movies, and they often faced issues like late fees, limited stock, and restricted rental periods.

Blockbuster’s $800 million annual revenue from late payments in the early 2000s showed how problematic the rental system was.

At the same time, internet usage was growing as technology evolved. Netflix took this as an opportunity to improve the rental experience with DVDs through the mail.

Here’s a clip of Netflix promoting a DVD rental feature:

Since many got used to visiting local stores, ordering movies online felt risky, and convincing people to switch from traditional stores to completely online services remained a challenge for Netflix.

The real problem, however, came after Netflix's initial success in DVD rentals. As online streaming technology advanced, competitors like Amazon Prime and Hulu entered the market.

Netflix had to adapt quickly or risk losing its early lead in the entertainment industry. By 2019, with Disney+ and Apple TV+ launching their services, Netflix faced fierce competition, forcing the company to innovate regularly to retain its subscriber base.

Solution Proposed

Netflix’s solution to the challenges in the movie rental market was both innovative and customer-focused. From the beginning, they made bold decisions that set them apart from competitors like Blockbuster.

Here are some things that Netflix did to set itself apart:

1. No Late Fees, Subscription Model

Netflix introduced a subscription-based model in 1999, which allowed users to rent unlimited DVDs for a flat monthly fee.

Customers could keep the DVDs for as long as they wanted without worrying about late fees, unlike Blockbuster, which generated $800 million annually from late payments.

This move eliminated one of the major frustrations for customers and made Netflix far more attractive.

2. DVD-by-Mail Service

Netflix started renting DVDs by mail, and because of this, customers had a chance to select movies online and have them delivered to their homes.

But that was not the case before - wait in long lines only to carry home the movie available. This feature stopped them from visiting physical stores and solved the problem of limited stock and long lines.

In 2003, Netflix shipped over 1 million DVDs daily, which tells us how their focus on convenience solved one of their problems. The service immediately attracted most internet users who valued convenience and variety.

Here’s another detailed clip you might want to watch:

3. Transition to Streaming

As the internet grew, people preferred convenience and wanted something more than DVDs - something that does not involve returning, waiting longer to see a new release, and watching anytime, anywhere.

Seeing this and the potential of digital content, Netflix started streaming in 2007. This transition from DVDs to instant access to movies and TV shows online was a massive shift in the company’s strategy.

By avoiding the costs and limitations of physical rentals, Netflix expanded its customer base and tapped into a growing global audience.

Check out this video to take a peek at 25 years of history of Netflix in 1 minute:

4. Original Content Production

Releasing movies and shows filmed by somebody was costly for Netflix and was something each of its competitors did. So, the same content was everywhere, which created heavy competition in getting new subscribers.

To differentiate itself from competitors, Netflix invested more in producing original content in 2013. This strategy was key to retaining subscribers as more companies, like Amazon Prime and Hulu, entered the market.

By 2023, Netflix spent $17 billion on original content, with shows like Stranger Things and The Crown becoming global hits. This move allowed Netflix to control its content library and give unique video content that we cannot find anywhere else.

Here’s an 8-year-old clip of Stranger Things:

5. Global Expansion

People's interest in exploring other cultures and traditions grew with the internet. They wanted to watch non-native movies and shows. Bridging this gap, Netflix extended its services to over 190 countries by 2016.

For better connection and customer experience, Netflix localized its content with subtitles and dubbing to address international audiences.

Doing so allowed Netflix to grow its subscriber base from 25 million in 2011 to over 238 million in 2024 and became a household name worldwide for binge-watching video content.

Implementation Process

Netflix’s success was not just about innovative ideas. It was about how they executed those ideas effectively. Their implementation process was data-driven, customer-focused, and strategically forward-thinking. Here's how they turned their vision into reality:

DVD Rentals (1998–2007)

Netflix initially implemented its DVD rental system through the mail. Customers could rent DVDs from an online catalog and get them delivered to their homes.

To ensure everything was smooth for the company and customers, they used a refined inventory management system that kept track of the availability of DVDs and customer preferences.

By 2005, Netflix had over 4.2 million subscribers and was shipping 1 million DVDs per day.

• Netflix used early data collection to track user behavior, which later became a cornerstone of its recommendation engine. This data-driven approach helped Netflix understand customer preferences and simplify its operations.

Shift to Streaming (2007)

Online streaming was a critical part of Netflix’s implementation process. Netflix saw that internet speeds were improving with digital content consumption. In 2007, Netflix launched its streaming service to let customers watch movies and TV shows instantly online.

This strategy helped Netflix cut shipping costs on renting physical DVDs. To support streaming, Netflix invested more in technology infrastructure, including cloud computing services.

By using Amazon Web Services (AWS) for cloud storage and computing, Netflix scaled its operations to serve millions of users simultaneously without interruptions.

By 2010, just three years after introducing streaming, Netflix had over 20 million subscribers, doubling its customer base from the DVD era.

• Netflix's transition was because of internal research that predicted DVD sales would peak by 2006. And that allowed them to shift focus just in time.

Original Content Strategy (2013)

As competition in the streaming industry grew, Netflix worked on a new strategy to maintain its leadership, creating original content.

The team internally analyzed the viewing habits of its target base and found out that political dramas had a fan base. In 2013, they released House of Cards, their first original series, produced entirely by Netflix.

Netflix followed this with an ongoing investment in original shows and movies. By 2023, the company spent $17 billion annually on content production and had over 1,500 original titles, making it one of the largest content producers in the world.

• Original hits like Stranger Things and The Witcher helped Netflix grow its global subscriber base and differentiate itself from competitors.

Global Expansion (2010–2016)

Another step in Netflix’s implementation process was its aggressive global expansion. It started in 2010 with Canada and expanded to Latin America, Europe, and eventually 190 countries by 2016.

The company localized its content with subtitles, dubbing, and creating region-specific shows like Money Heist (Spain) and Sacred Games (India).

This global approach allowed Netflix to enter new markets and diversify its subscriber base. It adapted to local cultures by creating content that resonated with different regions while offering popular global content.

By 2024, Netflix had over 238 million subscribers worldwide, with more than 50% of its revenue coming from international markets.

• Netflix uses advanced algorithms to identify which regions to enter first based on factors like internet penetration, population size, and competition in the local market.

Personalization & Data-Driven Decisions

Netflix went beyond expanding services to creating a personalized experience for each user. Using data from subscribers, Netflix developed its recommendation system, which has become one of its key features.

The algorithm analyzes user behavior, like what they watch, for how long, and when they pause or stop, to offer personalized suggestions.

The recommendation algorithm drives 80% of content watched on Netflix, meaning most viewers rely on these suggestions to find shows and movies. Do you now understand why people (you) binge-watch Netflix?

• Netflix saves around $1 billion annually in customer retention and reduces churn rates because of personalized recommendations.

You definitely want to check this out:

Impact and Results

• By 2024, Netflix had over 238 million subscribers globally, outpacing competitors like Amazon Prime Video, Disney+, and Hulu. This vast subscriber base generated $31.5 billion in 2023, while $1.2 billion in 2007 when the streaming service first launched.

• 61% of Netflix users binge-watch shows regularly. It's a behavior that Netflix’s on-demand streaming model encouraged.

• By 2023, over 50% of Netflix’s global viewership was driven by its original programming. Its hit show Stranger Things alone attracted more than 64 million households in its first four weeks.

• As of 2024, more than 50% of its total revenue came from international subscribers. For example, the Spanish-language series Money Heist became a global success, with over 180 million households watching the show by 2022.

Conclusion

Netflix’s journey from DVD rentals to global streaming dominance shows its ability to innovate and adapt. With technology, data, and original content, Netflix redefined how people consumed entertainment content. Its success is a blueprint for companies looking to disrupt industries with customer-centric approaches and forward-thinking strategies.

It's your turn now (We will feature the best answers in the next post):

1. How can smaller brands leverage data for customer retention?

2. What role does original content play in differentiating a brand from competitors?