Netflix is the major streaming giant used in countless households around the world. However, Netflix started with something quite different, which no longer exists today: video rental.
What is the current status of Netflix?
- Netflix is currently the largest streaming service in the world
- In July 2024, there were reported to be over 270 million users (via FlixPatrol)
- Netflix not only offers films from other studios, but also produces a lot of its own content
- This led to global hits like Arcane, Squid Game, or Wednesday
Everyone knows Netflix, and most people have probably subscribed to the streaming service at least once. However, before Netflix became the giant that produces its own films and series, it was involved in an area that no longer exists today: video rental.
Netflix and its start as a video rental service
How did Netflix start? Before the company became the huge streaming giant it is today, it started in 1997 as a video rental company. Marc Randolph and Reed Hastings founded the company. Marc Randolph explains on YouTube his initial idea, stating that he wanted to solve a problem in that specific area.
At that time, video rental was a big business with a lot of revenue. The biggest name in the field was Blockbuster. However, according to Randolph, many customers were unhappy with Blockbuster and he wanted to change that.
At Blockbuster and similar rental companies, you had to go to the stores and pay relatively high fees if you returned something late. Netflix started delivering DVDs by mail in 1998. This was much more convenient for customers.
Additionally, they speculated on DVDs, which were not yet that common at the time. Other rental companies mainly had VHS tapes.
Netflix quickly recognized new options: They offered the rental service online with a subscription. This meant that you paid monthly fees to select DVDs online, which would then be delivered to your home.
These were Netflix’s innovations at a glance:
- All DVDs were in a single store that supplied everything (a large selection was ensured)
- Convenience through delivery by mail
- Quickly recognized DVD as the future
- Subscription made rental fees outdated and was clear
- The offering was available online
The shift to subscription changed Netflix
In the interview, Randolph explains why it was so good that Netflix offered their DVDs with a subscription. The fees outside of the subscription disappeared, and people could rent their DVDs without much thought. The trick was that the customer returned the DVD when they rented a new one.
The big competitor Blockbuster had a major drawback according to Randolph. Everyone hated the fees when you returned a DVD late. Netflix did not have such fees.
VdoCipher points out another advantage that Netflix had over Blockbuster: Recommendations. Using an algorithm, they could recommend other series and films to customers even in the DVD era. The offering was called Cinematch. This meant there was less pressure to quickly bring new releases to customers, allowing for a more even distribution of their library.
Netflix quickly recognized streaming as a new option. In 2007, Netflix was the first to introduce streaming for some customers. It started in January for a few users and was an add-on for users with a DVD rental subscription. This had two advantages:
- Customers could try out the streaming offer
- By gradually releasing more customers, they could ensure server stability
At that time, however, Netflix did not have a large streaming offering. According to VdoCipher, there were only 1,000 titles available for streaming at the beginning. As a DVD rental service, they had almost 70,000 titles. The major shift occurred in 2008 when they made a deal with the cable TV channel Starz. Netflix obtained the rights to 2,500 films and series, including productions from Disney, which was still far from its own service.
Netflix and streaming changed viewing behavior
Eventually, an interaction developed between the networks and Netflix. The networks recognized that by offering older seasons and episodes on Netflix, more viewers tuned into the current episodes on television. Gradually, viewers’ viewing behavior regarding series changed.
Before, you could only watch the episodes on TV that were currently airing. If you wanted to catch up on previous episodes of a series, you had to wait for re-releases or buy expensive season boxes, which sometimes took a long time to wait for. For sitcoms, this didn’t matter, as episodes typically didn’t build on each other.
The rise of quality TV through drama series such as The Sopranos, The Wire, Mad Men, or later Breaking Bad changed the established structure that sitcoms had created. Suddenly, a large story with a red thread was being told. The episodes built on each other. If you couldn’t find the time for an episode, it became more difficult to keep up.
Netflix and similar platforms countered that. Suddenly, you could watch entire seasons whenever you wanted. The creator of Breaking Bad, Vince Gilligan, even sees streaming platforms as the reason his series became so successful (via Wired).
Binge-watching became established, and people started watching seasons of series in a row.
Original productions and the current state of Netflix
In 2013, Netflix even began with its own productions. The first series ordered by Netflix was the successful series House of Cards featuring Kevin Spacey. Later, series such as Stranger Things or films like Red Notice followed.
By now, Netflix has become a production giant. There is everything: documentaries, series, movies, and various formats like Too Hot to Handle. Netflix also wants to play a role in high-quality productions and releases films in theaters to qualify for the Oscars.
With films like Roma, Marriage Story, or All Quiet on the Western Front, they have already won some awards.
Today, there are countless streaming services that, like Netflix in DVD rental, want to get a slice of the pie. Disney Plus, Amazon Prime, Paramount, or WOW are not the only services in Germany. In the USA, there are even many more.
The services are increasingly competing with original productions or purchased films and series. The customer-friendliness
that Netflix once had over Blockbuster is no longer apparent. Netflix was one of the first services to ensure that accounts could not be shared across multiple households.
What do you think of Netflix? Do you use the service regularly, or do you prefer other streaming services? What is your favorite Netflix original? Let us know in the comments. If you need a recommendation for Netflix, you can check this list: 5 underrated sci-fi movies on Netflix that are worth watching and deserve more viewers
