Netflix

Netflix, Inc.,  NFLX is an American provider of on-demand internet streaming video in the United States and Canada, and flat rate DVD-by-mail in the United States. The company was established in 1997 and is headquartered in Los Gatos, California. It started its subscription service in 1999 and by 2009 it was offering a collection of 100,000 titles on DVD, surpassing 10 million subscribers. On February 25, 2007, Netflix announced the billionth DVD delivery. In April 2011, Netflix announced 23.6 million subscribers. In summer 2011, Netflix announced they will expand into the European market, starting in Spain by 2012.

History

Netflix was founded in 1997 in Scotts Valley, California by Marc Randolph[citation needed] and Reed Hastings, who previously had worked together at Pure Software, along with Mitch Lowe. Hastings was inspired to start the company after being charged late fees for returning a rented copy of Apollo 13 after the due date.The Netflix website launched in April 1998 with an online version of a more traditional pay-per-rental model (US $4 per rental plus US $2 in postage; late fees applied). Netflix introduced the monthly subscription concept in September 1999, then dropped the single-rental model in early 2000. Since that time the company has built its reputation on the business model of flat-fee unlimited rentals without due dates, late fees, shipping or handling fees, or per title rental fees.

Netflix developed and maintains an extensive personalized video-recommendation system based on ratings and reviews by its customers. On October 1, 2006, Netflix offered a $1,000,000 prize to the first developer of a video-recommendation algorithm that could beat its existing algorithm, Cinematch, at predicting customer ratings by more than 10%.

"Some 35,000 different film titles are contained in the 1 million DVDs it sends out every day.

Netflix has played a prominent role in independent film distribution. Through a division called Red Envelope Entertainment, Netflix licensed and distributed independent films such as Born into Brothels and Sherrybaby. As of late 2006, Red Envelope Entertainment also expanded into producing original content with filmmakers such as John Waters. Netflix announced plans to close Red Envelope Entertainment in 2008, in part to avoid competition with its studio partners.

Netflix initiated an initial public offering (IPO) on May 29, 2002, selling 5,500,000 shares of common stock at the price of US $15.00 per share. On June 14, 2002, the company sold an additional 825,000 shares of common stock at the same price. After incurring substantial losses during its first few years, Netflix posted its first profit during fiscal year 2003, earning US $6.5 million profit on revenues of US $272 million. The company is well-known for its worker-oriented culture, including unlimited vacation time for salaried workers and allowing those employees to take any amount of their paychecks in stock options.

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 company's published subscriber count increased from one million in the fourth quarter of 2002 to around 5.6 million at the end of the third quarter of 2006, to 14 million in March 2010. Netflix's growth has been fueled by the fast spread of DVD players in households; as of 2004, nearly two-thirds of U.S. homes had a DVD player. Netflix capitalized on the success of the DVD and its rapid expansion into U.S. homes, integrating the potential of the Internet and e-commerce to provide services and catalogs that brick and mortar retailers could not compete with. Netflix also operates an online affiliate program which has helped it to build online sales for DVD rentals.

On October 1, 2008, Netflix announced a partnership with Starz Entertainment to bring 2,500+ new movies and television shows to Watch Instantly in what is being called Starz Play.

In August 2010, Netflix announced it had reached a five-year deal worth nearly $1 billion to stream movies from Paramount, Lionsgate and MGM. The deal increases the amount Netflix spends on streaming movies annually. It spent $117 million in the first six months of 2010 on streaming, up from $31 million in 2009. This deal adds roughly $200 million per year.

As of 2011, Netflix's "Watch Instantly" service holds first-run rights to films from Paramount Pictures, MGM, Lions Gate Entertainment (through an output deal with Epix), along with films from Sony Pictures, Walt Disney Motion Pictures Group, Overture Films, Anchor Bay Entertainment (through an output deal with Starz). Other studios providing first-run films include First Look Pictures, Relativity Media and other smaller and independent distributors. In addition, Netflix holds rights to back-catalog titles to films from Time Warner, Universal Pictures, Sony Pictures, Paramount Pictures, MGM, Lions Gate Entertainment, 20th Century Fox and other distributors. Netflix also provides current and back-catalog TV programs distributed by NBC Universal, 20th Century Fox, Sony Pictures, Disney-ABC Domestic Television, with select shows from Warner Bros. as well. Netflix also previously showed movies from the Criterion Collection, but the titles were pulled from the streaming library when Criterion Collection titles were added to Hulu's Hulu Plus streaming library.

Services

Netflix is a subscription-based movie and television show rental service that offers media to subscribers via Internet streaming and via US mail.

Internet video streaming

Netflix offers Internet video streaming ("Watch Instantly") of selected titles to computers running Windows or Mac OS X and to compatible devices. Internet video streaming comes at no additional charge with Netflix's regular subscription service; however, only a portion of Netflix's content is available via the "Watch Instantly" option. In its simplest form, video is streamed to the user using standard PC hardware, and requires Microsoft's Silverlight software to be installed. Viewing is initiated by pressing a "Play Instantly" button, and played back on the PC monitor. Films can be paused or restarted at will. According to a 2011 report by Sandvine, Netflix is the biggest source of North American web traffic, accounting for 24.71 percent of aggregated traffic.

Initially, the feature offered subscribers one hour of media for approximately every dollar they spent on their subscription. (A $16.99 plan, for example, entitled the subscriber to 17 hours of streaming media.) In January 2008, however, Netflix lifted this restriction. Virtually all subscribers now are entitled to unlimited hours of streaming media at no additional cost. Subscribers with a plan of $4.99/two DVDs per month, one DVD at a time, are allowed two hours which can only be watched on a computer. The new terms of the service are a response to the introduction of Apple's new video rental services.

According to Netflix Tech Support, Netflix's content library is encoded into three bandwidth tiers, in a compression format based on the VC-1 video and Windows Media audio codecs. The lowest tier requires a continuous downstream bandwidth (to the client) of 1.5Mbps, and offers stereo audio and video quality comparable to DVD. The middle tier requires 3Mbps, and offers "better than DVD quality". The highest tier requires 5 Mbps, and offers 720p HD with surround sound audio. As of December 2010, the PS3 is the only device able to stream Netflix at 1080p resolution.

Netflix does not support playback on Linux PCs although the Linux-based Roku devices are supported. It is possible to connect the Roku device, game console, or blu-ray player to a Linux PC (or directly to the computer monitor) with an adapter. It is also possible to run Windows and Netflix in a virtual machine such as Virtualbox or Qemu. In a TechRepublic interview in August 2010, Netflix's VP of Corporate Communications stated that available Silverlight plugins for Linux, such as Moonlight, do not support the PlayReady DRM system that Netflix requires for playback. Netflix does support the Android operating system, which uses the Linux kernel, although is otherwise separate from Linux.