Streaming Media and Netflix

Topics: Streaming media, Renting, Netflix Pages: 5 (1586 words) Published: December 12, 2012
Netflix is an American company that provides video rental and on demand video streaming by way of either the mail or streaming through the internet. The company was founded in 1997 in Silicon Valley California by Marc Randolph and Reed Hastings. The idea for this DVD rental service came about when Reed Hastings was charged with a late fee when renting a movie and he questioned why he should have a time restriction on how long he is able to rent the movie. In April of 1998, the Netflix website was launched and they developed the concept of unlimited rentals with no shipping fees or late fees. In September of 2002, an article in The New York Times article stated that Netflix had around almost 670,000 subscribers. At the end of 2002, the company had one million subscribers and in 2006 they had close to 5.6 million subscribers. After these first important milestones, the company’s growth became exponential.

In the fall of 2004, a consumer filed a class action law suit against Netflix in Frank Chavez v. Netflix, Inc. The lawsuit was due to claims of false advertising in which the company said they provided “unlimited rentals” within a “one day delivery.” Netflix denied making any mistakes within their advertising. A month later, Netflix decided to give anyone who was a member before January 15, 2005, a membership renewal with one free month included. The final settlement came to around 4 million dollars. This caused a change in the Terms of use which went into effect in January of 2005 and the term “throttling” was created. Throttling is when the mail is delivered so fast that Netflix customers who pay for the "Unlimited" plan can send their discs back fast enough so they can receive enough shipments in a month in that the company's actual cost of delivery will exceed the actual subscription fee. This restricts the company from making any profits.

According to a survey in 2008, the Netflix website brought in around almost 194 million viewers total. Earlier, in a 2010 interview with The New York Times, CEO of Times Warner, Jeffrey Bewkes, noted that the Netflix company contributed to the decline of sales of DVD’s in stores due to the increase of consumers paying for monthly subscriptions by way of Netflix. He was quoting about Netflix when he said, "It’s a little bit like, is the Albanian army going to take over the world?" Netflix also clashed with the public when they chose not to support their costumer’s using the software Linux. Linux is an operating system in which open-source software can be distributed freely on servers. Instead, the company chose to only support subscribers using Windows, Microsoft, OS X, iOS, and Android.

In August of 2010, at the price of 1 billion dollars, Netflix decided to stream films through their online service from the studios MGM, Paramount Pictures, and Lions Gate. This will create additional options and selections of movies for members to choose from. Deals and contracts with movie studios and premium channels are extremely important as they are what is going to keep the company afloat financially. In that same year the company decided to go international. They launched their online streaming service in Canada and then Latin America in the spring of 2011. Next, they expanded to Europe, Mexico, Central America, and South America. Lastly, they launched their services in the United Kingdom, Ireland, Sweden, Finland, Norway and Denmark.

In May of 2011, Google released the Chrome plugin in which even Linux users could stream and view Netflix at their disposal. In the summer of that same year, the company faced a major clash with their customers. Netflix decided to raise the price of using both the combined services of internet streaming and DVD-by-mail and separate the two services under different bills in a desperate attempt to raise money for the allowance of even more streaming content for their subscribers. This change infuriated the majority of the company’s customers. Netflix then...
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