What Is Netflix and How Does It Work?

Sometime ago Netflix overtook Disney, becoming the most valuable media corporation in the world.

How it all began?

Netflix was founded in 1997. Back then, Reed Hastings and Marc Randolph came up with an idea of sending rented DVDs. They introduced their service in 1998, and in 1999 they introduced a subscription system - for a fee, you could order as many films as you like. In 2007, Netflix was launched as a streaming platform.

Producing content

The overthrow of the usual television business model began only about seven years ago. Then the streaming company from Silicon Valley went around the HBO and AMC, having bought the rights to stage a remake of the British mini-series “House of Cards”. The producer and director of the project was David Fincher. At that time, it was a serious bid: first, Netflix spent a huge amount ($ 100 million for two seasons), and second, it outlined its ambitions as becoming a streaming platform — not only showing existing films and TV shows but also shooting own.

This year, Netflix plans to spend $10 billion on content creation. No other broadcaster produces so much content.

In the past, American television was already undergoing major transformations. In particular, cable TV appeared in the 1980s, and Rupert Murdoch’s Fox channel put an end to the Big Three hegemony (ABC, CBS, and NBC). However, Netflix innovations are of a different kind. The service didn’t want to be an HBO or NBC streaming clone. It sought to change our approach to watching television in general.

Given that Netflix had debts around $6 billion when the company expanded to other countries, some analysts felt that the profitability of the subscriber-based business model was questionable. But the Wall Street looked at the company's activities with optimism. In June 2018, Netflix’s aggregate market value was $150 billion. Thus, Netflix bypassed the Disney conglomerate, becoming the most valuable media company in the world.

One of the main differences between the Netflix approach for working with television content is in ordering the whole season. Usually, channels spend millions of dollars on creating a pilot series of projects, many of which never see the light. But Netflix launches the entire production series. Thanks to this approach, the viewer can watch the whole season at once (called “binge-watching”), without expecting a new episode every week.

How does Netflix produce content?

An important distinguishing feature of Netflix working with new content is decentralization and distribution of powers. Ted Sarandos is listed as content director, but he is not the only one who decides what to launch and what not. So, under the direction of Cindy Holland, vice president of original content, there are two more levels of managers who can make decisions about the launch of projects on their own. Sarandos and Holland also built a decentralized development and production system that allows Netflix to work like 10-15 semi-independent production companies.

Geo-blocking

For now, in some countries, Netflix is not available. People use VPN services to overcome this geo-blocking. Netflix is struggling with them and forbid and block VPN servers from being able to pass its traffic.

There are still several VPN services that can help to watch Netflix.  Most of them do not work well. I tested plenty of so-called VPNs for American Netflix to find the best service that works all the time without interruptions and provide high streaming quality. Sad but the only way to make sure is to constantly test new VPNs.