Analysing NetFlix Performance - Essay Example

Analysing NetFlix PerformanceHISTORYMarc Randolph and Reed Hastings started NetFlix in 1997.NetFlix is in the business of video-rentals. It started with renting movies on DVD’s on a monthly subscription basis. Later it also started providing streamed videos through the internet. NetFlix initiated a initial Public Offering(IPO) on May 29 2002 selling 5,500,000 shares at the price of US $15 per share.The Company posted its first profits in 2003 earning a profit of US $ 6.5 million from a revenue of US $ 272 million .

Netflix’s subscription count increased from one million in 2002 to 14 million in 2010.On October 1, 2008 Netflix started partnering with Starz Entertainment for new movies.In August 2010 Netflix entered into a five year deal with Paramount,Lionsgate and MGM for streaming videos through the internet. This increased their expenditure on streaming from US $33 million to US $200 million per year.On July 12, 2011 they increased their monthly subscription from US $ 9 to US $ 15 PERFORMANC IN THE STOCK MARKET The Comparison of the two graphs tells the story of the growth of the NetFlix’s Share.

It takes off after 2003 when the company makes a profit for the first time. Between 2003 and 2009 the growth is steady but slow. The year 2010 find’s the stock taking off in a big way. The reason may be the sudden increase in subscription base or due to the tie-up with Starz Entertainment. The company becomes a dot com success story.JULY 12,2011 AND AFTER The prices take a dip after NetFlix’s announcement of its new pricing policy losing almost 10%.The question is whether it is a temporary hiccup or a downward trend ANALYSIS Video rentals is a technology driven industry.

At the time NetFlix entered the market DVD’s were a novelty and were costlier .Internet was also in it’s infancy. Video Cassettes were the popular medium and it was mostly retail renting. NetFlix made use of the compactness of the DVD and the accessibility of the internet to start online renting , sending the DVD’s by mail. Monthly Subscription was another attraction. When the business prospered they tied up with Cable TV operators and Movie producing companies to get new movies at the earliest time.

They also made use of the Improvement in the internet speed by offering Movies over the internet by streaming.This meant that no physical media was to be transported and that the user can make his choice online. The Web Portal of the Company also has facilities for registering viewer preferences . Right decisions at the right time and adapting to changing technologies and keeping track of the user preferences are reason behind NetFlix’s success.The recent dip in stock prices and the negative comments of the customers on the increase in subscription rates are only temporary hiccups.

NetFlix has a bright futureReferencesNetFlix Introduces New Plans and Announces Price Changes, http://blog.netflix.com/2011/07/netflix-introduces-new-plans-and.htmlNetFlix http://en.wikipedia.org/wiki/NetflixFinance.yahoo.com .