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Netflix's 15th Anniversary Going Public

23 May, 2017 By: Erik Gruenwedel



Netflix became a publicly held company 15 years ago on May 23, 2002. Its market capitalization today is nearly $70 billion — or 22,000% more than the $300 million valuation when it launched the IPO.

With Netflix turning 20 years old Aug. 29, the company made no mention of the IPO, instead announcing localized streaming service in Romania and global subscriber binge-viewing trends.

“We’ve given consumers control and it’s interesting to see the behaviors that emerge when viewers aren’t tied to a schedule,” Cindy Holland, VP of original content, said in a May 23 statement about binge viewing.

Ubiquitous access to video content likely seemed a pipe dream in 2002 when Netflix was a by-mail DVD rental service with about 600,000 subscribers. Today, the company has 100 million streaming subs worldwide, including 4 million who still receive rental discs in the mail.

Through the first quarter of 2002, Netflix had total revenue of $30.5 million and a loss of $3.6 million. By comparison, Netflix reported income of $178 million on revenue of $2.63 billion through March 31, 2017.

On the April 16, 2002 IPO prospectus, Netflix noted the home entertainment industry’s transitioning from VHS to DVD. Indeed, co-founders Reed Hastings and Marc Randolph famously created the by-mail disc market in 1997 after mailing a CD without incident. Disc rental service launched in 1998 with about $1 million in annual revenue.

Netflix (in the prospectus) said standalone DVD player shipments in September 2001 outpaced VCR shipments for the first time. At the end of 2001, approximately 25 million U.S. households had a DVD player, representing a year-over-year increase of 97%.

“Adams Media Research estimates that the number of U.S. households with a DVD player will grow to 67 million in 2006, representing approximately 60% of U.S. television households,” read the prospectus.

Netflix in 2002 said its business remained DVD-centric and its proprietary “CineMatch” technology enabled it to provide customized title selections to subscribers — including shipping and receiving 5.3 million DVDs per month.

“Our software automates the process of tracking and routing titles to and from each of our distribution centers and allocates order responsibilities among them. We plan to operate low-cost regional distribution centers throughout the United States to reduce delivery times and increase library utilization,” read the prospectus.

Netflix’s by-mail success would prompt video store juggernaut Blockbuster in 2004 to launch its own by-mail service. The same Blockbuster that in 2000 reportedly dismissed Hastings’ $50 million offer to sell Netflix.

The rest is video store history.

Blockbuster, which had been acquired out of bankruptcy in 2010 by Dish Network, shuttered all remaining stores in 2013.

 


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