THE NETFLIX STORY FROM LOCAL TO GLOBAL
Last week I was privileged to have a closed webinar with a group of young people.
Together we shared the concept of local solutions with global impact.
In our discussion, I shared with them the story of Netflix.
How Netflix were able to solve a local problem which turned out making a global impact.
Most of us know about the billion dollars company, Netflix.
Netflix 2019 Revenue: US$20.156 billion
Netflix 2019 Net Income: US$1.866 billion
So basically, Netflix is an online movie streaming company with a subscription-based video on demand business model.
Netflix's initial business model included DVD sales and rental by mail, but Hastings (Netflix founder) abandoned the sales about a year after the company's founding to focus on the initial DVD rental business.
To understand how and why Netflix was created, let's rewind back to the early/mid 1990s.
You can relate back then some guys who use to move around the street with truck carrying movies for sell and rent.
Also, how many of us remember then you go to movie shops to rent movies?
If you fail to bring it back in 2 days, you have to pay late fees.
One popular company that was using this model was BLOCKBUSTER.
When you look at the process, it's lengthy and expensive.
You have to leave the comfort of your house to drive down to the movie shop, waiting for them to finish attending to the customers before you rent the movie you want.
In the end, it might be that someone else has rented the movie you wanted to rent.
You go home, wait for 3 more days for the person to return it before you go back to rent it.
To solve this problem, BLOCKBUSTER will have to buy up to 5 DVDs of Prison Break for instance because many customers will be demanding to rent popular movies within same time frame.
They spend more money buying 5 copies of the movies.
When you end up renting the movie, you will be praying that NEPA (power supply company for those in Nigeria) will give you light to watch it with the DVD Player.
In 19997, Reed Hastings the founder of Netflix, rented a movie and failed to return it on time and had to pay $40 for late fees.
He was angry paying a late fee of $40 and about the entire process of BLOCKBUSTERS.
So, he decided to find a means to solve that problem.
He started a business model which is DVD by mail.
You don't have to come to the movie shop, just tell him, he will mail it to your address and when you are done, you mail it back. So you don't need to start going around looking for a movie to rent.
This brings me to my very first point.
Local solutions with global impact can come from your personal challenges from an existing solution.
Netflix later changed to a subscription model.
You pay as low as $20 every month and anytime you need any movie within that month, they ship it to you so far you have returned the last one you took.
This means I can watch as many movies as possible by just subscribing for that month.
A lot of people love the model and used his service.
This brings me to my second point.
A local solution with a global impact starts locally before going global by continuous innovation (finding new and better ways to satisfy your customers).
A few years later they changed the model which was a subscription-based video on demand.
They have to go online hosting the movies on the cloud.
THE BUSINESS VALUE
1. They don't need to buy multiple DVDs for one movie.
2. They didn't have to rent a shop for people to come rent movies.
3. They went online making them go global and reach more users over the world.
THE SOCIAL VALUE
1. Users don't have to go to the shop to rent movie, saving time.
2. Just have to pay $20 in a month and have access to unlimited movies, it saves cost.
3. You can now watch movies on TV, Tablet, Mobile Phone, or PC anytime, it is convenient.
4. You can decide what movie to watch base on other users' recommendations.
Today, Netflix is in over 190 countries and in 17 different languages with about 193 million subscribed users.
Netflix has over 8,600 employees with a total assets of approximately $34 billion.
Don't get it twisted, Netflix was like the everyday local truck DVD seller which turned out into billions of dollars.
FROM LOCAL TO GLOBAL.
Feel free to share your thoughts and share the post for anyone who might find it useful.
I hope I find time to write again soon.
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