Stream Punked! How Netflix changed the entertainment game to become the biggest player in the world

Last week,Netflix was worth more than long-established Disney and Comcast and is currently one of the most major media companies driving Hollywood to the edge. How is it doing so?

                            Stream Punked! How Netflix changed the entertainment game to become the biggest player in the world
Netflix CEO Reed Hastings (Source: Getty Images)

For some time around the Memorial Weekend Netflix was worth more than the world's long-standing and highly valued media and entertainment companies, Disney and Comcast.

On May 24, the network had a market capitalization of $152.7 billion, just a few digits above Disney's $152.3 billion, and way ahead of Comcast's $142.6 billion.

There's a raging ongoing debate if Netflix's hyper-focused but debt-ridden strategy is a sustainable one as Disney quickly regained the crown over the weekend but Netflix still soars in the second position.

There's more competition coming from Disney next year as the company plans to have its own streaming service by 2019.

However, as of today, it is pretty hard to imagine life without Netflix.

How are you going to ask someone out without the pickup line to "Netflix and chill"? Our favorite movies are instantly available, suiting our every mood. There are some undeniable reasons why we trust this streaming service more than others and despite the hike in subscription fee last year, Netflix's onward march has not been impeded.

Barack and Michelle Obama also signed a deal with Netflix on May 21 to produce original shows and the network itself has promised to have close to a 1000 original shows by the end of the year.

The network is getting more and more promising and scaring the biggies of Hollywood, in fact, pushing Hollywood itself to the edge.

Many directors and producers from Tinsel Town have cited enough concern with the network and given how people are choosing streaming services over old school means of entertainment, which are still stuck in 20th century, there are high chances that Netflix will reign as the most valued media and entertainment company in the future.

It isn't a question of when, but how. To start off, how did a streaming service that began as a mail-rental movie outlet, mainly to avoid the late fee from Blockbuster, conquer 192 countries with over 125 million customers?

Netflix started 20 years ago but it is more valuable today than it ever was. The reason for the sudden boom for the multi-million dollar company is that it has taken time to understand its audience more than any entertainment company has.

Think about it, besides a handful of successful and award-winning actors in the network, the streamer produces originals with rarely seen faces and new stars.

But these shows including 'Stranger Things' and '13 Reasons Why' are still massive hits and public has taken keen interest to such series irrespective of the cast or the director.

The reason why this has happened is because, when subscribers sign up for Netflix, they give more than just bank details, the audience gives detailed information on their taste and interests, which is used by the network to curate a hit show.

This data analysis is a long sustaining model that others have failed to create in a tech-driven society we live in.

On the other hand what may not be a long-standing model is Netflix's debt-financing strategy. In April, the network announced that it is going to raise $1.5 billion in debt to invest in its original content.

This isn't something new for the network since the company has already raised billions in debt to accelerate its push into original content. But what may jeopardize the tactic is Disney's own streaming network launching next year.

Adding to the competition, Amazon founder Jeff Bezos intends to take the fight to Netflix with a 'Game of Thrones'-style hit for its Prime Video service with executives striking a $1billion deal to bring the 'Lord of the Rings' to TV.

Time will tell how this may work for one of the most powerful media as of now.

But ever since its inception, Netflix has stood strong against adversities with its unique approaches and media tactics and its safe to say, it has been successful. 

The origin of Netflix can be traced to 1997, when the CEO, Reed Hastings, came up with the idea for the DVD-by-mail rental business simply because he was late returning a videotape.

The story in Fortune by Hastings suggest that he had rented Tom Hank starrer 'Apollo 13' from his local Blockbuster Video store and lost it.

The penalty was a $40 fine.

He writes: "I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there’s a big market out there."

Following that he started his investigations."I ran out to Tower Records in Santa Cruz, California, and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point," he adds.

However, this story has been discredited by Netflix co-founder Marc Rudolph, who left the company in 2002.

Then in 2006, it was reported that Netflix decided to come up with a plan to better its algorithm. The plan offered $1 million "Netflix Prize" to anyone who came up with it. The prize was claimed three years later by seven-men team but it is said their idea was never implemented.

Then in 2013, the network came up with 'House of Cards,' which etched Netflix as a major media player, bagging back to back Emmy nominations.

But the show wasn't Netflix's first. In 2012, Netflix debuted 'Lilyhammer' starring Steven Van Zandt as an American gangster in Norway and availed all eight episodes in the streaming service, a practice peculiar to the network.

Netflix has been focused in their set of goals and besides the 2011 stint on spitting DVD and streaming business, they haven't done anything amiss. 

In the same Fortune article quoted above, Hastings highlights his mantra of success and though the article was written eight years ago, Netflix still abides by the points mainly the one noting "not to be afraid to change the model."

Hastings has been in charge of the company ever since its inception and has kept the company focused tightly in one direction regarding the entertainment world: forward.