Introduction

Netflix did not begin as a streaming company.

It started with something much simpler: DVDs delivered through the mail.

Yet that early business contained the seeds of a much bigger idea. Netflix gave customers more choice, removed late fees, used technology to personalize recommendations, and eventually replaced physical media with streaming. Then it went one step further: instead of depending primarily on other studios for content, Netflix began producing and commissioning its own films and series.

That willingness to repeatedly change its own business is one of the most important reasons Netflix became a global entertainment company.

Netflix says it began as a DVD-by-mail business, moved into streaming in 2007, started making its own shows in 2013, and expanded from 60 countries to 190 countries in 2016.

The company's strategy has continued to evolve. Netflix now operates across subscription streaming, advertising, original content, games and live programming. In 2026, the company describes itself as a global entertainment service offering TV series, films, games and live programming.

Netflix's story is therefore much more than a streaming success story. It is a business case study in digital transformation, subscription economics, technology, content strategy, international expansion and customer experience.

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Company Background: How Netflix Started

Netflix was founded in 1997.

The company initially focused on DVD rentals through the internet, entering a market dominated by physical video-rental stores.

Netflix's first online DVD rental store opened in 1998. Customers could browse titles online and have DVDs delivered to their homes, rather than visiting a physical rental store.

This was an important change in convenience.

Instead of driving to a store and hoping a particular movie was available, customers could search a much larger catalog online.

But Netflix's biggest early innovation was its subscription model.

In 1999, Netflix introduced a subscription program that eliminated traditional due dates and late fees. Customers paid a recurring monthly fee and could rent DVDs without the same restrictions associated with traditional video stores.

The company had already started changing the rental experience.

The next challenge was much bigger:

Could Netflix change the way people watched entertainment altogether?

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The Problem or Opportunity

Traditional video rental had several frustrations.

Customers had to:

• Travel to a store
• Search through physical shelves
• Deal with limited inventory
• Return movies on time
• Pay late fees
• Accept whatever was available locally

Netflix used the internet to remove many of these limitations.

Its online catalog could be much larger than the inventory of an individual store.

The company also introduced personalized recommendations based on customers' previous activity. Its original online store specifically highlighted personalized merchandising and recommendations as part of the customer experience.

But Netflix eventually recognized an even bigger opportunity.

The internet could eliminate the physical DVD altogether.

As broadband connections became faster, streaming video became increasingly practical.

Netflix launched streaming in 2007, initially allowing subscribers to watch a selection of movies and television programs instantly on their computers. The streaming option was included in existing membership plans at no additional charge at launch.

This decision would eventually transform the company.

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The Big Idea: Don't Just Rent Entertainment—Deliver It Instantly

Netflix's most important strategic insight was that customers ultimately did not want DVDs.

They wanted entertainment.

The DVD was simply the delivery mechanism.

Once internet streaming became technically viable, Netflix could replace the physical delivery system with a digital one.

That changed the customer experience:

Old model:

Choose movie → wait for DVD → watch → return DVD

Netflix streaming model:

Choose content → press play → watch instantly

The transformation was more than technological.

It changed the economics and expectations of entertainment.

Customers could watch when they wanted, across supported devices, without visiting a store.

Netflix itself has described this shift as part of its broader history of reinvention—from DVDs to streaming, then from licensed programming toward original content and finally toward global entertainment.

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Business Model: How Netflix Makes Money

Netflix's core business model is based on paid memberships.

Customers pay for access to a large library of films and series, with different plans and price points depending on market and offering.

Netflix says it focuses primarily on long-term revenue rather than simply maximizing membership numbers. The company uses different price points and periodically adjusts pricing to balance consumer demand, investment in content and profitability.

1. Subscription Revenue

Subscriptions remain the foundation of Netflix's business.

The company collects recurring payments and uses that revenue to fund:

• Content production
• Content licensing
• Technology
• Marketing
• Infrastructure
• Global operations

This creates a recurring-revenue model that is very different from traditional movie rentals or individual purchases.

2. Advertising

Netflix introduced its advertising-supported plan in late 2022.

The strategy gave consumers a lower-priced option while creating another source of revenue for Netflix.

Netflix said in 2024 that the ads plan was already accounting for more than 45% of sign-ups in its advertising markets during Q2, and later reported that it represented more than 50% of sign-ups in those markets in Q3.

Netflix has since invested in its own advertising technology.

As of 2026, Netflix says its ads-supported service operates in 12 markets and that it plans additional launches in 2027.

3. Games and Live Programming

Netflix has expanded beyond traditional films and series.

The company now offers games and has increased investment in live programming.

This gives Netflix more opportunities to compete for consumers' entertainment time.

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Growth Strategy: How Netflix Built a Global Entertainment Business

1. Use Technology to Remove Friction

Netflix consistently looked for ways to make entertainment easier to access.

First it removed the need to visit a video store.

Then it removed the DVD.

Then it made content available across internet-connected devices.

This focus on convenience became one of Netflix's strongest competitive characteristics.

2. Personalization

Netflix invested heavily in recommendation technology.

A streaming service can offer thousands of titles, but a large catalog can become overwhelming.

Personalization helps users discover what to watch.

That creates a valuable cycle:

Better recommendations → more viewing → stronger engagement → greater perceived value → stronger retention.

3. Original Content

Netflix eventually realized that relying entirely on licensed content could limit its long-term strategy.

In 2013, it began producing original shows, starting with projects such as House of Cards.

Netflix has described the move into original programming as its second major reinvention after the transition from DVDs to streaming.

Original content gave Netflix something important:

Content it could control and distribute globally.

4. International Expansion

Netflix expanded aggressively outside the United States.

In 2016, the company expanded its service to almost the entire world, moving from roughly 60 countries to 190 countries.

International expansion also changed Netflix's content strategy.

The company began investing more heavily in local-language productions that could find audiences both domestically and internationally.

Shows such as Squid Game demonstrated how a production from one country could become a global phenomenon.

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Marketing Strategy: Make the Content the Marketing

Netflix's marketing strategy is closely connected to its content.

A successful show can generate enormous organic attention through:

• Social media discussions
• Trailers
• Memes
• Reviews
• Word of mouth
• Fan communities
• Press coverage

This creates a powerful marketing cycle.

A popular series attracts attention.

Attention brings people to Netflix.

New subscribers discover other content.

That additional viewing increases the value of the overall catalog.

Netflix also uses highly visible campaigns around major releases.

Rather than selling Netflix as simply a technology platform, the company markets stories, characters, franchises and cultural moments.

This distinction is important.

Netflix is ultimately competing for people's leisure time, not simply for subscriptions.

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Key Turning Points

1997: Netflix Is Founded

Netflix was founded as an internet-based DVD rental company.

1998: Online DVD Store

Netflix opened its online DVD rental store, providing customers with a much broader selection and home delivery.

1999: Subscription Model

Netflix introduced a subscription program without traditional rental due dates and late fees.

This was an important foundation for the company's recurring-revenue model.

2007: Streaming Begins

Netflix introduced instant streaming to subscribers.

Initially, streaming was an additional benefit alongside the DVD business.

Over time, streaming became the company's future.

2013: Original Programming

Netflix moved into original television production with House of Cards.

This marked another major strategic shift.

Netflix was no longer simply distributing other companies' entertainment.

It was becoming a content producer.

2016: Global Expansion

Netflix expanded to 190 countries, transforming the company into a genuinely global entertainment service.

2022: Advertising

Netflix launched its advertising-supported plan.

This created another monetization model beyond traditional subscriptions.

2023: DVD Business Ends

Netflix shipped its final DVDs on September 29, 2023, ending a 25-year chapter.

The decision was symbolic.

Netflix had essentially eliminated the business that had created the company.

2024–2026: Live, Games and Advertising

Netflix continued expanding beyond traditional on-demand streaming.

The company invested in live programming, games and advertising technology.

In 2025, Netflix highlighted initiatives including WWE RAW, live boxing and NFL games as part of its broader entertainment strategy.

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Challenges and Failures: Netflix Had to Reinvent Itself Repeatedly

Netflix's success can sometimes make its transformation look inevitable.

It wasn't.

The DVD-to-Streaming Transition

Netflix had to transition away from the business that had built the company.

That was difficult because the DVD business still had customers and generated revenue.

Netflix executives have acknowledged that the technology around early streaming was not yet great and that the company faced competition from both piracy and its own DVD operation.

The strategic challenge was obvious:

The company had to make its own successful business obsolete.

The Qwikster Mistake

In 2011, Netflix announced plans to separate its DVD rental business under the Qwikster brand while keeping streaming under Netflix.

Customers reacted negatively to the proposed change.

Netflix ultimately abandoned the Qwikster plan and kept the DVD and streaming businesses together under the Netflix brand.

The episode demonstrated how difficult major pricing and product changes can be, even for a successful company.

Content Costs

Original entertainment is expensive.

Netflix must continuously invest in films and series while dealing with uncertain audience demand.

A show can cost a large amount to produce without guaranteeing that it will attract enough viewers.

Netflix therefore has to balance creative ambition with financial discipline.

Competition

Netflix now competes against a huge range of entertainment options:

• Disney+
• Amazon Prime Video
• YouTube
• Traditional television
• Social media
• Gaming
• TikTok
• Other streaming platforms

Netflix itself has noted that consumers have more ways than ever to spend their time.

The company is therefore competing for attention, not merely subscriptions.

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Technology & Innovation

Technology has always been central to Netflix's business strategy.

Recommendation Algorithms

Netflix uses data and machine learning to help personalize content discovery.

This matters because a large catalog is only valuable if customers can find something they want to watch.

Streaming Infrastructure

Netflix built technology capable of delivering video efficiently to millions of viewers around the world.

Its content delivery strategy has been an important part of making streaming reliable at global scale.

User Experience

Netflix continuously experiments with interfaces, search, recommendations, previews and content discovery.

The goal is simple:

Reduce the time between opening Netflix and finding something worth watching.

Advertising Technology

Netflix has also begun developing its own advertising technology.

In 2025, the company launched its in-house ad-tech platform in the United States, following earlier development and testing in other markets.

This gives Netflix greater control over how advertising is sold, measured and delivered.

Games

Netflix has expanded into mobile games, giving members another form of entertainment within its broader ecosystem.

This is strategically significant because Netflix is trying to increase the amount of entertainment value it provides rather than depending entirely on television and films.

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Key Business Numbers

Netflix has grown dramatically from its original DVD business.

At the end of 2025, Netflix reported over 300 million paid memberships in more than 190 countries, according to its investor-relations materials.

In Q1 2025, Netflix reported:

• $10.54 billion in revenue
• $3.35 billion in operating income
• $2.89 billion in net income
• 31.7% operating margin

Netflix also reported that its advertising-supported membership base was growing rapidly during 2024. In Q2 2024, the ads plan's membership base increased 34% sequentially, while the plan accounted for more than 45% of sign-ups in advertising markets.

These numbers illustrate an important evolution.

Netflix is no longer simply a subscription streaming company.

It is building a broader entertainment business with multiple monetization channels.

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Lessons Entrepreneurs Can Learn From Netflix

1. Don't Become Attached to Your Original Business

Netflix eventually eliminated its DVD business—the very business that created the company.

Entrepreneurs should understand that today's successful product can become tomorrow's constraint.

2. Solve the Customer's Real Problem

Customers did not fundamentally want DVDs.

They wanted convenient entertainment.

Netflix identified that distinction and changed the delivery mechanism.

3. Technology Should Improve the Customer Experience

Streaming was valuable because it made entertainment easier and faster to access.

Technology was not the product by itself.

It improved the product experience.

4. Recurring Revenue Can Create a Strong Business Foundation

Netflix's subscription model created a continuous customer relationship.

But recurring revenue alone is not enough.

The company must continuously give customers reasons to stay.

5. Build Your Own Competitive Assets

Original content gave Netflix greater control over its entertainment offering.

This reduced complete dependence on external studios and created globally recognizable Netflix franchises.

6. Think Globally From the Product Stage

Netflix didn't simply export American programming.

It increasingly invested in local creators and local-language productions.

That helped turn the service into a global entertainment platform.

7. Compete for Attention, Not Just Customers

Netflix's real competition is broader than other streaming services.

People can spend their free time watching YouTube, playing games, scrolling social media or watching traditional television.

The business that earns attention has an important advantage.

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What Netflix Is Doing Today

Netflix is now positioning itself as a global entertainment company, not simply a streaming-video service.

Its offering includes:

• Films
• TV series
• Games
• Live programming
• Ad-supported plans
• Subscription plans
• Original productions
• Licensed content

Netflix is also expanding its advertising business.

As of 2026, the company says its advertising-supported service is available in 12 markets, with additional markets planned for 2027.

Live programming is another growing area.

Netflix has streamed major sporting and entertainment events, including WWE programming, boxing and NFL games. Its 2025 shareholder materials specifically identified live programming and games as newer initiatives alongside its core series and films business.

The company also continues to invest heavily in original films and series.

In February 2026, Netflix said it expected to invest approximately $20 billion in quality films and series during 2026.

The strategic direction is clear:

More content + more formats + more ways to watch + more ways to monetize.

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Conclusion

Netflix transformed entertainment by repeatedly making its own business obsolete.

It started with DVDs.

Then it moved to streaming.

Then it moved from licensed content into original programming.

Then it expanded globally.

And now it is moving beyond traditional streaming into advertising, games and live entertainment.

The company's greatest strategic advantage has not been one particular technology or one hit television show.

It has been its willingness to reinvent the business before the market forces it to.

Netflix understood that customers wanted entertainment—not DVDs.

It understood that streaming could become more convenient than physical media.

It understood that controlling original content could strengthen the platform.

And it understood that a global audience required stories from around the world.

The result is a business that has changed dramatically several times while maintaining the same fundamental objective: making entertainment easier for people to discover and enjoy.

Business takeaway: The strongest companies don't just adapt to disruption—they are willing to disrupt their own successful business before someone else does.