Netflix Is Making Another Big Change, and It's the Best Example I've Seen Yet
Bill Murphy Jr.
1 hour ago

A couple of years ago, I interviewed one of the early marketing directors at Netflix, who went on to become a business school professor, about the nine big changes he'd identified in the history of Netflix.

Now there's a 10th big change.

Netflix is worth studying for many reasons; it's the one of the best examples I can imagine of a company that has launched, built, and blown up its main business over and over again. If your business is stuck, I think you'll find some food for thought.

So, let's recap the big changes that Joel Mier, who was at Netflix from 1998 to 2006, and who now teaches at the University of Richmond, identified in a 2021 article and told me about in an interview. Then, we'll add Big Change Number 10, and look toward Netflix's future.

1. From sales to rentals.
Originally, Netflix was in the DVD sales business, as streaming didn't exist yet. When Netflix first launched, in 1998 it had every DVD available in the world--all 925 of them. Retailers like Walmart and Best Buy were going to crush Netflix, however, so the company made its first big change: from DVD sales to DVD rentals.

2. From one-offs to subscriptions.
It seems obvious now, but Netflix didn't even sell subscriptions at first; instead, they rented DVDs one at a time. But, between 1999 and 2000, the company experimented with a subscription service, going from zero paid subscribers to 100,000 in a matter of months. It went all-in on this model, and stopped renting DVDs to non-subscribers.

3. The rise of unlimited rentals.
Remember, we're still talking about mailing physical DVDs here; once it moved to a subscription-based model, Netflix did away with limits on how many DVDs you could order each month. Making this happen required significant confidence in the company's predictive abilities.

4. Adding episodic content on DVDs.
This was probably the least revolutionary change, but it was still important. As Mier explained, Netflix started offering DVDs with numerous episodes of TV shows, which people were much less likely to rent from video stores like its big competitor, Blockbuster.

5. Moving from DVDs to streaming.
Isn't it wild that Netflix was already 10 years old, in 2007, before it even started moving toward streaming? That's what happened. Originally, streaming was very limited, and possible only on PCs.

6. Going all-in on streaming.
Around July 2011, by Mier's calculation, Netflix went all-in on streaming, to the point that it stopped trying to add customers to its existing DVD subscription business. This meant beginning to upend its entire business.

7. Adding DVD.com.
We're still talking about the switch to streaming, but it was interesting when Netflix acquired the domain DVD.com and eventually rebranded its entire legacy DVD-by-mail service under the subbrand, "DVD.com, A Netflix Company," saving Netflix itself for streaming.

8. The move to original content.
Up until about 2012 or 2013, Netflix's biggest streaming draws involved streaming entertainment produced by other companies, even sitcom reruns like The Office and Friends. As other streaming companies rose, Netflix got into production, introducing shows like Stranger Things, Tiger King, Bridgerton, Ozark and its original, House of Cards.

9. The shift to international content.
Around 2021, while Netflix was booming as a result of the pandemic, the company started pushing hard toward international content, including both acquisitions and its own productions. Two word example: Squid Game. By the end of last year, people had watched 2.2 billion hours of the South Korean drama on Netflix.

10. The winding down.
Finally, we get to Big Change number 10, which is that Netflix is ending its physical DVD subscription rental business entirely: discontinuing memberships, and even telling customers via social media to keep whatever DVDs they happen to have on hand as of September 29.

Even as it shuts the doors, one estimate is that Netflix still has about 1.3 million DVD-only subscribers; down from 16 million at the peak, and it's a smart way to end. They've also run a mystery giveaway program, where some subscribers signed up to be sent DVDs they hadn't even asked for.

(My colleague, Jason Aten, called this a "delightful surprise" when he reported on it last month.)

So there we have it: 10 big changes. Any ideas on what might be the 11th?

I don't know if you watch a lot of Netflix, or if you're even old enough to to realize that Netflix once lived and breathed DVDs rather than streaming.

But I do know that if you find yourself worried about making big changes to your business to keep up with technology or customer preferences, you could choose a worse role model to follow than Netflix.