Remember when you had to go to Blockbuster to rent an actual movie? You had to get there Friday before 6:00 pm to make sure the newest releases were still in stock. Enter Netflix. It not only saved a trip to the store, but after experimenting with mailing DVD’s, it started streaming movies via the internet. In 2011, it produced its own show, House of Cards—a blockbuster hit—which thrust the company into a third dimension of entrepreneurial brilliance. This year, Netflix is signing on some of Hollywood’s biggest movie stars to date; but it’s really an example of how the free market works so well. Necessity bred an invention; competition encouraged excellence; supply met demand. Even liberals, who claim to hate capitalism, still love to “Netflix and chill.”
Although we’re accustomed to it now, the idea of Netflix is a novel one and the foremost demonstration of how it demonstrates the free market at work. Whether through mail-order DVD’s or on-demand streaming, Netflix’s founders Marc Randolph and Reed Hastings understood what people wanted but couldn’t quite conceive. So less than two decades ago, with fewer than thirty employees, 1,000 DVD’s, and $2.5 million in start-up cash, Netflix started delivering movies right to a person’s door—all for less than $10 a month.
As DVD players became more and more mainstream—over two-thirds of Americans own one—Netflix took off. It went from focusing on mailing DVD’s to on-demand streaming. Netflix continued to meet the demands of its customers. For example, over the years Netflix changed its website, eventually adding places for individual users to include profiles of themselves. After awhile they announced they would remove them but then, after negative feedback from customers, decided to keep them. It’s one of my children’s favorite aspects of using Netflix—it helps them and Netflix.
Todd Yellin, Netflix’s Vice President of Product Innovation, said, “About 75 percent to 80 percent of what people watch on Netflix comes from what Netflix recommends, not from what people search for.” Netflix profiles give the company information about the viewing habits of their subscribers so it knows what type of products to suggest. By July of 2014, “Netflix surpassed 50 million global subscribers;” as of last month, they’ve nearly doubled that figure. Their current revenue is $8.83 billion.
Netflix combined its ability to compete with its innovative methods of knowing what subscribers want, and the company continues to show their capitalistic prowess in the way they’ve made deals with Hollywood production companies and started to produce their own original content. Around 2008 they started making deals with Starz, then Paramount. They have an exclusive, multi-year agreement with Disney that supplies the kind of stuff my kids eat up—and I’ve loved watching Disney classics like Lady and the Tramp with them. This year in school, my son developed an interest in World War II history. Thanks to Netflix, he’s been able to watch dozens of documentaries on the topic, often pausing the show to come tell me what he’s learned. With 2011’s House of Cards, and 2013’s Orange is the New Black, Hollywood sat up and took notice of Netflix’s success with original content as well. The company has even convinced movie stars like Idris Elba, Adam Sandler, and Will Smith to star in movies I can’t—that is, don’t have to—go to the theater to see.
All of this should be celebrated as an example of American innovation, the gift of competition, and the beauty of capitalism. As for those liberals who denounce capitalism as a monstrous force of greed and inequality, but who happily consume its popular products such as Netflix, I suggest you take a hard look at your own hypocrisy before imposing your ideology on the rest of us. While you do that, I’ll be watching Netflix.