Netflix’s shows and movies feature young rising stars like Jenna Ortega and Sadie Sink, but the company itself is older than your favorite Gen Z pop singer (yes, we googled it—Tyla is 23).
The streaming juggernaut, which is 27 years old, first opened its doors ahead of the turn of the century, and it’s gone through nearly as many reinventions as there are seasons of Grey’s Anatomy (20 seasons of which are available to watch on Netflix). After it got its humble start sending DVDs through the mail when it first debuted in 1997, the company revolutionized the entertainment industry when it entered the streaming arena in 2007, giving consumers a taste of what it was like to have access to movies, shows, and more without a cable subscription or a Blockbuster card. Now, with its aggressive push into advertising and its increasing global footprint, could Netflix stand to do it all over again?
“They took the principle of global distribution to a new level,” Eric Schmitt, VP analyst at Gartner, said. “And I think that let them race ahead of a lot of the other competitors and alternatives.”
Baby steps
Shortly after it was founded by Reed Hastings and Marc Randolph, Netflix began shipping DVDs in its once-iconic red envelopes in March 1998. At the time, one of its biggest competitors was Blockbuster, the brick-and-mortar video-rental chain that opened its first locations in 1985.
Netflix IPO’ed in May 2002 and had over 740,000 subscribers in October 2002 despite the dot-com crash that affected so many other tech companies at the turn of the century. But even though Netflix was backed by VC money, has the word “net” in its name, and, at that point, mainly interacted with consumers through its website, it wasn’t exactly a traditional tech company.
As the company continued to grow (and Blockbuster slid toward bankruptcy), new competitors arose, namely Redbox, whose DVD-rental kiosks began popping up around the country in 2004. Redbox might feel like a relic from a bygone era, but at the time, it represented a formidable rival for Netflix.
“By the end of the year, kiosks will likely be our No. 1 competitor,” Hastings, who at that point was leading the company after Randolph’s exit from the company, said in a 2009 conference call. “There are already more kiosks in America than video stores.”
A once-in-a-lifetime transformation
By January 2007, despite Redbox’s increasing footprint, Netflix was doing solid business: It had 6.3 million subscribers, representing a 51% increase year over year. That month, the company announced a major investment in a new division of its business—one that would change the course of the entire entertainment industry.
“We are pushing into online video to lead the next generation of movie viewing,” Hastings wrote in the company’s Q1 2007 earnings release.
That slow-and-steady investment extended through the 2010s, and in 2012, the company made its first bets on producing original content, instead of simply licensing existing programming from other studios. In 2013, it released the first season of the political drama House of Cards, marking a permanent shift in the way executives and consumers alike thought about where they could find (and distribute) prestigious TV. All the while, subscribers were still flocking to the platform: Netflix recorded over 44 million subscribers by the end of 2013, with profits ballooning 5x what they were a year prior.
As it built out its originals strategy, Netflix was also executing an aggressive international expansion campaign. In September 2010, the service expanded to Canada, and a year later, it came to Latin America. In January 2016, it made its biggest international expansion move yet, launching in 130 additional countries simultaneously.
Schmitt said the international expansion added layers of complexity to the business in order for programming to be distributed to the countries into which Netflix was branching out.
“Folks who haven’t been in the industry or weren’t in the industry decades ago may not appreciate how complicated rights management was,” Schmitt told Marketing Brew. “Even just getting sign-off to run a movie or a TV show in another market somewhere in the world meant mountains of paperwork and agreement renegotiations. It was a huge point of friction for the industry.”
In many ways, Netflix’s business moves helped provide a blueprint for other legacy media companies to follow, and it was only several years later that other major entertainment companies began rolling out their own streamers. It was a busy few years: Disney+ debuted in November 2019, followed by Warner Bros. Discovery’s HBO Max in May 2020 and NBCU’s Peacock in July of the same year. (All of them, of course, are going head-to-head with YouTube, which has steadily grown its TV viewership and now, according to Nielsen, eclipses them all in terms of percentage of TV time spent.)
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For some of these rival streamers, rolling out during the pandemic made figuring out long-term strategy and a route to profitability even more challenging, according to Jeff Loucks, executive director of brand, marketing, and thought leadership ED at Deloitte.
“When streaming services came along, that allowed [consumers] to watch a lot of content that they liked ad-free for really only a few dollars,” he said. “That was a big moment for people, and it really changed the media landscape forever.”
Not a tough sell
Today, Netflix continues to rule the paid-streaming roost, most recently counting over 300 million global subscribers as of January (although the company has opted to no longer share subscriber numbers each quarter). With that said, the streaming giant has gone through some recent rough patches, including recording its first subscriber drop in over a decade in Q1 2022; the day after the company reported the decline, its stock price fell 35%. Around the same time, the company announced a push into advertising, which co-CEO Greg Peters would soon characterize as a “crawl, walk, run” model.
It was an about-face from Hastings’s prior anti-advertising stance. “We want to be the safe respite where you can explore, you can get stimulated, have fun, and enjoy—and have none of the controversy around exploiting users with advertising,” Hastings had previously told investors in 2020.
Perhaps it’s no surprise, then, that Hastings transitioned from the role of co-CEO to executive chairman in January 2023, when he officially handed the baton to co-CEOs Ted Sarandos and Peters (Sarandos had already been co-CEO with Hastings since 2020).
Under the new executives’ leadership, Netflix has grown its ad tier to over 94 million global monthly active users; at the company’s upfront event this year in New York, president of advertising Amy Reinhard said its ad-supported viewers spend an average of 41 hours a month watching programming on the service. It also debuted its own in-house ad-tech stack in Canada in 2024, and rolled out the tech in the US in April, with further expansion expected by June.
Amid the shift to advertising, the company began the final phase-out of its physical-media business: Netflix shipped its last DVD in September 2023.
Netflix’s ads business, of course, still has a ways to go. Netflix will put more resources toward its ads to make them more relevant to consumers, Ryan Gilbert, VP of digital media at Rain the Growth Agency, predicted.
Netflix isn’t the only media company facing the task: streaming companies of all stripes are looking to court advertisers, perhaps especially small-and-medium-sized businesses, Peter Naylor, senior advisor at McKinsey and former Netflix global ad sales VP, said.
“They all want that long tail of advertising that has found a home on Meta in particular, Google in particular, and increasingly, YouTube,” he said. “Now that more and more of the inventory is addressable, there’s no reason those advertisers shouldn’t seriously consider streaming for their small, little markets. There’s so much money being spent on a local and small regional basis, and they all want a piece of that.”
After hosting its first-ever upfront in 2023, Netflix said in 2024 that upfront ad spend commitments grew 150% YoY. Ad spend on the streamer hit almost $964 million in 2024, an 8% YoY bump, according to data compiled by MediaRadar for Marketing Brew.
That’s part of a broader trend: Spending in the US on CTV advertising is expected to jump from $30 billion in 2024 to more than $42 million by 2027, according to eMarketer.
New year, new me?
Today, Netflix has shifted some of its focus to some of its tertiary businesses that are aimed at supporting its core product, including gaming, experiential activations, and live programming like sports. It’s also continuing to (cautiously) eye other, bigger screens: Netflix has opted to give director Greta Gerwig’s upcoming Narnia film a short IMAX release in 2026 before it hits the streamer.
Naylor said that the broader shift has been a long time coming.
“If you know your media history, media companies for a long time have figured out that their audiences are happy to consume in many ways. That’s why you see things like the Stranger Things experience, the Stranger Things play…the Squid Game game, a Bridgerton candle,” he said. “Every one of these media companies have business dev executives scribbling on whiteboards, trying to figure out, Where do we have a right to go? How can we activate our IP in multiple ways?”
This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.
