The movie world has undergone a number of revolutionary changes since the first moving pictures appeared in the 1890’s. Viewers had to be content with silent films while waiting for the first movie with a soundtrack which came out in 1927.
Until the first Walt Disney animated movie Flowers and Trees came out in 1932, introducing the three color system, moviegoers had to be satisfied with black and white pictures. The movie industry has gone from color to technicolor and from ordinary sound to surround sound as well as a myriad of other developments.
The next development for movie watchers was the advent of television in 1947 which saw a few thousand homes with television sets in 1950 increasing to over 98% by 1990, a mere hundred years since the first moving picture. We have gone through the video machine era where cassettes became smaller and smaller and video machines increasingly sophisticated.
The internet has resulted in the introduction of the streaming era which brings movies, videos, and sports events to the smallest mobile devices such as smartphones and tablets.
The Netflix (NFLX, +4.18%) CEO, Reed Hastings, who was annoyed by a $40 late fee when returning a video after expiry time, came up with the Netflix model which has taken less than twenty years to transform how people watch movies and videos.
The service offered by Netflix has led to the next revolution in how people watch movies and has had a dramatic effect on the cable television services that viewers had become used to. Media companies have now been forced to offer stand-alone services to the public at affordable prices in a counter to the streaming revolution.
Netflix is now contemplating a double pronged attack by looking to become a leader, not only in streaming, where it already holds ascendancy, but also in the creation of content.
“When you look at studios like Pixar, that combine great storytelling and the great technological aspects, that’s where we want to be”, Hastings told MarketWatch in an interview.
Achieving these objectives means that Netflix will have to challenge the established movie and video production companies and take them on at their own game. This means that billions of dollars will have to be spent to produce content and to extend its service to cover the globe while still relying on its $7.99 per month base fee.
The increased cost of content as well as the production of its content caused Netflix profit to drop by 63% in its recently reported quarter while the negative cash flow also asks questions of the sustainability of the current business model which includes an unwavering opposition to advertising as a means of increasing revenue.
Hastings, who has the technological background that has assisted Netflix in the creation of its streaming-video technology, has pushed his company far ahead of the competition.
Netflix is on stream, with 65 million subscribers who are watching 100 million hours of content daily, as the clear leader in the industry.
The determination to hold the edge in the streaming market is apparent as the company spends 9% of its revenue on technology and R&D, according to Raymond James Analyst, Justin Patterson.
MT4 Chart: Netflix