Almost all of us with access to Wi-Fi and a personal computer have Netflix. If not, you certainly know of the gigantic entertainment company that spans across nations. The company, founded in 1997 in Scotts Valley, California, initially provided DVDs by mail to subscribers, and eventually became the largest online streaming service for movies and television shows. The company’s success can even be seen in their share price, as their initial public offering (IPO) in 2002 was fifteen US dollars per share, and it has now sitting at $101.47. Their business model consists of a flat monthly payment that gives users unlimited streaming of whatever entertainment you desire through their website. However, since the company is present in over 190 countries, streaming options vary depending on your location. These ‘geo-restrictions’ are a legally binding result of Netflix’s country-exclusive licensing agreements with Hollywood. As we’ve learnt in class, Hollywood would be an important stakeholder in Netflix, since they can easily affect the operations of the company by terminating licensing agreements and depleting their content.
When some subscribers tire from the selection Netflix offers them or they simply want access to a certain show not available in their own country, they resort to third party companies to help them get around these regulations. ‘Unblocking’ companies posed a big problem to Netflix’s business, as they would essentially hack Netflix’s system, allowing subscribers access to Netflix selections in any location they want and hurting the company’s legal agreements with entertainment providers. The ongoing fight between the multinational company and unblocking services has recently calmed down. We see examples of many companies, one after the other, giving up in their fight to bypass Netflix’s borders, as written about in the CBC news article I cited below. Relating to when we talked about costs and the importance of cash flow in class, it was most likely getting too costly for these companies to continuously change their strategy in bypassing a huge company’s country restrictions. The services could have run out of cash flow, from not enough paying subscribers and increasing costs. Either way, it was clearly not profitable anymore to fight Netflix, and the multinational company came out on top.
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