10 Incredible Facts About Netflix, Its Evolution, And How It Maintains Its Competitive Edge

We talk a lot about Netflix around here, and for good reason: It’s become, for many of us, a huge part of our lives. Most of the discussion, however, revolves around the best TV shows on the streaming service, the latest additions to its library, or even the threat of price hikes. What we don’t discuss as often, however, are the origins of Netflix, and how it maintains its competitive edge over rivals like Amazon Prime and Hulu, and even HBO.

Netflix CEO Reed Hastings hasn’t been shy about his rivalry with HBO. In fact, he announced last February that his goal is to “become HBO faster than HBO becomes us,” and even kidded last week that HBO CEO Richard Plepler’s HBO Go password was “Netflix bitch.” Netflix has 33 million subscribers now, and the service hopes to double that number in the near future, as we all move away from our traditional TV sets and toward Internet streaming. My guess is that, though it has occasionally suffered setbacks in the past, Netflix will accomplish this goal. Sooner, rather than later.

But before they accomplish 66 million subscribers, let’s take a quick look back at 10 interesting facts about Netflix, and how it got to where it is today.

1. Reed Hastings was inspired to start Netflix after racking up a $40 late charge on a VHS copy of Apollo 13. So, uh, thanks Ron Howard! (Wikipedia)

2. In order to determine what television series it should be purchasing — especially for the European markets — Netflix monitors Bittorent and other pirating sites to see what is popular before making decisions. (Forbes)

3. Netflix, which had purchased the licensing rights to House of Cards, brought in David Fincher to run the show, and Kevin Spacey to star in it because Fincher and Spacey movies were very popular on Netflix. (Fincher, actually, had originally wanted Eric Roth in the title role). (Wikipedia)

4. In 2000, CEO and co-founder Reed Hastings approaching Blockbuster about a partnership, and the Blockbuster CEO laughed in their face. In fact, Blockbuster even had a chance to purchase Netflix for $50 million. I don’t know how much Netflix is worth now, but its third quarter earnings in 2013 were $1.1 billion, while Blockbuster is bankrupt. (CNet)

5. As of 2009, Netflix had around 58 warehouses nationwide, but most were hidden, disguised, and could not be found on a map. Likewise, Netflix delivery trucks are also disguised. (The reason is because of the number of discs being held in warehouses, and because Netflix doesn’t want anyone to drop their discs off at the warehouse locations). (Chicago Tribune)

6. Netflix chief content officer Ted Sarandos believes that the broadband caps that Canadian ISPs put on their subscribers is as bad as in third-world countries, and should be considered “almost a human rights violation.” As a result of the caps, the default streaming option for Canadian Netflix subscribers is for non-HD streams. (Gigaom)

7. During peak times — between 9 p.m. and midnight — Netflix accounts for 33 percent of North American’s downstream traffic. (CNet)

8. In 2008, Netflix stated that Napoleon Dynamite was the hardest movie to recommend to viewers based on their previous likes and dislikes. (NYTimes)

9. The reason why Netflix envelopes are rectangular instead of square is because the USPS charges more for square envelopes, enough more than in 2011, postage would’ve cost Netflix more than $225 million in additional charges. (Quora)

10. Netflix uses huge teams of people to watch films and tag every aspect of each movie from director to actor to genre to what kind of ending, to how sexually suggestive, gory, or romantic each film is, and even how moral the lead character is. They categorize each “quanta” — or element of the movie — using a document they call Netflix Quantum Theory, which has allowed them to basically reverse engineer Hollywood. In doing so, Netflix has created a whopping 76,897 genres (at least), designed to best recommend movies to its viewers. Why? Because the better Netflix knows you, the better it can tailor to your likes and dislikes, and the more likely you’ll stick around. (The Atlantic)