Five years ago, your friend would be telling you about an interesting show they’d started watching, and you would respond by asking them what channel they saw it on. Someone tells you about a show now and your first question will be “Is it on Netflix?” Go back a decade and you’d have to physically drive to a store and borrow a DVD or wait a week for someone else to return it.

Netflix’s success is such an interesting topic, not only because of its prevalence in most people’s lives, but also because of how its story highlights a broader trend in business today. The TV industry is not an easy one to get into, owing to its towering barriers to entry caused by the huge streams of content produced every year. Mass media companies like NBC, WarnerMedia and Discovery Inc. have historically dominated cable television with channels such as E!, HBO and the Discovery Channel, and held such a strong position that competing against them would seem like suicide for a young company.

Netflix however, as I’m sure you’re aware, doesn’t operate in the same way as these traditional networks. Its streaming, on-demand service means consumers don’t have to tune in to their TVs at a certain time to catch their favourite show or wait a week to see the next episode. Additionally, since Netflix operates on a subscription model rather than off ad revenue, your viewing experience is never interrupted, giving the service a strong USP. Netflix has perfected this system over thirteen years to provide a seamless streaming experience that now almost 200 million people subscribe to. In doing so, it turned consumers away from live television and towards its own service, without ever directly competing against the network giants. And this type of competition has been part of a larger movement, especially in the tech industry.

Take Microsoft as an example: until the 1990s, IBM’s large, immobile mainframes were the only method of processing the vast amount of data a business required. But when Microsoft introduced the PC, suddenly businesses – especially smaller ones – could do the same task for a tenth of the price. Microsoft didn’t overturn IBM’s dominance of mainframes – instead, PCs made mainframes irrelevant. Facebook took on Google not by creating a new web search but by founding another innovative idea to steal web traffic. In the same way, Netflix shifted consumers’ tastes and preferences by exposing them to a new way of enjoying their TV, changing the market as a whole. However, while the move was hugely innovative this idea alone didn’t make Netflix the company it is today.

One key to the service’s popularity is its focus on original content. By creating high-quality movies and shows, Netflix not only supplies its own constant stream of fresh content, but also establishes a reputable brand that has gained users’ trust to produce premium shows. The very first episode of Netflix’s first original, House of Cards, won two Emmy awards, and the whole series went on to win seven more. Since then, the company has seen even greater success with Netflix Originals amassing 51 Emmys since they started in 2013. These shows have started a major movement of people on their cable networks switching to Netflix, giving them access to some of the most popular and recognisable shows in recent times (think Narcos and Stranger Things).

Another major factor in Netflix’s success is its algorithm. How many times have you found a show you really enjoyed from a Netflix recommendation or by scrolling through its simple yet innovative homepage? This is the algorithm at work. It analyses colossal amounts of data from your and others’ behaviour on the platform to automatically build a profile of your watching activity allowing it to present you with the most relevant shows and movies. Netflix has refined this extensively over the years; in 2009 it even put out a competition called the “Netflix Prize” with a grand prize of $1 million to the first team that could submit an algorithm beating its existing one at predicting user ratings for films by 10%. Now, the algorithm constantly learns from user behaviour through artificial intelligence to adapt and improve the system meaning its almost never wrong.

Finally, Netflix invented the behaviour known as ‘binge-watching’ when it released all thirteen episodes of its first season of House of Cards at the same time. This was viable due to the absence of ads on the platform leaving viewers with more time to spend on Netflix and less time tuning out to do something else while they wait for the show to resume. The standard for a new TV show before this was for a network to release an episode weekly—that way people would have to hold on to their subscription longer to be able to watch a whole series. Netflix’s approach means that as soon as a new show releases there will be widespread coverage of it. Media corporations and journalists can write pieces after watching the whole season making them more in depth than an episodic approach; viewers will be much more likely to spread the show through word of mouth especially if it makes them stay up all night to watch the entire series at once; and Netflix can generate much more data on a series based on how much it is binged. This obviously improves the algorithm, but it’s sometimes even used to inform decisions about the shows itself. A notable example of this is Netflix’s Arrested Development which originally ended with season 4 in 2013, but after Netflix realised it was being continually re-watched by bingers, produced a fifth season, 5 years later.

Netflix was the early pioneer of digital streaming back in 2007 and succeeded largely due to this fact. But in the modern day, competitors like Prime Video and Disney+ are starting to gain a lot of attention, especially with their own originals like The Boys and The Mandalorian. Netflix has also, up until this year, been reporting a negative free cash flow of billions of dollars from its excessive spending on original content. However it is important to note that this spending is an investment rather than a one-time purchase and so continually brings in additional revenue. On the other hand, the pandemic has seemed to help the service, earning record subscriber additions of 15.8 million in the first quarter of 2020.

All companies require a sound business model and Netflix seems to have hit a goldmine with theirs. From their ocean of original content to ambitious film collaborations planned for the future, their outlook is looking bright. However, while the streaming giant is enjoying success for now, the question still remains to be answered: “Will Netflix survive in the world which it created?”