Streaming kills the DVD store

The world has changed a little since 1998. Back then, Reed Hastings and Marc Randolph spotted the potential to set up a company that would rent out the new-fangled DVD by post. The aim was to disrupt the old order, which involved going to your local video store, renting a VHS tape and then taking it back after watching it.

It is remarkable that, just 20 years ago, this antediluvian process was the norm, supporting an enormous infrastructure of bricks-and-mortar stores and employees that have subsequently gone the way of the dodo.

Now the happy consumer can remain recumbent in his or her recliner and, for a small monthly subscription, summon up a bewildering range of content with the remote control in one hand and a glass of something refreshing in the other. The effect, in terms of obesity and overarching idleness, remains to be assessed, but there’s no doubt Netflix is a cracking good product, as 125m global subscribers as of April will attest.

The company’s share price has rocketed as its land grab has gathered momentum, giving it a market cap of about $174bn — a level that is giving some commentators goose bumps as they look nervously at Netflix’s growing debt and streaming content obligations, as well as the ambitious numbers it is spending on generating original content.

This clearly puts the company in a position in which there is little room for error, and it will have to execute its strategy flawlessly to justify these lofty valuations. Growth in global subscribers will be the key, but it’s put in a remarkable performance so far.

The Netflix share price has rocketed as its land grab has gathered momentum