How Did Netflix Grow: A Product Case Study

You open Netflix after a long day. Within seconds, you are watching something that feels just right, a show you didn’t even know you wanted, but can’t stop watching.

The picture quality is perfect. It loads instantly. And somehow, there’s always something new that pulls you in. That seamless experience didn’t happen by accident.

Behind the scenes, Netflix has reinvented its product again and again. And this isn’t just a story about streaming. It’s about:

• Making hard product decisions before they are urgent
• Building the technology that powers the experience
• Using data not just for insight, but for action
• And creating a team culture that moves fast, learns fast, and stays ahead

In this case study, we will break down how Netflix evolved its product through bold bets and constant experimentation.

Because great products don’t stand still. They keep earning their place. One user session at a time.

Let's dig in!

DVD to Streaming Strategic Pivot

In the early 2000s, Netflix was known for mailing DVDs to homes. Customers went online, picked movies, and got DVDs by post. Once finished, customers mailed the DVDs back.

It was convenient, cheaper than late fees at rental stores, and gave Netflix an edge. But this model had limits:

• It took days for the DVDs to arrive.
• Physical inventory was expensive to manage.
• Scaling globally would mean warehouses, not software.

By 2007, the internet had improved, and so had user expectations. People wanted instant access. So Netflix introduced streaming.

Instead of sending DVDs, users could now press play and watch shows instantly on their computers. That pivot changed everything:

• The product went from physical (DVDs) to digital (streaming).
• The value proposition became speed and instant satisfaction.
• The business model shifted to supporting unlimited streaming, instead of shipping costs per DVD.

But launching streaming wasn’t simple, either. Netflix had to:

• Develop technology capable of handling video delivery across various devices.
• Secure digital licenses from studios, which didn’t exist at scale yet.
• Educate users that they didn’t have to wait anymore.

Despite challenges, this shift gave Netflix a first-mover advantage.

By the time competitors started streaming, Netflix had years of experience, a growing library, and millions of loyal users.

The 2007 pivot redefined what Netflix was. It turned a DVD rental company into a digital entertainment platform. And this is how Netflix celebrated its 25th anniversary.

Building Proprietary Infrastructure

After Netflix shifted to streaming in 2007, internet speed was the biggest problem. Millions were watching movies and shows at the same time.

And if the internet signals were slow, the videos would buffer, look blurry, or stop playing altogether. That ruined the experience.

At first, Netflix relied on third-party content delivery networks (CDNs), companies that help websites and apps deliver videos or files faster.

But that wasn’t enough. So in 2012, Netflix decided to build its own CDN from scratch. They called it Open Connect.

Here’s what that means:

• Instead of sending videos from far-away data centers, Netflix placed special servers (called Open Connect Appliances) inside Internet Service Providers (ISPs) around the world.
• These servers stored Netflix’s most popular content, like hit shows and trending movies, closer to where users lived.
• When a user clicked “play,” the video was delivered directly from a nearby server instead of traveling across the entire internet.

If you want to learn how exactly Open Connect works, check out this video.

This change did three important things:

1. Improved streaming quality - Faster load times, fewer interruptions, better video resolution.
2. Reduced costs - By avoiding third-party CDNs and expensive long-distance data traffic.
3. Gave Netflix more control - They could fine-tune the delivery experience and optimize how their product performed at scale.

For product teams, Open Connect is a lesson in owning the core infrastructure behind your product.

Instead of depending on outside vendors, Netflix invested in what mattered most to their user experience: fast, reliable video delivery.

And that decision helped them scale from millions to hundreds of millions of users globally without breaking the internet.

Personalization and Experimentation

When you open Netflix, what you see is not random. It’s personalized for you carefully.

From the rows of categories to the cover images, almost everything is chosen based on what Netflix thinks you will want to watch next.

That is made possible by data-driven personalization. Netflix tracks what you watch, when you watch, how long you watch, and what you skip.

It uses this behavior data to understand your taste, like whether you prefer thrillers over comedies or short episodes over long films.

Based on that, Netflix suggests shows and movies it thinks you will enjoy.

For example:

But personalization doesn’t stop there. Netflix also runs experiments to see what works. For example:

• You might see one cover image for a show, while someone else sees a different one, and Netflix tracks which image gets more clicks.
• The same title might appear under different categories for different users, like “Binge-worthy Sci-Fi” for one person and “Critically Acclaimed Drama” for another.
• Netflix constantly A/B tests everything, from button placements to font styles, across millions of users.

All these might seem small, but they matter the most for Netflix because:

• Personalization keeps users watching, which reduces churn.
• Experimentation helps Netflix make product decisions based on real user behavior, not just guesses.
• Together, they create a dynamic product that learns and improves on its own.

The more the platform learns, the better it gets at keeping users engaged. And Netflix proved that.

Original Content and Global Localization

In the early days of streaming, Netflix mostly offered shows and movies made by other studios. But that came with two challenging risks:

1. Licenses could expire, and popular titles could disappear.
2. Studios could launch their streaming services, becoming Netflix’s competitors.

So in 2013, Netflix took a huge product decision: creating its own content.

Their first major original show was House of Cards. It wasn’t just a hit but showed that Netflix could compete with Hollywood.

Soon after came other successful originals like Stranger Things, The Crown, and Narcos. Owning content changed the product in three ways:

• It gave Netflix control over what stayed on the platform.
• It made the service stand out because these shows were only available on Netflix.
• It allowed data to drive content decisions, like what genres were most in demand or which actors attracted more viewers.

But Netflix didn’t stop there. To grow globally, they had to go local. Netflix began investing in original content in different languages, made by creators from those regions.

That strategy helped them enter and win in global markets.

Some successful examples include Squid Game from South Korea, Money Heist from Spain, and Delhi Crime from India.

These shows weren’t just successful in their home countries. They became global sensations, watched and loved by audiences everywhere.

Here’s what made this localization work:

• Netflix partnered with local filmmakers who understood the culture.
• The platform offered subtitles and dubbing in many languages.
• The same personalization engine promoted local shows to global audiences.

Netflix just thought global but built local. It created original experiences that resonated deeply in each market, then used its platform to scale them worldwide.

Innovations Beyond Streaming

After becoming the leader in on-demand streaming, Netflix didn’t stop there. They explored ways to create a more engaging viewing experience.

In 2018, Netflix released Bandersnatch, an interactive film where viewers could choose what the main character does.

Each choice led to a different outcome, like a video game inside a movie. That was something completely new:

• It turned passive watching into active storytelling.
• It created multiple endings, giving people a reason to rewatch.
• It pushed the boundaries of what a streaming platform could be.

Bandersnatch wasn’t just an experiment. It showed that Netflix could rethink how we tell stories, using technology to make them more immersive.

Then came another leap: live events. Instead of only offering on-demand shows, Netflix began testing real-time experiences, like:

• Live stand-up comedy specials
• Reality show reunions streamed live
• Upcoming live sports events, such as boxing matches and NFL games

That move served two goals:

1. Drive urgency. With live content, people show up at a specific time, building hype and community.
2. Reach new audiences. Sports and live shows attract users who might not binge-watch series.

Netflix didn’t try to become a complete sports network. Instead, it picked selective, high-interest events to expand its offering without changing its core identity.

These innovations are a reminder that even mature products can evolve.

And by testing new formats like interactive storytelling and live content, Netflix expanded without losing focus on user experience.

Culture of Chaos, Experimentation, and Agility

Behind Netflix’s product success is something less visible but just as important: It’s company culture.

Netflix is known for its principle of “freedom and responsibility.”

That means teams are trusted to make decisions on their own without layers of approval. There’s no need to wait weeks for sign-off.

If an engineer, designer, or PM believes in testing something, they can move fast and try it. This freedom fuels experimentation.

At Netflix, they test almost everything - new homepage layouts, recommendation logic, playback features, and even content thumbnails.

Instead of debating what might work, teams run real-world A/B tests and let the data decide. If an idea works, it scales.

If it doesn’t, it’s shut down quickly with no blame. Netflix calls this “informed risk-taking.”

They expect some ideas to fail, but believe the wins will be worth it.

And because teams work independently, many ideas can be tested at the same time, across different parts of the product.

That creates a culture that might look chaotic from the outside, but it’s designed carefully to be agile and fast-moving.

Netflix shows that a great product isn’t just about better features.

It’s also about building a team culture where people can take action quickly, learn from results, and keep improving the product every single day.

Lessons for Product Managers

1. Your Product Is Never Finished

Netflix didn’t stop at one successful model.

Many product teams treat a launch as the finish line. But real product success comes from constant reinvention. User behavior changes.

Technology evolves. What worked last year may not work tomorrow.

So, treat your product like a living system. Keep improving it. Don’t wait for the market to force you. Pivot before you are pushed.

2. Build the Core Yourself When It Matters

Instead of relying on third-party CDNs, Netflix built its own. That gave them more control over speed, reliability, and cost.

When your core experience relies on others, your product becomes fragile.

Netflix chose to invest in infrastructure because streaming performance was key to user satisfaction. So, ask: What is the one thing our product can’t afford to get wrong?

If it's central to the experience, build it in-house even if it’s hard.

3. Let Data Drive, But Keep Experimenting

Netflix uses massive amounts of data to personalize every user’s experience.

But they don’t stop at analysis. They run A/B tests at scale, constantly experimenting with everything. Data gives direction, but testing tells the truth.

Netflix’s product teams validate, not just assume. And they learn fast by creating a culture where experiments are easy to run and safe to fail.

Therefore, use data to inform your roadmap, but don’t get stuck in the analysis phase. Test quickly. Learn fast. Kill what doesn’t work and double down on what does.

Final Thoughts

Netflix didn’t win because it had one great idea. It succeeded because it kept changing its product before the world changed around it.

It went from mailing DVDs…
to building a global streaming platform…
to creating award-winning content…
to shaping how people discover, watch, and even interact with stories.

And it did all of this by:

• Owning its infrastructure
• Using data to understand its users inside out
• Moving fast, testing constantly, and staying flexible
• Thinking global, while acting local

But here’s the real takeaway. Netflix didn’t just build a product. It rebuilt the product again and again, without waiting for permission or fearing failure.

So the question for us, as product managers, is simple... but challenging:

Are we shaping our products the way the world is moving? Or are we hoping the world stays still long enough for us to catch up?