Business & Tech

Netflix' Success Continues to Benefit Los Gatos

Subscription service that streams movies and TV shows over the Internet is town's biggest sales tax contributor.

Netflix, which launched at the foot of the Vasona Dam on University Avenue in 1997, is rapidly growing up.

Subscriptions to the company, which streams on-demand video over the Internet and mails DVDs, have shot up exponentially from .29 million in 2000 to 23.6 million in 2011. The local tech giant will hit the international market in the second half of this year, and invest $50 million more this year to secure streaming rights.

That’s why it comes as little surprise that Netflix generates 33 percent of the sales tax for Los Gatos, or about $8.3 million a year, according to Los Gatos Mayor Joe Pirzynski.

“Companies such as Netflix contribute to the health of the community,” said Pirzynski, who joined the Los Gatos Town Council right when Netflix was launching  14 years ago. “We’re pleased to have a homegrown company like them here.”

Now at 100 Winchester Boulevard, the company’s main office is a sprawling Adobe-colored mansion, with a series of wide, arched entrances. “It’s a gorgeous building, and a gateway to the community,” said Pirzynski, referring to its location right off Highway 85.

In light of its planned growth, the Los Gatos headquarters are currently advertising 108 jobs. The bulk are in engineering, marketing and advertising, and product development and management, according to Steve Swasey, vice president of corporate communications at Netflix.

On the Jobs section of its website, the company emphasizes how it's seeking creative-minded team players, stressing that it will not tolerate “brilliant jerks” as other places do. “For us, the cost of teamwork is too high,” reads a promotional slide.

“We look for high-energy, high-intellect people who will be in charge of their own destiny,” said Swasey. The company cuts human resources costs of leadership training, he added, instead looking for those who will take initiative on the job from day one.

The rise of Netflix over the past four years has mirrored the decline of Los Gatos’ auto industry, according to Pirzynki, so that they never experienced a deficit the way neighboring towns did. Netflix profits shot up during the same time three Los Gatos auto dealerships closed their doors.

Yet unlike other technology giants such as Google, the company does not publicly donate to schools or local organizations. “They’re very private in their demonstration,” said Pirzynski. Swasey did not offer further comment on any local activities.

Profits at Netflix increased from negative $58 million in 2000 to $161 million in 2010. For its first quarter of 2011, net income was $60.2 million with a revenue of $718.5 million. The company even treaded through recession-heavy terrain: between 2009 and 2011, the number of subscribers doubled.

Netflix ended the March quarter of this year with an additional 3.59 million subscribers, placing it ahead of Comcast’s 22.8 million, but behind HBO’s 28.6 billion. Yet despite its rapid growth, stocks have slightly dropped recently, which the company attributes to investors’ dismal Q2 predictions that people would spend less time in front of their TVs and computers.

Why has Netflix been so successful? It constantly innovates itself through features such as Watch Instantly, making it emblematic of Los Gatos itself, said Los Gatos Town Manager Greg Larson.

“When you have a powershed like Netflix in the community, it tells the rest of the world that we value entrepreneurship,” said Larson, pointing out the hundreds of start-ups that continue to stake a home in the community.

Pirzynski has been subscribing to the service since its beginnings, when it offered a traditional pay-per-rental model of charging $4 a DVD, plus $2 in shipping. For him, though, some aspects of the company do not change.

“We keep getting those red envelopes,” said Pirzynski. “It’s a signal that we continue to help the organization thrive.”




Get more local news delivered straight to your inbox. Sign up for free Patch newsletters and alerts.

We’ve removed the ability to reply as we work to make improvements. Learn more here