Netflix was founded in 1997 in Scotts Valley, CA by Marc Randolph and Reed Hastings, who previously had worked together at Pure Software. Randolph was a co-founder of MicroWarehouse, a computer mail order company; and was later employed by Borland International as vice president of marketing. Hastings, who once worked as a math teacher, had founded Pure Software, which he had recently sold for $700 million. Hastings invested $2.5 million in startup cash for Netflix. The idea of Netflix came to Hastings when he was forced to pay $40 in overdue fines after returning Apollo 13 well past its due date.

The Netflix website was launched on August 29, 1997 with only 30 employees and 925 works available for rent through a traditional pay-per-rental model.

Netflix introduced the monthly subscription concept in September 1999, and then dropped the single-rental model in early 2000.

In 2000, Netflix was offered for acquisition to Blockbuster for $50 million, however Blockbuster declined the offer. Netflix hit the one million subscriber mark in February of 2003, by which time it had also opened five additional shipping centers. Netflix posted its first profit during fiscal year 2003, earning $6.5 million profit.

In 2005, 35,000 different film titles were available, and Netflix shipped 1 million DVDs out every day.

In 2007, Netflix saw the future of entertainment to be "on demand" content. As a result, they began offering streaming on demand videos for viewing from a PC or web-enabled device. Originally, Netflix did not charge extra for the service.

In March 2011, Netflix began acquiring original content for its popular subscription streaming service, beginning with the hour-long political drama House of Cards, which debuted on the streaming service in February 2013.

As of September 2013, for that year's third quarter report, Netflix reported its total of global streaming subscribers at 40.4 million (31.2 million in the U.S.)

Wow! All that because of $40 in late fees!