It was 1997 and I was at my local Blockbuster returning my VHS movie rental, Apollo 13, when the guy told me that I had a $40 dollar late fee. I didn't want to pay it but I had no choice because I wouldn't be able to rent any other movies until I did and Blockbuster was the only rental store. I asked him to please let this one by since this was my first time but he only said "Sorry, store policy". So I paid for it and embarrassingly rushed out.
The entire ride home, I was annoyed and couldn't get that $40 late fee out of my head. I knew there had to be some other option, but there wasn't! So instead of putting up with their ridiculous fees, I created my own video rental store beating Blockbuster and creating Netflix, my billion-dollar industry. But that's not really how Netflix was started; at least, not how the idea came to us.
I was working at my software company, Pure Atria, with a close friend, Marc Randolph, where we would carpool to Silicon Valley together every day when one day we began bouncing ideas off each other. We were looking for our next career move and hungry for something game-changing that would revolutionize an industry and fit more with the 21st century. We knew about Amazon's rising popularity and we wanted to make an Amazon-like business that would be internet-based and toyed with dog food, shampoo, and then, renting movies. It was a crazy one but so were we and so was America's obsession for movies.
We sat on the idea and the more we spoke, the more we began getting discouraged almost abandoning it. But in 1997, my company went through a merger with a larger corporation and I sold Pure Atria for $750 million giving me the opportunity to finally try our idea. We began building our site and planning our business model to ship movies to people's homes until we realized we didn't have a cost-effective way to deliver them because, at the time, the only movies you could rent were on VHS which were big and heavy and people went to Blockbuster to pick them up. But then a friend told me about a new of watching movies; DVDs.
We weren't sure how strong or if a DVD would make it in one piece to the customer so we tested the idea ourselves by inserting a DVD movie into an envelope and mailing it to our homes. When we ripped opened the envelope and saw that it made it in one piece and still worked, we knew it had to be done. I invested $2.5 million of my own money into the start-up imagining it to be the next Amazon of movie rentals. In 1998, with everything in place, we launched the world's first online DVD rental store with just under 1,000 titles.
We were going with a single rental service, meaning, pay per movie at $4 each plus a $2 postage fee, unlimited due dates and of course, no late fees. It all seemed flawless but we had no idea if people would even use the online story because all households were still on slow dial-up internet and the majority didn't own DVD players. But, with a few early-adopters, and within a few years of advancing internet connection, we managed to scrape by.
In 1998, Jeff Bezos tried to buy us out and even though we were tempted, we knew if he wanted our company, then we were on to something big. So, we turned him down. A year later, we regretted that decision when our business began falling because the dot-com bubble burst scaring investors from all things tech. We had no choice but to approach our rival, Blockbuster, to propose an offer to buy us out for $50 million. The CEO stared at us dead in the eyes and then laughed straight into our faces saying 'it will never work'. Both of us would remembered that meeting for the rest of our lives.
Building debt and unsure if we'd survive, I went back to our office prepared to tell our team of 30 that there might be no Netflix. When I saw their faces and knew how much they believed in this vision and the trust they put in me, I made the decision that I wasn't going to give up and I wasn't going to stop trying. I made the decision to get rid of our single rental service and moved to a subscription model for one low monthly price. That idea not only saved us but gave us the popularity we needed.
Throughout the early 2000's, we grew in ways we ever expected. Our user accounts hit 6.3 million subscribers at the end of 2006 with rivals like Amazon starting their own video services leaving us no time for rest. Instead, we pushed harder and introduced a streaming service where anyone could watch any movie as long as they had an internet connection. It was limited to under 1,000 movie selections and only worked with Internet Explorer. This was our next frontier and looking ahead, we knew DVDs would be a thing of the past.
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