A new documentary just dropped “Netflix vs the World”. The documentary shows the origins as well as hardships Netflix faced as a startup. The story goes at the end of the 90s and the start of 2000. A startup was launched to capture the video rental market. At that time all video rental market was dominated by Blockbuster Video.
Reed Hastings invested $2.5 million into a startup called “Netflix”. Their core model was to offer subscription based on No late fees and a huge library. The problem was VHS was too expensive and delicate to ship. However, during 1997 DVD was introduced to the US markets.
Hasting tested the concept of sending DVDs through US postal service. When the DVD arrived intact at Reed Hasting Santa Cruz home. At this moment Hasting invested his full attention into Netflix by launching an online DVD rental store. He also made sure to imprint a barcode as well as to cite DVD inside in order to allow postal services to handle them with care.
In early 2000 Netflix introduced the subscription model by dropping the single-rental model. Netflix was prominent was waiving late fees, shipping, and handling fees. However, nothing is what it looked like. During the 2000s as business was thriving Netflix was losing a lot of money. They were soon be acquired by their rival Blockbuster for $50 million.
Netflix suggested a merger instead of an acquisition. They suggested to Blockbuster that Netflix will be renamed as Blockbuster.com and would handle on the online store whereas Blockbuster will take care of the DVD in-store. The offer was declined.
Things were looking bleak for Mr. Hasting, However, things changed rapidly as DVD players became affordable which helped increase subscription for Netflix. Netflix saw a huge surge in demand as it was easy to subscribe to 3 DVDs instead of 1 as per Blockbuster`s model.
By 2007 Netflix a dominant force in DVD rental Sales decided to move away from its core business and ventured into VOD. Video on Demand or Streaming as it is known as an early concept it was introduced into everything. Phones, Websites, and even game consoles.
Unlike Blockbuster Netflix has a huge library of DVD titles. When it started to phase our of its original business model it decided to only stream only the 1 percent of their product as the servers could only handle that much amount.
As time passed by 2013 Netflix has more than 2 million US subscribers for DVD rental and 27 million for VOD service. Netflix’s hard work paid off. Its disruptive innovation of the Rental Video market was too much to handle for its rival Blockbuster who had more stores than Toysrus. Blockbuster closed businesses in 2014. By 2019 only 4 franchises remained open.
Netflix as of this day is considered to be a behemoth in terms of original content and on providing VOD services. The documentary reminds of certain steps involved in innovating a certain business model.
It requires persistence, sustainability, and patience. If Blockbuster bought Netflix than we wouldn`t have what we have right now. I would recommend everyone to watch their struggle.
Netflix’s success can also be seen through Netscape Navigator an early browser that tried to broker the dominant Apple and Internet Explorer market but lost its way. Its Product manager of Netscape who worked as its business development officer was the key to making Netflix a success.