That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea
That Will Never Work – If you are interested and learn about Netflix, you will probably hear through the story that, because you did not want to lose the deferred fee for the famous disc rental store Blockbuster at that time, Marc Randolph (the author) and his friend Reed bounced. created the idea of DVD rental via mail and home delivery. That is only part of the story, it shows the agility, opportunity and Creativity in the start-up ideas of the two founders, and it’s just a simple, neat story that Reed Hastings – master Netflix’s president and CEO up to now has always told the press and the media. Behind that story is also a process of discovery, commitment, doing, failure and continue to do that the insider himself tells in his 500-page memoir.
Netflix’s original startup team included Marc as president and chief executive officer. There are about 8 people in total. Website designers, intro content writers for movie titles, people in charge of ordering, packaging, working with post offices, people commenting on film forums big and small and all. they also add many other unnamed jobs including office cleaning, decoration, installation … ready to sleep in the office and work until the next morning. Modern storage technologies are not available at this time. Launch date, to meet the demand of renting discs for the first 100 orders, Netflix’s server has collapsed at least 3 times. But that is not all, after recovering the server, Marc realizes that the user’s need to buy off the DVD is much higher than the need to rent.
How do customers prefer renting discs over buying them outright? At this point, revenue from selling discs accounts for more than 90% of Netflix’s revenue. But one day when Amazon realizes this lucrative land, it will also invade the DVD business and drown a fledgling company like Netflix. They could have done so when Amazon had a few hundred employees at that point compared to Netflix’s team of less than 15. Partnering with Amazon, Marc decided to stop selling discs and focus 100% on rentals to avoid direct competition with Amazon. Netflix creates a direct link to Amazon for customers to access if they want to buy a DVD. Likewise, Amazon also creates a link to Netflix if the customer has a need to rent. However, this approach doesn’t really work, The number of customers Netflix brings to Amazon is many times more than they bring to Netflix. Again, how do customers find Netflix’s record rental service and return to renting them over and over?
Marc has come up with a very promising solution, offering a free rental service to DVD player owners. How do I know who owns a DVD player? The answer was the customers of major brands at that time Sony, Toshiba and Panasonic. Marc turned to the consumer electronics fair and connected with these brands. The deal that Marc made was that Netflix would offer 3 free rental to customers who buy DVD players of the three big players. Sony and Panasonic shook their heads, Toshiba agreed. Once again, Marc finds himself and Netflix a chance to keep going together.
But it was also the beginning like many other beginnings for many of Marc’s ideas. After 3 times of free rental, customers do not come back to rent for the 4th time. This approach once again costs a lot of money but is not really effective. At this point, Marc faced a very important decision, giving up the CEO position, and giving it to someone more suitable, Reed. Not because Marc was incompetent, but because after he was built, laid the foundation, Netflix came to the stage in need of a different, more suitable way of operating. Marc is still there as the chairman and in association with Reed continues to find the answer to the question “how do customers come back to rent discs many times instead of buying them off”.