NETFLIXED

The absorbing, fast-paced and bittersweet drama of Netflix’s rise, from its early days as a startup trying to invent a new kind of business, through its decade-long struggle with Blockbuster to own the online rental market – a battle that ultimately destroyed Blockbuster’s entire business.

In 1997, Silicon Valley entrepreneur Marc Randolph decided to start a DVD e-tailer modeled on Amazon.com and persuaded Reed Hastings, his boss and the founder of Pure Atria, to invest $2 million in the venture. NetFlix would sell and rent DVDs to attract the maximum revenue possible from the tiny niche of DVD households. They were surprised and elated when launch day traffic took down their server and resulted in 150 sales. Fourteen years later, Netflix has over 20 million subscribers and annual revenues of over $2 billion. Despite recent stumbles, the company has succeeded again and again at anticipating the next turn in the consumer video market, ushering in such innovations as DVD rental by mail, a patented online queue of upcoming rentals, “Watch Instantly” streaming, and the Netflix Prize, a competition to develop an algorithm that would improve Netflix’s recommendations feature by ten percent. Reed Hastings, the company’s CEO is still heralded as a visionary – he was named Business Person of the year in 2010 by Fortune Magazine – even as he is criticized for recent gaffes in rolling out new pricing structures. Recently, Netflix became the target of disgruntled customers, competitors like Hulu and Amazon attempting to reclaim market share, and cable companies and telecoms engaging in a battle over nothing less than the future of the free flow of information over the Internet. But before it was the market giant, it engaged in a David versus Goliath battle of its own with video behemoth Blockbuster – and won. Gina Keating recounts the absorbing, fast-paced and bittersweet drama Netflix’s rise, from its early days as a startup trying to invent a new kind of business, through its decade-long struggle with Blockbuster to own the online rental market – a battle that ultimately destroyed Blockbuster’s entire business. With video stores quickly becoming a relic of the past, Keating also looks ahead to the future of home entertainment. The irresistible Netflix model has become “a threat to traditional business models for its fast acquisition of online customers who could choose to supplant their cable subscriptions for online video,” according to the Washington Post. As Hastings reshaped the bricks-and-mortar movie rental industry, he is on his way to reimagining online entertainment – and it will look just like Netflix. Gina Keating is a journalist who covered U.S. media companies, law and government as a staff writer for Reuters and United Press International for more than a decade. Her stories have been reprinted in newspapers around the world and her freelance work has appeared in Variety, Texas Monthly, Food and Wine, Southern Living, and Forbes magazines. CNBC’s Jim Cramer singled out her coverage of the Walt Disney Company as “masterful” and “pitch perfect”, and the Greater Los Angeles Press Club and the California Teachers Associated honored her with awards for investigative reporting.