0:00 In September 2000, Netflix offered to sell itself to Blockbuster for fifty million dollars.0:06 And Blockbuster’s CEO, John Antioco, reportedly struggled not to laugh them out of the room.0:12 Right.0:12 And last week we talked about the accidental origins of Google, but this Netflix story feels like the ultimate "what if." The story everyone tells is that Blockbuster’s arrogance created a giant.0:25 It did.0:26 But, you know, that's not the whole story.0:28 The official version smooths over the panic and the improvisation that was happening inside Netflix at the time.0:36 The press release version credits Reed Hastings and a forty-dollar late fee for a VHS tape.0:42 Yeah, that’s the legend.0:44 He gets mad about the fee, and has a lightbulb moment for DVDs by mail.0:48 A great story.0:49 But the co-founder, and the company's first CEO, was a guy named Marc Randolph.0:55 And his telling of the story is… messier.0:57 More real.0:58 He and Hastings founded the company back in August 1997, and it wasn't a clean breakthrough.1:04 It was all trial and error.1:06 So it wasn't just this one big idea from Hastings?1:09 Not at all.1:10 Randolph was the one on the ground, beta testing, listening to customers.1:15 Their first model, for instance, wasn't subscriptions.1:18 It was a pay-per-rental model, just like Blockbuster, but with mail.1:23 It wasn't until September 1999 that they pivoted to the monthly subscription we all know.1:29 That was a huge, risky bet.1:31 Okay, so that brings us back to that meeting in 2000.1:34 They'd been doing subscriptions for about a year.1:38 Why offer to sell for just fifty million dollars if things were finally working?1:43 Because they were scared.1:45 The dot-com bubble had just burst.1:47 They were losing money.1:48 And they were terrified of competition, especially from Amazon.1:53 So that offer to Blockbuster?1:55 It wasn't a power move.1:56 It was a lifeline.1:57 So they weren't walking in there full of confidence.2:01 They were genuinely looking for an exit.2:03 Exactly.2:04 And according to Randolph, Hastings, who owned seventy percent of the company, was the one who was seriously considering it.2:12 He was the one who made the final call not to sell, but only on the flight home from the meeting.2:19 It was that close.2:20 Wow.2:20 So the story isn't "Blockbuster was dumb," it's "Netflix almost gave up." It's both.2:26 Blockbuster's CEO famously said, "The dot-com hysteria is completely overblown." He just could not see the future.2:33 But inside Netflix, they weren't sure they HAD a future.2:37 They were just trying to survive the next quarter.2:41 The whole thing was also complicated by the September eleventh attacks, which delayed their plans to go public.2:48 It was just one crisis after another.2:50 So Marc Randolph gets kind of written out of the hero narrative.2:55 It becomes the Reed Hastings story.2:57 It often does.2:58 The person who stays as CEO usually gets the credit.3:01 But Randolph's accounts, in interviews and his book, they paint this picture of a really improvised, contested startup story.3:10 It wasn't one visionary.3:11 It was two guys in a room, arguing, testing things, and making risky calls because they had no other choice.3:19 I mean, it’s a much better story for a press release to say it was all part of a grand plan.3:25 Of course.3:25 "We had a brilliant vision from day one" sounds a lot better than "We almost sold the company for fifty million dollars but the other guy laughed at us, so we had to figure something else out." Right.3:39 So the subscription model that changed EVERYTHING was less of a genius move and more of a… last resort?3:46 It was a pivot born from necessity.3:48 They saw the per-rental model wasn't sustainable.3:51 They listened to what their early customers were doing, and they took a leap.3:56 And that leap, combined with Blockbuster's incredible failure of imagination, is what created the Netflix we know today.4:04 Not a single forty-dollar late fee.4:07 That's just the marketing.4:09 The real story is always about the struggle.
