Today, Blockbuster has gone bust and Netflix is worth billions. Photo / 123RF
Today, Blockbuster has gone bust and Netflix is worth billions. Photo / 123RF
It's hard to believe today, but in 2000, video stores were still king — and Netflix was a struggling little start-up on the brink of collapse.
In fact, it was haemorrhaging money, which is why founders Reed Hastings and Marc Randolph and CFO Barry McCarthy organised a desperate last-ditch meeting with Blockbuster CEO John Antioco that year.
The men were hoping to sell Netflix to Blockbuster for US$50 million ($79.9m) — but when they made their pitch, they were just about laughed out of the room.
But it was a decision the video rental chain would soon regret.
By 2010, Blockbuster had filed for bankruptcy protection due to rising debt and growing competition — from one other than Netflix itself, along with other video on-demand services.
And today, it's almost extinct — while Netflix is worth billions.
In his new book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea, Marc Randolph describes that disastrous meeting — and how Netflix went on to "kick their ass".
An excerpt of Randolph's book was published in Vanity Fairthis week, with the publication describing the Blockbuster-Netflix meet up as "crazy" and "doomed".
Randolph revealed more details of the conference in excruciating detail.
"Through Reed's pitch and Barry's wind-up, I had been watching Antioco. I had seen him use all the tricks that I'd also learned over the years: lean in, make eye contact, nod slowly when the speaker turns in your direction. Frame questions in a way that makes it clear you're listening," he wrote.
"But now that Reed had named a number, I saw something new, something I didn't recognise, his earnest expression slightly unbalanced by a turning up at the corner of his mouth.
Netflix co-founder and CEO Reed Hastings. Photo / AP
"It was tiny, involuntary, and vanished almost immediately. But as soon as I saw it, I knew what was happening: John Antioco was struggling not to laugh.
"The meeting went downhill pretty quickly after that, and it was a long, quiet ride back to the airport."
At the time of the ill-fated meeting, Netflix was three years old, with the start-up launching in 1997 and mailing DVDs to customers.
But by 2000 it was failing, and was on track to lose A$73m ($78.9m) by the end of the year alone.
Meanwhile, Blockbuster was booming, with thousands of stores and employees and mind-blowing profits.
While the Netflix bosses tried to convince Antioco the internet was the way of the future, he dismissed it as something of a fad, allegedly telling the men: "The dotcom hysteria is completely overblown."
Blockbuster's reaction to the offer was a serious blow for Netflix — as Randolph wrote, "Goliath didn't want to buy us — he wanted to stomp us into the ground."
"As long a shot as Blockbuster had been, I had genuinely held out hope that it would save us," he wrote.
"Now it was clear that if we were going to get out of the crash alive, it was entirely on us. We would have to be ruthless in our focus on the future."
But on the subdued flight back home, Randolph raised an empty glass and toasted his colleagues.
"Blockbuster doesn't want us," he said. "So it's obvious what we have to do now. It looks like now we're going to have to kick their ass."
Two years later, Netflix went public with market capitalisation of $6.5 billion, and in 2007, it launched its movie streaming service that would make the company a household name.
Today, it is valued at $130b — while the only Blockbuster store left in the world is in Oregon in the US, where it has become a tourist attraction as a quaint relic of the past.
