Blockbuster Should Have Killed Netflix. What Happened?

June 30, 2020

Rani Molla and Peter Kafka When Netflix launched in 1997, it was a tiny movies-by-mail operation, run out of a storefront in a Silicon Valley stripmall. It was going up against Blockbuster, a $6 billion behemoth that owned the movie rental business. Now Blockbuster is gone, and Netflix is a $20 billion business, one so dominant that giant companies like Disney and AT&T are remaking themselves to chase after it. Even if you donít know this story, you know this story: Scrappy digital upstart comes out of nowhere, topples the incumbent, and becomes unstoppable. Except ... this one almost didnít happen. Blockbuster, it turns out, ended up doing a very good job of fighting back against Netflix and might well have won, but it made some fundamental mistakes that ended up dooming its future. If youíre old enough to miss Blockbuster night ó the predecessor to Netflix and chill ó you can blame Netflix. But you also need to blame Blockbuster. Thatís the story we tell in the newest chapter of Land of the Giants: The Netflix Effect ó our new seven-part podcast about Netflix and the impact it has had on Hollywood and the world. This one is part history lesson, part nostalgia trip, and, in part, an acknowledgement that luck plays an enormous part in any companyís success. We donít want to spoil everything for you ó weíd very much like you to listen to the episode below, or on Apple Podcasts, Google Podcasts, Spotify, Stitcher, or wherever you like to listen to podcasts. But we can point out that Netflix itself thought it didnít have a chance of unseating Blockbuster. Thatís why Netflix co-founders Reed Hastings and Marc Randolph went to Blockbusterís headquarters in 2000 and offered to sell their three-year-old company to their rival for $50 million. Blockbuster ended up trying to beat Netflix instead of buying it. And today Netflix is worth about $200 billion. Itís good to be lucky.

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