- Unheard Roots
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- Unheard Roots of Netflix 🎥
Ever heard the term “Netflix and Chill”?
Yea, it doesn’t always mean just watching Netflix 😉
But I want to focus on the first part of the phrase: “Netflix”.
The 100,000,000,000 billion dollar giant that has its very own verb in the English language.
But how did all of this madness start?
Well, I present to you the Unheard Roots of Netflix 🥂
Reed Hastings, co-founder of Netflix.
Day -1 of Netflix 🎯
Let’s take it back to even before day one of Netflix, when the Reed Hastings & Marc Randolph duo got together.
Reed Hastings comes from an engineering background, having worked at different tech startups and labs before deciding to start his very first tech company, Pure Software.
Marc Randolph on the other hand is a marketing guy, having spent most of his life before founding Netflix in direct marketing (junk mail, catalogs, magazine circulation, etc).
Pure Software, the Unix tools startup Reed founded, is the bridge that helped Marc meet Reed.
Quick Interruption…
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Getting Fired & Acquired ⚠️
In 1997 Pure Software was acquired for approximately $954 million, giving Reed enough money to not work for the rest of his life.
When an acquisition happens, it usually means former staff are mostly laid off (they still keep their stock options and get paid generously).
Since Marc Randolph also worked for Pure Software at the time, he was told he would be fired but they would pay to keep him around for 6 months in case they had questions.
Plus Marc would get to keep his stock options and all he had to do in return was show up to the office.
“Now Reed Hastings was in the same boat. He was also made redundant and he didn’t want to start another company. He wanted to go off and change the world of education as a philanthropist which he has been remarkably effective at but once you’re an entrepreneur, you’re always an entrepreneur.”
Coming up with ideas 💡
Reed Hastings still wanted to have his hand in a startup but as an investor rather than a full-time founder.
The deal was Marc Randolph would be the founder that built the startup full-time and Reed Hastings would fund & advise it.
“He [Reed Hastings] wanted to keep a hand in so he said let’s come up with an idea together and I’ll fund it. And you Marc can run it and off we will go but we needed that idea.”
The following six months were spent trying to come up with good ideas & doing research on whether or not the ideas could work.
“Reed and I lived in the same town and we had been in the habit of carpooling to work together everyday. So we just made our carpooling sessions into brainstorming sessions.”
Bad idea after bad idea 😕
“He would pick me up in the morning and we’d drive up and over the Santa Cruz mountains to the office in Sunnyvale and we would brainstorm ideas -dozens of ideas, hundreds of ideas.”
The Mountains of Santa Cruz
Marc was pitching lots of crazy ideas - anywhere from personalized shampoo to custom dog food.
“And I’d take these ideas and go in my office with my fast internet and my whiteboard and I’d do all the research and then I’d get back in the car every day and I’d fill Reed in on everything I had learned.”
Unfortunately, most of these ideas were pure 💩.
“And we did this day after day and most of these ideas were terrible. It would take very little research to realize the fatal flaw - the why this would not work.”
Finding the gem in a sea of crap 💎
Marc knew he wanted to do something with mail since he had spent the majority of his life up till that point in direct mail and next-day shipping.
“One of the ideas we had was video rental by mail. Big category, eight billion dollars and the entrenched player left certain customer experiences to be desired.”
There was one big problem - in 1997 video came in VHS cassettes that were too big and heavy for mailing.
They literally look like books lol
Cassettes would be a huge problem logistically so they abandoned the idea until two months later when Reed mentioned he had discovered this thing called the DVD.
DVDs were able to carry 5 Gigabytes of data on these tiny slim devices.
Which made the duos video rental by mail idea actually logistically possible.
Listen so far it’s just been “once upon a time”, I promise there is more strategy in the following parts.
But… I can’t give away all of the secrets in one issue so you’re gonna have to tune in next Wednesday to learn how Netflix went from idea to startup and beat Blockbuster.
Oh and there are still some good implicit lessons on ideation here - like finding a big, growing market or finding ways to make an established process faster, cheaper, and easier.
Read between the lines my friends :)
Cya later 👋
Just one more thing…
You might be wondering where the heck I’m getting this information and quotes from.
Here is a playlist I made with every single interview I could find of Reed Hastings & Marc Randolph
These videos are my only sources.