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- Unheard Roots of Netflix (PT.2) š¬
Youāre back! (or maybe youāre a new sub, welcome!), welcome to part 2 of the Netflix story.
Iām here to understand the fabric of a 100 billion-dollar company called Netflix and take you on the journey with me.
But before you read this, make sure you read Part 1.
Get some contextā¦ š
Colliding with reality quickly & cheaply š
Marc Randolph loves using the term ācolliding ideas with realityā, itās one of his favorite concepts for ideation.
The premise is when you get an idea, you validate it as quickly & cheaply as humanly possible.
This was the exact method he used with Reed Hastings to understand if Netflix V1, DVD rental by mail, could work.
If you recall from the last issue, the duo discovered DVDs as an alternative to VHS cassettes that would make renting video via mail possible.
Old Netflix DVD with the famous red envelope
As soon as Reed & Marc realized their idea was possible, they turned the car around and drove back to Santa Cruz to do an experiment.
Quick Interruptionā¦
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The Experiment š§Ŗ
āWe just turned the car around and drove back down to town we lived to buy a DVD but of course there werenāt any, it was in test market. So we said well close enough we bought a music cd and we just mailed it to Reedās house and we found out in 24 hours whether the fundamental premise of our idea would work.ā
Andddddd it worked š
Before 24 hours, Reed received the envelope and the cd inside was completely undamaged.
For 50 cents and 20 minutes of work, the duo learned if the basic premise of their idea was possible.
The very first check šµ
After it became clear the idea was viable, Reed wrote a check for 1.9 million dollars to Marc to lease an office, hire some employees, and start building inventory.
Up till this point, you might be wondering, where is internet streaming? Wait just a bit more.
On exactly April 14th, 1998 Netflix V1 launched and was ready to get to business.
Long story short, they got close to 150~ orders on the very first day and spent all of their time shopping for hardware to keep their servers running (their servers crashed from too much traffic).
First version of the Netflix website
From then on, as with all startups, the team kept testing with different ideas including due dates, late fees, no due dates & late fees, subscriptions, one-time payments, buying vs renting, etc.
The long 8 years š»
From 1998 to 2007 Netflix was a DVD rental by mail service.
Reed & Marc knew streaming was the future but in 1998 it would cost more to stream 5 Gigabytes through the internet than to mail a DVD with 5 Gigabytes of video.
Youtube, in 2005, helped create a breakthrough in streaming that allowed Netflix to start streaming movies through the Internet.
But before streaming, we canāt skip the war with Blockbusterā¦
And cut š¬
This issue, like Part 1, has turned out to be too long.
So, weāre adding a 3rd part.
Tune in next Saturday folks :)
Just one more thingā¦
You might be wondering where the heck Iām 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.