In Gina Keating's new book, Netflixed: The Epic Battle for America's Eyeballs,
the story of the rise of Netflix sounds almost as juicy as those in the
movies it rents out in those signature red envelopes: Two Silicon
Valley tech dreamers turn a DVD-by-mail service into a $3 billion
empire. Along the way they slay an entire industry and make a few
enemies. But only one of the pair survives to emerge a star.
about the real genesis of the Internet giant, Keating, a Pasadena-based
freelancer and former Reuters staff writer, set out to chronicle
Netflix's evolution. She started off by interviewing little-known
co-founder Marc Randolph.
Randolph helps Keating debunk the
company's most pervasive myth: that CEO Reed Hastings single-handedly
dreamt up the idea for Netflix after incurring a $40 Blockbuster late
charge for a copy of Apollo 13. It made for a nice
David-and-Goliath story. But the reality, according to the book, was
that Hastings and Randolph conceptualized their plan during their
morning commute to work in Santa Cruz in 1997, a time when most
homeowners didn't own a DVD player. After testing the durability of
sending compact discs through the mail, Netflix launched in 1998.
book covers the startup's shabby beginnings in dingy offices and its
early strategies to lure subscribers. Among them was Netflix's monster
inventory -- the biggest on the Web -- but paramount were its consumer
instinct and technological might. The marketing staff would cold-call
customers for feedback and even visit them at home to observe their
"Unlike a lot of web companies, they built the
website so they could really test things as they went in real time, and
make decisions about the business using data instead of hunches,"
Keating says in a phone conversation. "They were very flexible, and they
could back up all their decisions with numbers."
describes Randolph's and Hastings' partnership as "Lennon and
McCartney"; Randolph was the creative, consumer-oriented one, Hastings
the numbers guy.
"They were the perfect fusion for that type of
business," Keating says. "Marc was very customer-oriented and fascinated
with people. The customer experience was his baby. Hastings took all of
Randolph's ideas about what customers wanted, and he made them into
beautiful software that functions so perfectly."
comes off as a bit more ruthless, once even laying off a staffer in
front of her coworkers. Randolph left (or was squeezed out) in 2004. The
rest of the founding team, except Hastings, eventually would follow.
Netflix's biggest showdown was with then-rival Blockbuster, and Keating
amps up the corporate catfight with painstaking, page-turning details
about rival bosses, dueling websites and price wars. Blockbuster argued
until the bitter end that brick-and-mortar stores would stick around. We
all know how many of those are left. And Blockbuster's own online
rental arm would only further bleed the company dry: It filed for
bankruptcy in 2010.
Even as Netflix remains the dominant source of
home entertainment, it's not without its troubles, including last
year's price hike, which alienated users. Subscribers still looking to
rent DVDs now have to pay for a hybrid plan that also includes video
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streaming -- a growing demand that threatens to send compact discs down
the same path as VHS.
Netflix may have been founded on video, but the future portends a new business model.