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.

Curious

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.

Keating's

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

viewing habits.

“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.”

Keating

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.”

Hastings also

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.

But

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

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.

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