Reed Hastings: ¡Padre de Netflix!

Josh Jacobson

The Genesis of Netflix

1997: Reed Hastings forced to pay a $40 late fee for a VHS of Apollo 13Hastings decided that there could be a market for DVD rentals by mail with no late feesHastings founded Netflix in 1997, providing a new alternative to movie rental stores

The Subscription Model

Netflix started out with a pay-per-rental business model, similar to that of current movie rental storesNetflix had only limited success at first with this business modelWhen Hastings decided to make the risky move to a subscription-based business model Netflix's popularity exploded1999: Netflix launched an internet-based subscription service, signing up 239,000 subscribers in the first year

Reasons for Hastings' success

Netflix's subscription model offers customers unlimited DVD rentals for a relatively low monthly rateSince the vast majority of Netflix subscribers don't watch a lot of movies, Netflix can afford to offer customers unlimited rentals for the same price as 4-5 rentals from Hollywood Video or BlockbusterAs a result, even though Netflix's average cost per subscriber is less than 1/4 of the subscription price, Netflix is technically offering customers a service worth far more than the subscription price

Netflix Instant Streaming

When Hastings formed Netflix in 1997, he predicted that someday movies would be delivered through the Internet rather than by mailThere was a reason why Hastings named the company "Netflix," not something like "DVD's by Mail" In 2005, Netflix launched Instant Streaming

Offers customers unlimited instant streaming at no additional chargeLibrary of over 90,000 titles, a selection with which cable Pay-Per-View can't compete With Xbox and Blu-Ray players, Netflix offers instant streaming (in HD!) directly to your TV

Netflix Instant Streaming, cont.

Netflix Instant Streaming also offers past seasons of many popular TV showsIn the future, Netflix could conceivably become an alternative to a cable subscription by offering current TV shows on demand

Impact on Society

Hastings has effectively abolished the idea of "late fees" in movie rentalsNetflix instant streaming represents a major step into the future of content delivery, both for movies and for TVNetflix is beginning to provide some competition for cable companies, whose prices have gotten out of control

Hastings' Entrepreneurial Genius

Every step of the way, Hastings has planned for the future, ensuring that Netflix would not be buried in the dust of technological innovation

Even in 1997, Hastings knew to name the company "Netflix," not "DVD's by Mail"Netflix has consistently stayed one step ahead of the competition, especially since the launch of Netflix Streaming in 2005

Hastings' success should be a model for aspiring entrepreneurs

Bibliography

Abkowitz, Alyssa. "How Netflix Got Started." Fortune 28     Jan. 2009. Print.

Hastings, Reed. "How I Did It: Reed Hastings, Netflix." Inc.com. 1 Dec.     2005. Web. 10 Feb. 2010. <http://www.inc.com/magazine    /20051201/qa-hastings.html>.

Maney, Keven. "Netflix Plans Blockbuster Future of Serving Movie    Watchers." USA Today 16 June 2004. Print.

Bibliography, cont.

Riley, Jason. "Movie Man." The Wall Street Journal [New    York, NY] 9 Feb. 2008, Opinion sec.: A9. Print. Roth, Daniel. "Netflix Inside." Wired 1 Oct. 2009. Print.