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Movies by Mail: How Netflix Netted Billions

Article Overview: Netflix is one of the most closely watched home entertainment companies around. Why? The reason lies not only in its current success, but in Hastings’ intent to continue to roll out many of the latest technologies, including Blu-ray and video-streaming into the company’s services. But how did this once-math teacher in rural Africa create a billion-dollar business that has become a household name?

Movies by Mail: How Netflix Netted Billions

Netflix is one of the most closely watched home entertainment companies around. Why? The reason lies not only in its current success, but in Hastings' intent to continue to roll out many of the latest technologies, including Blu-ray and video-streaming into the company's services. But how did this once-math teacher in rural Africa create a billion-dollar business that has become a household name?

Risk: When Hastings decided to switch revenue models and focus on a subscription service, he was not sure if customers would be as enthused as he was. It was a risk, a major risk, but Hastings knew that with great risk came great reward. "Guessing right is a skill developed over time," he says. "Not all smart risks work out, but many of them do." He opted for a radical new idea in the movie rental world, and the idea paid off.

Flexibility: "We tried not to get drunk on the future, but actually to predict it accurately," Hastings once said. In looking ahead and predicting the future, Hastings knew that he had to keep his company flexible enough to respond to changing trends.

Fear: Hastings has learned the hard way that a certain amount of fear does a company good. In his early years, he admits to making several mistakes by underestimating the competition, including going public too early. "I found I was definitely underwater and over my head," he says. "I was doing white water kayaking at the time, and in kayaking if you stare and focus on the problem you are much more likely to hit danger. I focused on the safe water and what I wanted to happen. I didn't listen to the skeptics."

Perspective: "Experts and analysts have written the obit on Netflix so many times I've stopped ordering flowers for the funeral," says Hastings. Despite the ups and downs that have come his way, Hastings has been able to weather the storm by adopting a long-term perspective, and taking actions that he knew would bring results in the years to come.

Employees: "Avoid chaos as you grow with ever more high performance people, not with rules." Hastings was a firm believer in surrounding himself with the best, and in turn rewarding them with the freedom they needed to perform to the top of their abilities. By weeding out the worst and rewarding the best, Hastings and his team of superstar employees took Netflix to the top.

Hastings once said, "When there's an ache, you want to be like aspirin, not vitamins. Aspirin solves a very particular problem someone has, whereas vitamins are a general ‘nice to have' market. [The Netflix idea] was certainly aspirin."

Having locked onto his aspirin idea, Hastings was ready to ride it to the top. In April 2009, Netflix announced it had mailed its two billionth DVD. With an American Customer Satisfaction Index score of 86, nine points above the industry average, the company shows no signs of slowing down.

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Article Tags: chaos, dollar business, entertainment companies, enthused, hastings, home entertainment, household name, kayaking, mail, math teacher, obit, ordering flowers, predicting the future, revenue models, skeptics, subscription service, term perspective, ups, ups and downs, white water



Related Forum Posts
Re: Do you think Blockbuster will survive? - I don't know if they will survive or not but I do know that I don't ever go there anymore. I also don't use Netflix. I only use the Redbox movie rental stations these days.
Re: Would you pay $35 for a movie ticket? - I wouldn't pay $35 for a movie ticket either. You'd be better off paying the normal price and then buying the DVD when it's eventually released with that kind of money. In fact, I find the current prices of $12-20/ticket to be too much already. Movies should be $5 for non-prime time hours and $8-10 at most for prime time viewings.
Re: Do you think Blockbuster will survive? - Personally, I don't feel that renting movies online has the same "movie rental experience" as going to a bricks-and-mortar store like Blockbuster. It'll be a shame if/when Blockbuster goes out of business because of Netflix and the rise in DVD piracy.
Re: What do think you about these statisitcs? - I think those stats are very concerning. Billions of dollars in wasted man hours. You can bet corporate America and frankly international corps are all working on solving this problem. Wasted productivity is no different than wasted/stolen product at the retail level. A few percentage points one direction or another can mean the difference between profit and loss for many companies. If I were the CEO of a large corp, I'd have a team at work blocking Facebook and other social sites from all company computers, as well as unauthorized email accounts etc. Cheers, Zac
Re: Would you pay $35 for a movie ticket? - No way. We went to a similar theater here in the Chicago suburbs and one in Florida while vacationing. We found that people still talk during the movie and the noise of eating food, etc is just as annoying at $35 as it is at $9.00. We put in a video room complete with reclining chairs, high quality sound, HD DVD player and very large HD TV and that works great. Netflix is our friend, nobody talking and we can pause the movie for bathroom and snack breaks.


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