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.

Want More?

New Graphic
Subscriber Counter