You have likely heard that Netflix got its start because of a Blockbuster late fee. Well it turns out that is an urban myth.
Recently the cofounder of Netflix, Marc Randolph, sat down and explained how Netflix really got started and the true story is even more interesting.
The story goes back to when Randolph and Reed Hastings ended up being fired from a software company after it was acquired by a larger company. It turned out after the merger his job was redundant and he was left with what he called a “in that wonderful Silicon Valley, golden handcuffs way,” Randolph said.
The company that fired him first asked him to stay for 6 months during the transition in case the company had questions. Both Randolph and Reed Hastings didn’t have any official duties, so they just used the company’s time to start his next company.
“We’d look at car trends, new technologies, new business models. I’d take all these ideas and bring them into the office, and I’d research them all day. At the end of the day, I would get back in the car. We’d drive home, and I would debrief Reed about everything that I had learned,” Randolph said.
At first they rejected the idea of a movie rental by mail idea. VHS tapes at the time were still the number one way people rented movies; however, about six weeks later Hastings heard about a new technology called the DVD. This small, flat, lightweight disk that would easily fit into an envelope could change everything. To make sure that it could work Randolph put a CD in a stamped envelope and dropped it into a mailbox slot.
“The very next day when Reed came to pick me up, he didn’t even say anything. He just held up this envelope with an unbroken CD in it that had gotten to his house in less than 24 hours. That’s when we said this thing actually has some promise,” Randolph said.
“Ideas do not spring out of thin air at some mythical eureka moment. You have to look for ideas,” Randolph said.
“You’ve got to train yourself to see them when they appear. The idea for Netflix, for example, did not come from some moment of anguish over a late fee on a movie. We were looking for that idea. We looked for a long time, and it was buried in this big pile of bad ideas. We didn’t even find it in a video store. We actually had the idea for Netflix while we were carpooling,” he said.
If you want to learn more about Netflix, head over to Richmond.com to see the full interview with Randolph.
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