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How Netflix became an online streaming giant

Just like any other startup, Netflix's journey hasn't been a bed of roses

Sonal Khetarpal        Last Updated: September 24, 2019  | 18:52 IST
How Netflix became an online streaming giant

Founded in 1997 before it became a streaming giant that it is today, Netflix was a DVD rental firm competing with the neighbourhood video rental stores. Now, the US-based firm has evolved into a $130 billion streaming and production company with a long list of award winning TV shows and movies that over 150 million subscribers enjoy globally.

Marc Randolph, the company's first CEO has written a frank memoir 'That Will Never work' of the untold story of how Netflix was started. Since Randolph had left Netflix in 2003, a year after its IPO, he has only chronicled Netflix's early years to help budding entrepreneurs with insights on how to start up and create a successful business model. "It's a guide for everyone aspiring to follow her dreams and take the next big leap."

The reason is simple. Randolph's focus is on mentoring founders to grow their fledgling firms. "I left Netflix because I realised that the finished product of Netflix wasn't my dream. My dream was building things. My dream was the process of making Netflix," he writes in the book.

Just like any other startup, Netflix's journey hasn't been a bed of roses. Right in the initial phase, they turned down Amazon's offer for a takeover for "low eight figures... probably something between $14 million and $16 million". With the launch of Amazon Prime, Amazon later became Netflix's competitor. Randolph writes, "It won't be long before Amazon expands into selling DVDs. And after Amazon, there will be Borders. Then Walmart. And then virtually every other store - online or brick-and-mortar - in America... once everyone is selling the exact same thing ... it will only be a matter of time before our margins shrink to nothing." They then decided to focus on DVD rental. After 12 years in 2001, they deconstructed themselves again; this time by dropping the rental business to focus on streaming. 

In hindsight, Randolph says, what helped was identifying the right problem. This marks his mentor/investor journey. He says that early in his entrepreneurial journey he realised that all ideas in their early stages are bad and entrepreneurs need a lot of twists and turns to turn it into a successful company. He says, "If a founder is going on and on about how clever their idea is, I don't want to hear that. But if they are going on and on about how interesting their problem is, it shows they understand the problem, and are trying to solve it." He explains if entrepreneurs are in love with solving a problem, they can objectively look at different solutions until it helps the consumers. "Those are the ones I decide to work with, either as a mentor or an investor."

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