That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea
By Marc Randolph
In a nutshell: The inside story of how Netflix grew from a quirky car ride conversation into a major communications company.
Who’s it for? General interest, a good read for business owners, managers, aspiring entrepreneurs.
Author quote: “The truth is that no business plan survives a collision with a real customer. So the trick is to take your idea and set it on a collision course with reality as soon as possible.”
Business ideas are easy to brainstorm. Improving the way people do things and seeing an idea to fruition is hard. More difficult is believing that your idea is worthy enough to risk starting a new company.
How a company makes it from conception to prominence is what Netflix co-founder Marc Randolph reveals in his book “That Will Never Work.”
His story began on a daily carpool with his friend and co-worker Reed Hastings. Their daily ritual included brainstorming new business concepts that popped into their heads. Things were getting a bit stressful for Randolph who lost his job when Hastings sold the tech company Randolph worked for.
Randolph, never short on ideas, numbered and tracked them in a notebook. His brainstorms included personalized shampoo, dog food and baseball bats. Some ideas were vetted, others were quickly shot down. One day Randolph floated a service that could mail movie videos direct to consumers without charging fees. The thought strikes a chord with Hastings who fears telling his wife about $40 in late fees he owed at a local video store. The conversation continued. Both agree that Randolph should form a company to pursue the concept and Hastings would initially fund it.
It should be made clear that this isn’t exactly a rags-to-riches story. The two Netflix co-founders worked in California’s Silicon Valley for several years, understanding the nuances of pitching a concept, garnering investment money and building a business to scale.
Netflix launched in 1997 and the company began to hire employees. At that time, there were few movie DVDs available. Popular movie videos were mostly available in a VHS format that was bulky to mail. More importantly, DVD players were still in their infancy and Netflix was gambling on a customer rental model that had yet to form.
As customers slowly adapted to the virtual video store concept, Netflix was selling more (but less profitable) videos than it was renting, at the same time wasting money on coupon deals with the major manufacturers that sold DVD players. It’s only after an experimental subscription model gained traction that the company showed promise.
This chicken before the egg puzzle makes up the compelling portion of “That Will Never Work.” Randolph is candid with recounting how the company struggled to keep afloat while it waited for consumer behavior to catch up with Netflix’s perceived potential. The world slowly adapted but at the eleventh hour, the California tech bubble burst and Randolph and Hastings began to fear that it was too late.
With Netflix close to insolvency, one of the book’s strangest twists is a long-anticipated meeting with the then-juggernaut Blockbuster Video. Randolph and Hastings pitch the idea of Blockbuster purchasing Netflix for $50 million. Blockbuster almost laughed the Netflix team out of the room. Months later the subscription rental model finally caught fire. The rest is history.
Told as an entertaining first-person narrative, Randolph’s behind-the-scenes anecdotes reveal his strengths and also his blind spots. As he looks back at the evolution of Netflix, he points to instances where the company almost collapsed, giving major credit to his staff and their determination to always rebound from adversity.
Oh, and that interesting title, “That Will Never Work”? It was Randolph’s wife’s response when he first told her about his Netflix brainstorm.
Chris Wendel is a Business Advisor with Northern Initiatives, a community development financial institution (CDFI) based in Marquette, Mich. Northern Initiatives provides money and know-how to businesses throughout Michigan. Wendel lives and works in Traverse City and can be reached at firstname.lastname@example.org.