Netflix Founded
Reed Hastings and Marc Randolph founded Netflix as a DVD-by-mail service
August 29, 1997
A Late Fee That Inspired a Revolution
Netflix was founded on August 29, 1997, by Reed Hastings and Marc Randolph in Scotts Valley, California. The company launched its DVD-by-mail service in April 1998, allowing customers to rent DVDs that were mailed to their homes and return them by post. There was no due date and no late fee, concepts that Hastings claimed were inspired by his frustration with a $40 late fee he received from Blockbuster for an overdue copy of Apollo 13. Whether or not that story is entirely accurate, it captured the company's founding idea: a better, more flexible way to rent movies. The subscription model, where customers paid a flat monthly fee for unlimited rentals, was introduced in 1999.
Taking On Blockbuster
Netflix survived the dot-com bust of 2000 and went public in 2002. That same year, Hastings famously offered to sell Netflix to Blockbuster for $50 million. Blockbuster declined, a decision widely cited as one of the worst in business history. As Netflix grew, Blockbuster and other video rental chains struggled to compete with its convenience and selection. Netflix's subscriber base expanded rapidly through the mid-2000s. By the time Blockbuster filed for bankruptcy in 2010, Netflix had over 20 million subscribers in the United States. The DVD service remained profitable for years and was quietly discontinued in September 2023, bringing the physical media era of the company to a close.
Building Toward Streaming
From its earliest days, Reed Hastings spoke about streaming as the future of the company. The infrastructure and bandwidth costs of the late 1990s made it impractical, but the company invested in developing the technology. When Netflix launched its streaming service in January 2007, it was initially available only to existing DVD subscribers at no extra cost. The streaming library was limited compared to the DVD catalog, but it grew rapidly. That launch would eventually reshape the entire entertainment industry. See how Netflix streaming changed entertainment.