Netflix

Netflix is the world’s largest subscription streaming service, with some 325 million paid memberships in more than 190 countries. It began in 1997 by renting DVDs through the post, in competition with the video chain Blockbuster — which, in 2000, had the chance to buy it.

The Offer Blockbuster Declined

In 2000 Netflix was a small, loss-making company that rented DVDs by post. Its founders travelled to Dallas to meet the leadership of Blockbuster, which then dominated American video rental with thousands of stores.

As Marc Randolph, one of the founders, has told it, Netflix proposed that Blockbuster buy the company and run it as its online arm, for about $50 million. Blockbuster was not interested.

It has become one of the best-known missed opportunities in business, and it is worth being fair to Blockbuster. In 2000 its stores made a great deal of money, the dot-com bubble was bursting, and Netflix had no clear route to profit. The mistake was not turning down a deal that looked bad. It was failing to see that what Netflix was building — a direct, subscription relationship with viewers — would matter more than shops.

A Disc in the Post

Netflix was founded on 29 August 1997 in Scotts Valley, California, by Marc Randolph and Reed Hastings, who had worked together at Hastings’s previous software company.

The bet was on a new format. DVDs were light and thin enough to post cheaply, which video cassettes were not. Before committing, the founders tested the idea by posting a disc to see whether it would survive the mail. It did.

Hastings later told a founding story about a large late fee for a copy of Apollo 13 that had embarrassed him into imagining a better model. Randolph has said the anecdote was invented to explain the subscription idea, and Blockbuster reportedly asked Hastings to stop telling it after failing to find the rental in its records. Founding stories are often written afterwards.

No Late Fees

The website opened on 14 April 1998, renting DVDs one at a time. In September 1999 Netflix introduced a monthly subscription, and by early 2000 it had dropped single rentals. Customers paid a flat fee, kept discs as long as they liked, and received the next film on their list when they sent one back.

“No late fees” was more than a slogan. Late fees were a substantial part of how video shops made money, and the part customers resented most. Netflix built its model on removing the thing people hated about the incumbent.

It still nearly failed. The dot-com crash dried up funding, and in 2001 the company laid off about a third of its staff. It survived, grew with the spread of DVD players, and listed on the stock market in May 2002.

Replacing the Envelope

By the mid-2000s the DVD business was growing strongly, and Hastings was already planning its replacement. The company’s name had never been about discs.

On 16 January 2007 Netflix launched streaming, letting subscribers watch films on their computers. A month later it delivered its billionth DVD. For several years it ran both businesses side by side, with a streaming library licensed from Hollywood studios that did not yet see it as a threat.

Building the thing that will destroy your own profitable business is widely recommended and rarely done. Netflix did it while the envelope business was near its peak.

The Qwikster Mistake

In 2011 the plan went wrong in public. In July Netflix announced that its combined DVD-and-streaming plan would be split into two subscriptions, which amounted to a sharp price rise for many customers. In September Hastings announced that the DVD business would become a separate service with its own name and website: Qwikster.

Customers revolted. About 800,000 cancelled, and the share price fell steeply. Within weeks Netflix abandoned Qwikster, and Hastings apologised.

The strategy underneath — that the future was streaming and DVDs should not hold it back — was right. The execution treated loyal customers as an obstacle. Netflix learned to travel to the same destination more carefully.

House of Cards and the World

Licensed films and series could be withdrawn by the studios that owned them, and increasingly were, as those studios planned streaming services of their own. Netflix’s answer was to own its programmes.

It outbid American cable networks for the political drama House of Cards, ordering it straight to series without a pilot, and released the whole first season at once on 1 February 2013 as the first “Netflix Original”. It became the first streaming series to earn major Primetime Emmy nominations.

In January 2016, at the Consumer Electronics Show, Netflix switched on its service in 130 more countries at once, reaching almost everywhere except China, Syria, North Korea and a few other territories. It then began commissioning series in those markets — in Spain, Germany, India and South Korea — for audiences everywhere.

The culture that ran all this became famous in its own right. Hastings’s “Freedom and Responsibility” document, which offered high pay and few rules in return for high performance, and a generous severance for work that was merely adequate, was studied across Silicon Valley.

The First Loss, and the Crackdown

For a decade growth looked unstoppable. In April 2022 it stopped. Netflix reported that it had lost subscribers for the first time in more than ten years, and estimated that 100 million households were watching on someone else’s password. Its shares fell by about a third in a day.

The response reversed two long-held positions. Netflix, which had always refused advertising, launched a cheaper plan with adverts in November 2022. And in May 2023, in the United States and other markets, it began charging for accounts shared outside a household.

Both moves worked. Growth returned sharply: in January 2025 Netflix said it had passed 300 million members after adding a record 18.9 million in the last quarter of 2024, and by May 2026 its advertising plan reached 250 million monthly active viewers. In January 2023 Hastings stepped back from running the company to become executive chairman, leaving Ted Sarandos and Greg Peters as co-chief executives; the board is now chaired by Jay Hoag.

Live Sport, and a Studio It Did Not Buy

Netflix spent its first streaming decade avoiding live television. It has since embraced it: ten years of WWE’s Raw from January 2025, in a deal reported at $5 billion, American football on Christmas Day, and major boxing events.

In December 2025 it went further than ever before, winning the first round of bidding for Warner Bros., the studio behind a century of Hollywood films. The prize did not stay won. Paramount Skydance pursued the company with a rival offer, and on 26 February 2026 Warner Bros. Discovery agreed instead to be acquired by Paramount, in a deal valuing it at $111 billion.

The episode showed how far Netflix had travelled from renting DVDs, and where its limits lay. For 2025 it reported revenue of $45.2 billion and net income of $11.0 billion.

What Could Still Go Wrong

Three things are worth stating.

Price and patience. Netflix has raised prices repeatedly and no longer reports its subscriber numbers every quarter. Each increase tests how much a household will pay for one service among several.

Attention. Its real competitor is not another streamer but everything else competing for viewers’ time, above all YouTube and short video. In July 2026 it was reported to be exploring live channels and third-party bundles to counter declining engagement.

A library it has to keep building. Losing Warner Bros. leaves Netflix facing a combined Paramount and Warner catalogue. It must keep producing its own hits, at enormous cost, rather than owning a century of them.

In 2000 Netflix offered itself to Blockbuster for $50 million and was turned down. A quarter of a century later it bid for one of Hollywood’s great studios. Blockbuster, meanwhile, is down to a single store, in Bend, Oregon.

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