September 12, 2020
It’s hard to imagine that 20 years ago Netflix co-founder Reed Hastings and then-CFO Barry McCarthy sat in the Dallas corporate headquarters of Blockbuster Video begging the video store giant to buy the upstart by-mail DVD rental service for $50 million.
As the story goes, Blockbuster CEO John Antioco and other executives practically laughed Hastings and McCarthy out of the building. Blockbuster at the the time was a $5 billion company operating about 9,000 video stores worldwide. Netflix, by comparison, was running TV spots with Ryan Seacrest pitching consumers the concept of DVD movies in the mail. Subscription streaming video-on-demand (and Roku) was still a pipedream.
Of course, Hastings today is the one laughing as the once mighty Blockbuster brand has been reduced to a singular independent store moonlighting as an Airbnb in Bend, Ore. Hasting is also mindful that Netflix dodged a corporate crossroad that could have significantly changed his life as well as the modern home entertainment ecosystem as we know it.
“Well, now I say thank God that they didn’t want to go ahead [with the deal],” Hastings told Yahoo Finance plugging his co-authored book, “No Rules Rules: Netflix and the Culture of Reinvention,” during an episode of “Influencers With Andy Serwer,” a weekly series featuring business, political, and entertainment leaders. “But you know, at the time, [Blockbuster was] so formidable and even later, when we went public, we were $50 million in revenue, and they were $5 billion, so a hundred times larger than us.”
Indeed, had Blockbuster acquired Netflix, it likely would have rebranded the upstart by-mail disc business. The million-dollar question remains whether the Blockbuster brass would have been receptive to SVOD and its impact on video stores. If not, the subscription streaming video business model might have died on the vine; binge-viewing left to TV on DVD boxed sets; co-CEO Ted Sarandos overseeing Blockbuster video stores; and HBO Max, Amazon Prime Video, Disney+ or Peacock just science-fiction.
“For our first decade, [Blockbuster] was such a big gorilla over our future,” Hastings said. “It was a number of things that made it possible for us to thrive, and eventually then have the chance to move into streaming.”
Today, Netflix has more than 193 million paid subscribers worldwide, and a Wall Street market cap around $223.5 billion.