Netflix’s Origin Story: How The Streamer Changed Hollywood Forever

Circa 1998, Blockbuster was the biggest video rental chain in the world. However, when Netflix launched as a DVD rental service, its pitch to remove late fees garnered popularity quickly. It allowed customers not just to keep movies for however long they wanted, but offered unlimited rentals for a monthly fee. Plus the added bonus of having DVDs delivered directly to customers’ homes.

At the time, it was a huge gamble, but it’s clear that gamble paid off. 28 years later, Netflix has been the leader in Hollywood under the leadership of Ted Sarandos and Greg Peters. Its market cap is $392.68 billion, bigger than Disney, Warner Bros. Discovery, Paramount Global and Comcast combined. Netflix’s transformation is one of the biggest in corporate history, up there with Apple and Facebook. And the steps it took to get to that point are vaguely remembered.

Despite the dispute over the facts, it is acknowledged that Blockbuster turned down the chance to buy Netflix in 2000. “They had us down there, but I don’t think it was serious,” Hastings tells Variety. “They didn’t see us as a significant player. I think it was curiosity rather than anything else.”

In 2007, Blockbuster’s launch of Total Access garnered them a new batch of customers, gaining 2 million online subscribers in its first year. This online service allowed customers to rent a DVD online and get a new movie free when they returned it to any of its stores. However, the company was actually losing money after shipping and other costs were factored in. And after spinning off from its parent company, Viacom, in 2004, it went into a $1 billion debt, which out Netflix ahead in the beginning of the streaming era.

“Now, it looks obvious to everyone that we would win, but at the time it didn’t feel that way,” says Jay Hoag, an early investor in Netflix and a member of its board of directors. “We were locked in a price war with Blockbuster. Our stock was bouncing around a lot. It was a challenging time for the company. But Reed and Ted had a vision to offer a better service, and they stuck to it.”

Netflix built up the company by continuing DVD-by-mail and then transitioning to online  streaming to watch longer movies and shows in 2007. And in three years the company nearly tripled its customer base from 7.3 million to 18.3 million. But Netflix was still lacking something that made it its own. So Sarandos found it in the show House of Cards, a remake of a BBC miniseries that swapped the British Parliament for the U.S. Congress. Every network and cable company wanted to nab the series because of the star studded cast. David Fincher produced and directed the first two episodes, while Kevin Spacey and Robin Wright starred as corrupt couple.

Sarandos said he would commit to spending $100 million on the series and pick up the show for two additional seasons before the pilot had even been shot. He also agreed to let Fincher have full creative control, a deal that HBO nor anyone else could match. Furthermore, he pushed for the show to release all episodes at once, instead of weekly, like standard cable and television.

Over the next decade, Netflix was the hub for hit movies and TV shows such as Stranger Things, Roma, and Squid Game. And it inspired other streaming services such as Disney+ and Max.