Netflix concept spurred by $40 VHS late fee -- who knew?

We've listened to Netflix founder and CEO Reed Hastings talk business about his company, but how's about a little background? After announcing a momentous Q4 while practically every other outfit on the planet hung their head in shame, the understandably elated exec sat down with Fortune to explain how Netflix came to be. As the story goes, Reed lamented the $40 fee he was nailed with upon returning a VHS copy of Apollo 13 in 1997. Soon after, he began to research the idea of starting a rental-by-mail outfit. Interestingly enough, the subscription based model that nearly 10 million people enjoy today was something that came after the first concept, but obviously he hasn't tried to mess with the magical elixir very much sense. Have a look at the read link for the full writeup.

[(Unverified) Posted Jan 29th 2009 4:06PM]

figures........

he was one of the pissed off people that said "This is an outrage, I wont pay it, in fact I'll start my own company!!!"....but the clerk looks back and laughs saying 'yeah right, We're BlockBuster....you cant fuck with us"

12 years later it seems as if the ones getting scared is blockbuster.......

[FredMC Posted Jan 29th 2009 4:27PM]

"but obviously he hasn't tried to mess with the magical elixir very much sense"

umm since. lol


Thanks Blockbuster for coercing the Netflix concept with your tightwad ways!

[Jonthomasdesigns Posted Jan 29th 2009 5:31PM]

Im confused why everyone in so in love with Netflix ... i have been off and on with them since the beginning .. I knew they were throttling me even before there was a term for it ... There new release blurays take months to ship and i pay a extra $1 for them ... and the play it now HD section is horrible .. (sure the SD might be good but i dont want to watch SD) .. ($11 a month for 1 movie at a time with the bluray fee)

no i know Blockbuster is not perfect but for $19.99 a month i get 3 Blurays out at a time , and i take those to BB store and get 3 more Blurays and they send me my next 3 that day ... i can do this about every 3 days a month .. so i have 6 blurays out at a time .. and i get 2 free Game/ Movie coupons a month (always get games)

I know i was grandfathered in but damn tell me what the better deal is ??

[Pusta Posted Jan 29th 2009 6:02PM]

People who do not live near a Blockbuster? Or the fact that Blockbuster is closing stores around the country? Or you're paying more for 3 at a time than Netflix? Neither is perfect, but after having both I am happier with Netflix, but YMMV

[DeadPlasmaCell Posted Jan 29th 2009 8:56PM]

You forgot to mention that you're limited to only 5 in-store exchanges a month on that $19.99 3-movie plan. If you want unlimited in-store exchanges with 3 movies at a time it's $35/mo.. Not a good deal considering Blockbusters online Blu-ray selection is about the same as Netflix. I use both Netflix & Blockbuster. If Netflix is taking forever to send a movie I really want to watch, then I'll just go up the street to Blockbuster and get it there.

[Jonthomasdesigns Posted Jan 30th 2009 5:34AM]

i have no limits at all for 19.99 ... i was a member of the online since day one .. they let me keep going with my plan (grandfathered)

[(Unverified) Posted Jan 29th 2009 5:32PM]

Reed talked about this on Charlie Rose back in 2005.

http://www.charlierose.com/view/interview/606

[Fizzler Posted Jan 29th 2009 7:23PM]

Blockbusters will go the way of the DoDo. The overhead required by the Brick and Mortar will not be able to keep up.

I was a Netflix user way back when and was loving it. Then I started to noticed that my rentals were taking longer and longer to arrive. There was a 1 month stint where I was laid up at home after an injury and was renting movies like crazy. It was at the end of that month that I found my DVD's were taking longer and longer. This was before they admitted to having this list. After that month at home I was back at work and back to my routine rental pace but my DVD's were still being throttled. A few months later Netflix admits to the throttling I try in vain to get myself taken off this list to which they would not so I left them. I would go back but it left such a sour taste in my mouth that my stubborness will not allow it.

[(Unverified) Posted Jan 29th 2009 7:46PM]

For those that want (non-Blu-Ray) DVD B&M rentals, I think RedBox and DVDPlay have a much better concept than BlockBuster.

Go someplace (McDs, WalMart, Grocery Store, etc) rent a movie, pay $1 (+ tax) and return it the next day (by 7pm or 9pm depending on the market)

You don't even have to return them to the same store, just the same brand kiosk.

I think the kiosks can be more of a threat to BlockBuster and HolllywoodVideo than NetFlix.

I am kinda surprised that BlockBuster hasn't converted stores over to kiosks or at least have BlockBuster branded kiosks.

[UnnDunn Posted Jan 29th 2009 9:37PM]

Funny, I remember back in the early days of Netflix, when they were doing weekly rentals, getting hit with $20 late charges.

Whenever I see one of teir ads claiming "never a late fee", I always think of that.

That said, I'm a happy Netflix subscriber and I have no intention of canceling any time soon.

[sivartk Posted Jan 29th 2009 10:14PM]

What is funny is that he was watching VHS in 1997. I know that I had stopped watching VHS by that year, almost all together.

[mugatu Posted Jan 30th 2009 12:44AM]

Netflix owns. Blockbuster is gone, they know it but won't admit it yet. The Netflix business model is functioning an all high cylinders. Movies come in 3 days or less to everyone. No need for anything else. Competitors? None.

I didn't see it coming but it did. This guy is a genius on the level of Google.

[Bixmen Posted Jan 30th 2009 12:22PM]

I love it! the best companies/concepts/ideas come from when someone gets pissed off... Lamborghini, Ford GT40, Netflix...

[RyanLN Posted Jan 30th 2009 2:42PM]

I hate Blockbuster so much I can taste the bile in the back of my throat. I'm one of those people who has, over the course of my lifetime, paid WAY more in late fees than I care to admit. I suppose that it's not Blockbuster's fault that I couldn't get off my ass and get the movie in on time, but it is a bitter pill to swallow when you're paying more in late fees than the cost of the movie. Additionally, time and time again Blockbuster would move into a neighborhood and drive all of the other rental agencies out of business by undercutting their prices, only to inflate them again once the competition was gone. To see them go from lead dog to dinosaur in the span of a decade brings on the most delicious sort of schadenfreude. I have been a Netflix subscriber since year one, and will never look back. God bless you, people of Netflix- every single one of you.

[NestoJR Posted Jan 31st 2009 2:43PM]

to Jon,

your being grandfathered will not help any new subscribers, so what is the better deal ?

As for why "everyone is in love with Netflix" ? Well, we like/love it for apparently the same reason the company was created. Because of late fees late fees late fees. I have friends who still do it this way. Hell, they pay more to rent a few movies in a single visit than I do monthly. They may complain about having to wait with Netflix, changing their mind and wanting a different movie, not being able to go to a physical location but hey, I've never paid any late fees. If you're a patient person, all those complaints are non-existant. I have a much better selection and I've been able to rent blu-ray for 2 years now and I can stream. It always boggles my mind that they pay what they do. But some people feel they have to have the newest releases for some reason and need it NOW.... symoblic of the way our society thinks eh ?

The benefits of the service far outweigh any negatives. I have no complaints with the service, I've nary had a problem in the 5+ years I've had it. I left once before and thats because I wasn't using the service. Sure, blu-ray releases are much harder to get ahold of nowadays but whatever. I have 150+ movies in my queue, new and old, so theres always something to watch. If I didn't see it in theaters then I'm in no rush for new releases. Sure, I can throw a fit, cancel my service and go back to blockbuster but as an avid movie fan and someone who doesn't like wasting money, that'd be insane.

Lastly, you support great companies like Netflix. I mean, whats wrong with them ? The people who champion downloading as the next big thing are more than likely the ones who do it illegally and I won't say much more on that, I've always been against it. Netflix's prices are actually cheaper than they used to be. We pay an optional $1 charge now for blu-ray (find me a legal, cheaper alternative) but we didnt' for almost 2 years and now we have streaming, no extra charge (yet). I also like that I get recommendations which has helped me see movies I never would have. You also get a ratings system thats been built up over all these years and depending on the movie, the average score is made up of 10,000 users up to over 1 million.

Everyone else is playing catch up. So question is, why do people who like watching movies NOT like Netflix ?? Or why do people who don't like blu-ray or HD, post on Engadget HD ??? Oh, right... its the internet. Like the media, lets focus on the bad. With that mindset, next time you see your friends or family, just start thinking about all the bad memories and let it all out. Way to live a life.

To each his/her own.

[batmanclock Posted Mar 27th 2009 12:31PM]

I did Netflix for 2 months. I was sending the movies back as quick as I could and with the 3 at a time rule, I only got 25 movies in 2 months.
I recently switched over to the new Power Play package at HollyWood Video. For $40 you get three rentals at a time (2 of which can be games.) I have both a Wii and a PS3. I have played so many games within 2 weeks it is sick. Games and movies that I would never even thought about watching or playing are coming home now.
The only compaint about this plan is the fact that they don't have very many games to choose from.

I love this plan over Netflix and BB.