[News Inside] David Who Toppled the 'Blockbuster'... From Math Teacher to Global Video OTT Empire Founder

Reed Hastings, CEO of Netflix

▲Reed Hastings

[Asia Economy Reporter Kwon Jaehee] 'The battle between David and Goliath'

The confrontation between Blockbuster and Netflix is often described this way. Both companies made money by renting movies; in 2010, Blockbuster was the industry leader, while Netflix was a fledgling startup.

However, against all expectations, Netflix adapted well to waves of change with meticulous strategies, toppling the industry giant Blockbuster and emerging as a video streaming service (OTT) giant with over 200 million members in about 190 countries. In this battle of David and Goliath, David emerged victorious.

Netflix started in 1997 as a video rental company. Reed Hastings, a Boston native, combined the words internet (NET) and movies (flicks) to create the name Netflix. From the beginning, he had the ambition to distribute movies via the internet, and Netflix embodies this belief.

Reed Hastings, who founded Netflix, one of the most successful companies in the U.S., majored in mathematics, unrelated to either the internet or movies. Born in 1960 in Boston, Massachusetts, he majored in mathematics at Bowdoin College and then taught math to high school students in Swaziland as a member of the Peace Corps. Later, he entered Stanford University and earned a master's degree in computer science in 1988.

While working as a software engineer, he left his job to pursue his entrepreneurial dream. One day, Hastings forgot to return a rented video and was charged a $40 late fee, which sparked his startup idea. He felt the high late fees for rented videos were unfair and devised a business model with a monthly subscription fee instead of late fees. Customers could order movies on an internet website and receive DVDs by mail through a monthly flat-rate service.

At the time, in the late 1990s when the dot-com bubble was bursting, most were pessimistic about this business model, predicting it would fail. The internet ordering method was unfamiliar, and the U.S. postal system was notoriously slow.

[Image source=Reuters Yonhap News]

However, Netflix defied these expectations, growing rapidly from $5 million in revenue in 1999 to $1 billion in 2006, seven years later. By 2014, it had surpassed a 50% market share in the U.S. video-on-demand (VOD) market. By 2016, with about 85 million members, Netflix was considered one of the most successful companies.

Netflix did not have an easy path from the start. The fees charged to users were low, and the content turnover rate was slow. As the company recorded consecutive losses since its founding, Hastings even decided to sell Netflix to Blockbuster in 2000. Hastings offered $50 million, but Blockbuster rejected the offer. Ultimately, Hastings had no choice but to continue managing Netflix, and the failed sale turned out to be a blessing in disguise.

In 2007, Netflix launched its first internet video streaming service. This was the moment when the business model Hastings envisioned at the company's founding was realized for the first time. Initially, the service was offered only in the U.S., but later expanded to Canada in 2010, South America in 2011, and the UK and Northern Europe in 2012, gradually increasing its service countries.

After starting internet video streaming services, Netflix began its full-fledged growth trajectory. At its IPO in 2002, Netflix's revenue was $150 million; by 2007, it had grown to $1.205 billion, and by 2010, $2.16 billion?doubling every three years.

Netflix was praised for changing the way Americans watch movies and entered a full growth phase, but Hastings did not stop innovating there. In 2011, Netflix moved beyond content distribution to producing its own content. The work produced, 'House of Cards,' released in 2013, was a huge success, leading Netflix to focus on strengthening its original content, which has been a driving force for continuous innovation to this day.

Meanwhile, as of December 26, Reed Hastings ranks 386th on Bloomberg's billionaire list, with a fortune of $6.4 billion (approximately 7 trillion KRW).

This content was produced with the assistance of AI translation services.