How Netflix took on Blockbuster — and won

Blockbuster was Goliath. Netflix was David.

Now, Netflix is Goliath, or maybe Zeus. Blockbuster is a little-remembered punchline.

How this exceptional reversal came to be is the subject of a new documentary, Netflix vs. the World, made by Gina Keating and directed by Shawn Cauthen. It is now available for streaming on Amazon Prime Video and soon will be available on a number of other digital platforms.

Keating chronicled the rivalry between Netflix and Blockbuster as a Los Angeles-based reporter for Reuters covering the business side of the entertainment industry. It was 2004 when she started, and the reporter who previously had the beat told her about a small company that she hadn’t even heard of: Netflix.

The company was renting movies by mail, the other reporter said, and he found the concept fascinating.

Keating learned what she could about the company because, unlike almost every other corporation she covered, its executives actually wanted to talk to reporters and make their story known, she says.

Keating was there when Netflix and Blockbuster went toe-totoe, vying for customers to order their movies online. When the smoke had cleared and Blockbuster filed for bankruptcy in 2010, Keating turned the story into a book, Netflixed: The Epic Battle for America’s Eyeballs.”

The book, which came out in 2012, is used in some business schools, says Keating, 56.

After the book came out, she had a vague idea to make it into a movie — though she had never done anything like that before, she says. But she got lucky when Netflix co-founder Marc Randolph called her when they were both in Austin, Texas.

She had talked to the littleknown Randolph while writing the book and had mentioned her plan to make a film. He said he was available for an interview on film, if she wanted to have one. The whole documentary grew from that interview.

“I was very worried that the Blockbuster guys wouldn’t talk to me because it was considered so disgraceful what happened to them,” Keating says.

But it turned out that several former Blockbuster executives, including former CEO John Antioco, wanted to tell their side of the story. As the film makes clear, Blockbuster — despite being new to the online world — had Netflix on the ropes in the all-important race for online customers.

But then, corporate raider Carl Icahn took over Blockbuster and engineered Antioco’s resignation. In his place, he hired a former CEO of 7-Eleven, James W. Keyes, who had no relevant experience in movies, entertainment or, significantly, anything digital. Blockbuster’s fate was sealed. “I wanted to show that these guys at Blockbuster did not have any of the same skills that the guys in Silicon Valley [where Netflix is headquartered] had, and yet they almost won the war,” Keating says.

Keating says the conflict came down to a difference in personalities and styles.

“Blockbuster came at it from an MBA point of view — a traditional business point of view: Give the consumers an exceptional value, and that will always win the day. It was a typical war — you go in there, you copy the other guy, spy on them and then offer everything at a lower price,” she says.

“The Netflix people, that team was very creative. They were really consumer-focused. The company was almost a thought problem to them. While they were competitive, they wanted to make something that the customers loved,” she says.

“The two different cultures were completely opposite.”

Keating decided to write the book after the last economic downturn, which she called a depressing time to be working at a business-related news service. That was why she wanted to tell the Netflix story.

“The company has done something really amazing. They put customers at the centre of their business model, and they succeeded.”