A fortune from binge-watching

It’s terribly easy to forget that Netflix was founded way back in 1997, a time when terms such as binge-watch and streaming wars were completely unheard of. The world was a simple place back then: If you wanted to watch a film at home, all you needed to do was to head to your nearest video store and rent a VHS tape, those clunky relics from that antiquated era.

Just that Marc Randolph wanted to make everything even simpler. He was a restless entrepreneur always seeking the next big thing, tireless in his obsession of taking an idea and turning into something that would revolutionise an entire industry. Before he came up with Netflix, Mr Randolph considered selling customised versions of dog food, baseball bats and shampoo over the internet, all seemingly ludicrous suggestions that were shot down by Reed Hastings, whose software company had acquired a startup that the former had co-founded. Mr Hastings was the man with the cash, and a shrewd businessman who reserved little room for sentiment when it came to business.

Despite their many disagreements, the two were certain about one thing — their new venture just had to involve the internet. They had just seen Jeff Bezos take books — solely a property of physical stores in those days — and put them out online, and were impressed by the rapid progress that Amazon had made.

Both flirted with the idea of allowing customers to rent videocassettes online, but the plan was shelved after some initial promise — tardy postal services, high procurement and shipping costs, and the uncertainty of getting the tapes back meant that the economics never quite worked out. Instead, they decided to try their luck with DVDS, a new technology that was launched in Japan the previous year and was slowly making its way to the US. Neither had ever watched a film on DVD, nor were there many people with DVD players at home, but they were somehow convinced that the idea had potential.

That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea is the story of how Mr Randolph, the company’s first CEO, and Mr Hastings, the current chairman and CEO, took that very potential and transformed it into a streaming service with over 150 million subscribers; of how they were able to take on ubiquitous brick-and-mortar stores, survive the dot-com crash and even resist the temptation to sell the company to Amazon when business seemed destined for collapse soon after they had launched.

In the process, Netflix also bought movie rights from studios, before coming up with their own originals. Now, of course, Netflix is such a media behemoth that it’s even challenging the might of multiplexes. Martin Scorsese’s The Irishman, for instance, a big-ticket film starring the likes of Al Pacino, Robert De Niro and Joe Pesci, only had a limited theatrical release on November 1. It will be available on Netflix as early as November 27.

Mr Randolph’s book is not so much about Netflix’s recent heady success as it is about how it began on shaky ground, with few backers and catastrophe lurking at every difficult moment. He writes about how the deals he managed to strike with Toshiba and Sony — ones that would direct new owners of DVD players straight to Netflix — almost never happened, and that the subscription model was a desperate move to keep business afloat after initial DVD sales tapered off. “If you had asked me on launch day to describe what Netflix would eventually look like, I never would have come up with a monthly subscription service,” he says.

Mr Randolph’s honesty is precisely what makes this book tick. When deciding on the name Netflix — it was initially Netflix.com — Mr Randolph confesses that he thought the name wasn’t perfect and sounded a little “porn-y”. On the decline of the DVD rental business, he unhesitatingly claims that his advisors, including Mr Hastings, were right in the first place — that the technology was just a flash in the pan and no one was going to adopt it long-term.

Such candour makes That Will Never Work a brilliantly entertaining read filled with tales of luck, risk and doggedness. While most of it is written like a memoir, a part of the book also features management lessons, “Randolph’s Rules for Success”, which offer quite a handy glimpse into what goes into running a giant like Netflix.

Mr Randolph is no longer associated with Netflix — he left the company in 2003, soon after it went public. He still holds some shares — mainly for sentimental reasons — but buys a monthly subscription like anyone else. In another display of brute honesty, he claims that his skill-set was always more suited to running a start-up than managing the success of a large corporation. Thankfully for him and millions of binge watchers around the world, despite him leaving, his idea is not only working but is already perhaps the biggest disruptor the entertainment industry has ever seen.

THAT WILL NEVER WORK: The Birth Of Netflix And The Amazing Life Of An Idea

Marc Randolph

Hachette India

~699, 312 pages