Business Wars

Netflix goes from being a streaming company to a movement in which consumers all over the world decide what show to watch -- and when and how they watch them. The future that Reed Hastings and Marc Randolph envisioned two decades earlier has arrived. The unfettered reign of cable television has ended. The war for streaming viewers will become richer. And more cutthroat.

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Hollywood execs thought Netflix was crazy to give up advertising and spin off opportunities by letting viewers flop on a couch and watch a whole season of a show all at once. But Netflix knew it was on to something. All of their studies and focus groups revealed something new: viewers who binged content formed an emotional attachment to Netflix. 

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We take a step back to explore how a little company called Home Box Office went from serving B-movies to 325 homes in Wilkes Barre, Pennsylvania to become the juggernaut that we know as HBO. In the process, HBO, become the standard by which all other cable companies would have to measure themselves - after all, it's not TV. It's HBO.

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You know that expression “content is king”? Well it turns out, sometimes it’s not. Sometimes it’s a hard-working algorithm that burrows into customer habits and viewing patterns. With that, Netflix had a clear upper hand on Blockbuster.

That, and the fact that Netflix targeted this new “streaming” technology that in 2007, no one really believed in. Soon they were on top of the world.

But it’s dangerous being on top. If you trip, you have a long way to fall.

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Thinking like your enemy is the best way to beat them, and during the war, Blockbuster tried every trick in the books to get inside Netflix. Sometimes they succeeded - sending “housewives” into warehouses as spies, and sometimes things didn’t go as planned. But when Blockbuster did deliver, they delivered big. They threw everything they had at Netflix, but the war raged on.

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After Hastings pleaded with Antioco to buy Blockbuster Online, Antioco agreed to present Hasting’s proposal to the board. What he didn’t tell him was that he was pushing the board to reject the offer so Netflix would wither and die. Meanwhile, Netflix was struggling to gain legitimacy in Hollywood. Netflix quickly realized that before it could take on the Hollywood gods, it would have to slay Blockbuster.

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This is Episode 1 of an 8-part series on the brutal business battle between Netflix and Blockbuster, and later HBO.

It all started around 1997, with a guy named Marc Randolph and his mathematician friend Reed Hastings. Randolph and Hastings knew they’d have to take on Blockbuster, but what they didn’t anticipate was that their business model would take on network television and eventually change the entire movie industry.

This was an 8-year total war that left innumerable casualties in its wake: thousands of hollowed out buildings and economic losses in the billions.

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Netflix-HBO. Nike-Adidas. Business is war. Sometimes the prize is your wallet. Sometimes your attention. Sometimes just the fun of beating the other guy. From Wondery, the network behind Dirty John and American History Tellers.

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