One Night Success — Episode 4.. Change is the only constant. If as a…
By: Ankit Shah
Tags: Success, Ideas, Innovation, Startup, Business

Most of the startups failed in today’s world, Even the big ones. Why ? I was just trying to find an answer to this question. is it idea, Business plan, Scaling or profitability? To find the answer i have studied so many case studies of the brands which was so successful startup at some point of time and today it just don’t exists.

Today i am going to share with you the best story i have ever read. The story is about small online movie rental company vs big offline movie rental company.The story begins in 1997 where some people feel so bad to pay late fees to that rental company.

Year 1997 — A $40 Late Fee Triggered a Startup

Reed Hastings, the co-founder of Netflix, forgot to return a rented VHS tape of the movie “Apollo 13” and was charged a $40 late fee. Hastings and Marc Randolf, who also happened to be co-workers, decided to revolutionize the movie-rental business and founded Netflix. One of the key features of their model was to eliminate late fees.

Year 1998 — Netflix Opened for Business

Netflix officially opened its DVD rental business this year with 30 employees. Remember, this was the time when customers were still used to renting Blockbuster’s VHS tapes, and not many people owned DVD players because they were expensive. However, Netflix founders were willing to take the risk.

It worked. The website received a lot of traffic. Netflix also joined hands with Toshiba, HP, and Sony and offered free DVD rentals to new DVD player buyers.

Year 1999 — Netflix Found an Investor

Netflix received a huge help from Groupe Arnault, a France-based private company owned by Bernard Arnault. A $30 million investment from the company helped Netflix launch its subscription-based service.

Customers loved the idea of renting out as many DVDs as they wanted for $16 a month (given that they only had 4 DVDs in their possession at any given time). There was no late fee for not returning DVDs in a given period.

Year 2000 — Netflix Offered to Surrender to Blockbuster

Despite its growing popularity, Netflix was still earning a measly $5 million in revenue. Meanwhile Blockbuster, Netflix’s biggest competitor, was killing it and making a whopping $4.5 billion.

This is when Netflix knocked on Blockbuster’s door and asked for some help. As I have already mentioned above, Blockbuster kicked them out in a rather discourteous way.

Netflix was yearning for external assistance as it experienced $58 million in losses this year.

Year 2001 — DVD players Became Popular

Reed Hastings managed to keep Netflix afloat while he hoped for DVD players to go mainstream. And it finally happened — DVD players were now cheap and people started buying them.

But DVD players were worthless without the right DVDs. No worries — Netflix was there to fill this gap by offering convenient DVD rentals.

Year 2003 — Netflix’s First Profitable Year

They say good things come to those who wait. After years of hardships and brutal rejections, 2003 turned out to be the first profitable year for Netflix.

The company also crossed the 1 million subscriber mark this year.

Year 2004 — Netflix vs. Blockbuster Began

Blockbuster realized that the old VHS rental model might not be their best bet, and the company began its online DVD-by-mail service, which was similar to Netflix.

The big boy was in direct DVD-rental competition with the little guy, but that didn’t stop Netflix from continuing.

Year 2005 — Netflix’s Revenue Increased, Blockbuster’s Revenue Decreased

Netflix was slowly increasing its profits as well as its popularity. This was the time during which they shipped 1 million DVDs daily.

As compared to 1998, when Netflix first opened, 2005 was a completely new era. Customers were inclined to ordering DVDs online instead of visiting a physical outlet — something that Netflix was used to and Blockbuster was new to.

Blockbuster’s brick-and-mortar film-rental model was becoming obsolete. The company started losing its revenue as well as popularity, gradually.

Year 2007 — Netflix Kept Soaring High and Launched On-Demand Video Streaming Service

Netflix mailed its billionth DVD this year. The company now also started offering an on-demand video streaming service.

But, they hadn’t obtained the copyrights to bestselling movies or TV shows yet, so the videos available on Netflix’s on-demand service were, for the lack of a better word, generic.

During this time, Blockbuster’s profits were declining further and Netflix’s profits were rising.

Year 2008 — Netflix Added More Popular Videos to Its Service

Netflix realized that it needed to provide more popular videos for its on-demand video streaming service to succeed. So the company signed a deal with Starz to bring more than a couple thousand movies and shows onboard.

Blockbuster’s profits declined further.

Year 2010 — Netflix Dominated the Market, Blockbuster Went Bankrupt

By this time, Netflix had signed deals with the entertainment industry giants, such as Disney, Lionsgate, MGM, Paramount, and Sony. Netflix became extremely popular in North America and grabbed a 20% share of peak-hour traffic.

Netflix’s profits increased further and Blockbuster, well, they finally accepted their defeat in this 6-year David versus Goliath type of battle and filed for bankruptcy.

Key Takeaways

Customer is the King, Technology is the Queen :

Customer always want something better, something great then you are providing right now. Technology gives always a chance to improve the things and make them better if you just so busy counting the notes someone will use the new technologies to provide better experience of the product or services which you are providing and sooner or latter if you don’t adopt the new ways your sky-fall is fixed.

Keep Flexibility :

Every time any startups grows big often they forgot to be flexible to adopt new technology and new approaches to serve the customers in best possible manner. That’s where a small startup optimize and take the big pie. Flexibility and open to adopt new changes is the key differentiator between success and failure, between rise and fall.

Focus on core :

Both companies were in the business of entertainment industry, both were in the renting DVD business but blockbuster focused on the revenue from late fees and Netflix focused on the improvement of their business which was to rent the DVD not to collect the late fees.

Hope you have learnt something good today. Take care, stay home, keep reading.