The New Yorker’s Ken Auletta wrote a profile of Netflix CEO Reed Hastings and revealed that the now-shuttered video chain Blockbuster missed out on a great chance to purchase the fledgling company in 2000.
Netflix CEO Reed Hastings flew out to Dallas that spring to meet with Blockbuster execs, who had 7,700 stores open at the time.
Netflix was losing money, had only 300,000 subscribers and relied on the U.S. postal service to deliver its movies to customers.
Reed wanted to form an alliance. Essentially, Netflix was willing to become Blockbuster’s own streaming service. Hastings was going to sell a 49% stake in the company and take on the Blockbuster name … but they decided to pass on it.
The 2000 tech bubble bursting was still fresh in Blockbuster’s mind. And the impending threat of digital media was not yet obvious — most Americans still used dial-up access at home.
Fast forward to 2004, and Blockbuster’s downward spiral began. The conglomerate had tried to launch its own subscription service but it was too late. By 2005, Netflix had 4.2 million subscribers and membership was steadily growing. Also, Hollywood studios began offering Netflix more movies for its library, and that hurt Blockbuster’s video archive revenue.
Reed admitted to Auletta that Netflix would have been in trouble if Blockbuster launched their service two years earlier.
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