Reed Hastings says he came up with the idea for Netflix when he was hit with a $40 late fee on the movie Apollo 13.He was embarrassed about the fee, and though there had to be a better way to do movie rentals:
So I started to investigate the idea of how to create a movie-rental business by mail. I didn’t know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point.
There’s two problems with this story, according to Gina Keating, the author of Netflixed, a forthcoming book about the online-video company.
First, it doesn’t mention Hastings’ cofounder, Marc Randolph, who has been largely written out of the company’s history.
Second, Randolph told Keating that the story his cofounder Reed Hastings tells about the company’s founding isn’t exactly true.
In an interview with CNET, Keating said Randolph told her that Hastings made up the story about getting the inspiration to start Netflix after getting hit with a late fee for Apollo 13.
It’s a story Hastings tells frequently—and he never seems to bring up Randolph.
There’s no reason to believe Hastings didn’t actually get the late fee, but according to Keating, that’s not how Randolph and Hastings came up with the business that became Netflix, and early employees disliked it when Hastings told the Apollo 13 story:
Randolph told me that Reed began circulating that story when he was still with the company and Reed explained that this was just a way to explain how the company worked — like the Pez dispensers at eBay. It didn’t really happen, but the founding story is long and complicated and is not a lightning strike. Initially the tale was sort of a marketing tool. It tells you everything about how Netflix works.
But what would grate on the founding team is that Reed would go out and just tell that story all the time. It never happened and there is something very indicative about the fact that Hastings would continue to do that. We go back to the hubris of the whole thing. It’s sort of, “this company is me; I thought it up,” and maybe it just becomes true after a while.
Netflix barely mentions Randolph today. He’s listed as the cofounder on a company timeline, but that’s it. According to his LinkedIn profile, Randolph, formerly a software-company executive, was the founding CEO of Netflix and worked there until 2002. He stayed on the board until 2004.