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THE STORY BEHIND THE APP Netflix

JACKSON PETERS

MASON CREST MIAMI

Mason Crest PO Box 221876, Hollywood, FL 33022 (866) MCP-BOOK (toll-free) • www.masoncrest.com

Copyright © 2024 by Mason Crest, an imprint of National Highlights, Inc. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, taping, or any information storage and retrieval system, without permission from the publisher. First printing 9 8 7 6 5 4 3 2 1 ISBN (hardback) 978-1-4222-4779-2 ISBN (series) 978-1-4222-4773-0 ISBN (ebook) 978-1-4222-7044-8 Library of Congress Cataloging-in-Publication Data Names: Peters, Jackson, author. Title: Netflix: the story behind the app / Jackson Peters. Description: Hollywood, FL: Mason Crest, 2024. | Series: Tech titans | Includes bibliographical references and index. Identifiers: LCCN 2023015341 | ISBN 9781422247792 (hardback) | ISBN 9781422270448 (ebook) | ISBN 9781422247730 (series) Subjects: LCSH: Netflix (Firm) | Streaming video. | Application software. Classification: LCC HD9697.V544 N4876 2024 | DDC 384.55/54--dc23/eng/20230628

LC record available at https://lccn.loc.gov/2023015341 Developed and Produced by National Highlights, Inc. Editor: Andrew Luke Interior and cover design: Tara Raymo • CreativelyTara Production: Crafted Content LLC Publisher’s Note: Websites listed in this book were active at the time of publication. The publisher is not responsible for websites that have changed their address or discontinued operation since the date of publication. The publisher reviews and updates the websites each time the book is reprinted.

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CONTENTS

Chapter 1: Story of a Startup . ......................................... 7 Chapter 2: Rise to the Top . ..................................... 21 Chapter 3: Market Domination . ................................. 33 Chapter 4: Beyond the Boardroom . ........................... 47 Chapter 5: On the Horizon ............................................. 61 Series Glossary of Key Terms . ....................................... 74 Further Reading . ................................................ 76 Internet Resources ......................................................... 77 Index . ............................................................................... 78 Author’s Biography & Credits . ..................................... 80 KEY ICONS TO LOOK FOR:

Words to Understand: These words with their easy-to-understand definitions will increase the reader’s understanding of the text while building vocabulary skills. Sidebars: This boxed material within the main text allows readers to build knowledge, gain insights, explore possibilities, and broaden their perspectives by weaving together additional information to provide realistic and holistic perspectives. Educational Videos: Readers can view videos by scanning our QR codes, providing them with additional educational content to supplement the text. Examples include news coverage, moments in history, speeches, iconic sports moments, and much more! Text-Dependent Questions: These questions send the reader back to the text for more careful attention to the evidence presented there. Research Projects: Readers are pointed toward areas of further inquiry connected to each chapter. Suggestions are provided for projects that encourage deeper research and analysis. Series Glossary of Key Terms: This back-of-the-book glossary contains terminology used throughout this series. Words found here increase the reader’s ability to read and comprehend higher-level books and articles in this field.

WORDS TO UNDERSTAND

CEO: chief executive officer; the person in charge of running a company mediocre: of moderate or low quality, value, or ability phenomenon: a remarkable event; wonder; marvel venture: an endeavor that involves some risk, where the outcome is uncertain

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chapter 1

STORY OF A STARTUP

ROCKETING TO SUCCESS When Reed Hastings rented the movie Apollo 13 from his local Blockbuster store decades ago, he went home with an Academy Award-winning film featuring a star-laden cast that included Tom Hanks, Kevin Bacon, and many other Hollywood heavyweights. This gave Hastings an idea, and within weeks of renting that VHS, Hastings had hatched a plan that would allow it to bloom into one of the most beloved and widely used innovations of the 21st century. Netflix forever changed how we watch and stream original programming, classic movies, comedies, horror flicks, dramas, documentaries, love stories—and even the dreaded duds that flopped at the box office, which we just can’t resist checking out. These days, Netflix is one of the biggest distributors and producers of video content in the world, with more than 200 million subscribers around the globe. Some even say that Hastings is directly responsible for the phenomenon known as binge-watching, which now takes place in millions of homes every day.

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Hastings is the reason binge watching is part of our society’s lexicon.

HOW IT BEGAN Before he became one of the most successful innovators of the 21st century, Hastings actually worked as a door-to-door salesman, and what he sold wasn’t at all related to movies. He sold vacuum cleaners! While it was originally supposed to be a summer job before college, Hastings discovered that he really liked selling vacuum cleaners and put off his studies for a year while he learned how to become a better salesman. It was only after spending an entire year selling Rainbow vacuum cleaners that Hastings finally moved to Maine and enrolled in a mathematics program at Bowdoin College. Mathematics caught Hastings’ attention because of how limitless the field was. He graduated from Bowdoin in 1983.

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STAYING IN SWAZILAND About halfway through college, Hastings enrolled in the military and began training in the Marine Corps in the summer. However, he did not like it one bit since being a Marine meant obeying orders without question, a mindset that was difficult for the kind of person who was always looking for ways to improve how something was done.

Hastings’ time in Swaziland taught him a lot about himself and other people, all of which would help him become a successful business person.

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Story of a Startup

The Marine Corps was incredibly strict and Hastings had trouble fitting in. “My questioning wasn’t particularly encouraged, and I realized I might be better off in the Peace Corps,” he told an interviewer. Enrolling in the Peace Corps, a volunteer organization that sends members to all areas of the world to help those in need, would allow Hastings to serve his country in a different way. Its members help by building houses, distributing food, or becoming teachers. Not wasting any time, Hastings left for Peace Corps training on the day of his graduation from Bowdoin College. Hastings was sent to teach mathematics in Swaziland, a small country on the southeastern tip of Africa. He lived far out in the country, away from any city, teaching in a school that didn’t even have electricity. He spent three years there, before returning home to the United States. Hastings’ experience in the Peace Corps completely changed how he thought about the world and business. Since he didn’t have much money while he was working in Africa, he needed to learn how to live with limited resources. When he returned home, Hastings applied to Stanford University and moved to California to study computer science. Earning a master’s degree is never easy, but the hard work helped prepare him for the future challenges of building his own company and keeping it strong. YOUNG ENTREPRENEUR Most successful businessmen tend to start small and build from there, and Hastings was no exception. He worked at a small company known as Adaptive Technology after graduating from college.

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Hastings learned about computers at Stanford University, where many famous Silicon Valley entrepreneurs have gotten their start.

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Story of a Startup

One of the most important people Hastings met at Adaptive Technology was then- CEO Audrey MacLean: “From her, I learned the value of focus. I learned it is better to do one product well than two products in a mediocre way,” he explained. Hastings worked at Adaptive Technology until 1991, when he decided to leave and co-found Pure Software. The purpose of Pure Software was to find and fix bugs in computer software. The type of work Hastings and his employees did was akin to what Adaptive Technology did, except on a much smaller scale. Pure Software took off quickly. Before Reed knew it, he was in charge of hundreds of employees. He was great at the technical part of his job, but he admitted having difficulties managing so many people. “As the company grew from 10 to 40 to 120 to 320 to 640 employees, I found I was definitely underwater and over my head,” he said. Hastings stuck with it until Pure Software announced it would merge with Atria Software in 1996. He was offered the chief technical officer (CTO) position at the new company in 1997, but turned it down. Hastings had learned a lot through Pure Software, and he was now ready to take on new challenges. Hastings wanted his next business venture to be more successful than his first, so he took his time thinking of the perfect idea.

REVAMPING RENTING That was when Hastings came up with the idea for Netflix. By 1997, video rental stores were booming. DVDs were not widely used yet,

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so most people who wanted to rent a movie had to rent a video cassette tape at a store and bring it home to watch on their VCR (video cassette recorder). Video cassette tapes were large, bulky, and heavy compared to DVDs. There were a few popular video rental stores at the time. Three of the largest store chains were Blockbuster, Family Video, and Hollywood Video. All these stores followed the same business model; customers would enter the store, pick a movie, pay to rent that movie for a certain amount of days, and bring it home. It was

In the late 1990s, DVDs quickly outstripped VHS as the relevant video media.

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Story of a Startup

up to the customer to return the cassette tape before the due date. If the customer failed to do so, late fees were charged that had to be paid before they would be permitted to rent again. Many stores would also charge customers an additional fee if they did not rewind the tape before returning it. Hastings was one of the many people who used video rental stores in the 1990s. “I had a big late fee for Apollo 13 ,” he recalled. “It was six weeks late and I owed the video store $40. I had misplaced the cassette. It was all my fault.” He was embarrassed and annoyed by the experience, which led him to think of a better way to go about renting movies. “On my way to the gym, I realized they had a much better business model,” he said. “You could pay $30 or $40 a month and work out as little or as much as you wanted.” A subscription-based video rental model would be like nothing else that existed at that time. OPERATING ONLINE Hastings’ new company would be different in another significant way. He would allow people to rent movies using an online service. Customers would not have to go to the store to pick up or return a movie, because everything would be delivered straight to their door. Taking the rental service online would not only be easier for customers to use, but also less costly for him to manage. Hastings also decided to switch to using DVDs as much as possible. Since DVDs were much smaller and lighter than video

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Blockbuster Video was one of the most famous and successful movie rental businesses in the United States before Netflix changed the way people rent and watch movies.

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Story of a Startup

cassette tapes, mailing them was a lot cheaper. He knew that Netflix would save both his company and his customer a lot of money by only renting them DVDs. The mathematician spent a lot of time perfecting an envelope that would only cost one first-class stamp to mail, making Netflix DVD rental cheaper than traditional video rental stores. Included in the delivery was a return envelope, which made it effortless for customers to mail the DVD back. With all these brand-new ideas in mind, Hastings set to work building his second company.

Hastings details the success of Netflix in an interview with a television station in India in 2018.

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