The Tale Of How Blockbuster Turned Down An Offer To Buy Netflix For Just $50M
In his new book That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea, Netflix co-founder Marc Randolph describes the moment in which he and his colleague Reed Hastings met with Blockbuster executives in 2000 with the hope that the video-rental chain would purchase their company for $50 million.
It’s hard to imagine Netflix as anything but the streaming titan it’s since become, but Randolph recalls distinctly feeling like the scrappy upstart and being intimidated by Blockbuster and the company’s impressive offices. “The walls of Blockbuster’s lobby, like ours, were covered with framed movie posters, though I couldn’t help but notice that Blockbuster’s were framed considerably more tastefully, each movie in its own gleaming stainless steel frame, encircled by a ring of light bulbs like the marquee posters you see in theatre lobbies,” writes Randolph.
“’Do you know what those things cost?’ I couldn’t help but mutter to Reed, as we were ushered into the conference room. I was already feeling a little like a country mouse in the big city – and in my shorts and T-shirt, a little chilly in the arctic blast of Texan AC – when the Blockbuster boys came in and introduced themselves.”
Randolph describes looking under-dressed, particularly in comparison to Blockbuster CEO John Antioco and his “beautiful Italian shoes.” But what really stands out in the book is the exchange that took place between the two businessmen, as Randolph and Hastings made an offer of $50 million for Blockbuster to buy their company.
“Through Reed’s pitch and Barry’s windup, I had been watching Antioco,” recalls Randolph. “I had seen him use all the tricks that I’d also learned over the years: lean in, make eye contact, nod slowly when the speaker turns in your direction. Frame questions in a way that makes it clear you’re listening. But now that Reed had named a number, I saw something new, something I didn’t recognise, his earnest expression slightly unbalanced by a turning up at the corner of his mouth. It was tiny, involuntary, and vanished almost immediately. But as soon as I saw it, I knew what was happening: John Antioco was struggling not to laugh.”
While Antioco could have bought Netflix for 1/2600th of what it is worth today, back then hardly anyone had ever heard of streaming. Instead, the then-three-year-old company was only mailing DVDs, but knew the Internet would eventually be the way forward.
The pitch was ultimately rejected, but most importantly it gave Netflix founders a new sink or swim resolve which catapulted them to the position the company now finds itself in. “Selling had seemed to be our only way out. And Goliath didn’t want to buy us – he wanted to stomp us into the ground. As long a shot as Blockbuster had been, I had genuinely held out hope that it would save us. Now it was clear that if we were going to get out of the crash alive, it was entirely on us,” writes Randolph.
It’s a remarkable tale, and one that comes after Hastings was previously quoted as saying he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy of Apollo 13. Regardless of whether that story holds any truth to it or not, Netflix ultimately had the last laugh. While the streaming company continues to dominate, winning an Oscar and a reported $16 billion revenue for 2018, Blockbuster in contrast filed for bankruptcy in 2010, with only one privately owned store in the world remaining open today.