Internet connections were once too slow for people to stream movies from Netflix. Instead, they borrowed videotapes from Blockbuster to watch at home. In September 2000, after months of trying to set up a meeting, Netflix co-founder Reed Hastings and CFO Barry McCarthy finally got together with Blockbuster CEO John Antioco. Netflix was in trouble. It was on track to lose $50 million that year while tens of other internet-based companies just went bust in the dot-com crash. Blockbuster on the other hand, after having just raised $465 million through an IPO the previous year, was doing very well.
Reed and Barry hoped to work with John. They could develop and grow the online arm of Blockbuster, while John and his team maintained its stores. The Blockbuster team presumed the Internet hysteria was overblown, so they were not interested in such an arrangement. Instead, they asked how much it would cost for Blockbuster to buy Netflix. When Reed and Barry asked for $50 million, John Antioco was struggling not to laugh. One of his team members claimed that online business would never make any money. The meeting ended, and Reed and Barry drove quietly to the airport, disappointed. Ten years later, Blockbuster filed for bankruptcy.
Blockbuster represented an old way of thinking: that we can only buy, rent or sell things we can touch and hold. It took a leap of imagination to consider consuming music and film without their physical manifestations like CDs, tapes or DVDs. When the internet came along, streaming and Netflix showed the world another way.
