Netflix Finds Value In Contrarian Approach

The recipe for Netflix's success involves an incredible amount of luck and perfect timing, evangelistic subscribers that spread the word about the company, the entrepreneurial spirit, and a laser focus on the core of the business. If any one ingredient were absent, Netflix would likely be a laggard and not the leader in the movie rental and Internet streaming space.

"The movie is the same. How you get it, the amount you pay for it, and the experience you have acquiring it is where Netflix wants to differentiate," said Netflix spokesman Steve Swasey. "Netflix wants to make it the most enjoyable experience with the greatest value and convenience at the lowest cost."

Is It Luck?

Hastings got the idea for Netflix after his startup company Pure Software was acquired by Rational Software in 1997, prompted by a late fee for a movie he had rented from a video store.

"It was six weeks late and I owed the video store $40. I had misplaced the cassette. It was all my fault. I didn't want to tell my wife about it," Hastings told The New York Times in late 2006. "And I said to myself, 'I'm going to compromise the integrity of my marriage over a late fee?' Later, on my way to the gym, I realized they had a much better business model. You could pay $30 or $40 a month and work out as little or as much as you wanted."

While the idea has certainly become a very profitable one in the last 12 years, Netflix spokesman Steve Swasey admits that Netflix was lucky that companies like DVD-rental giant Blockbuster were late to the DVD-by-mail game.