money & economicsWikipedia1997 · Scotts Valley, California, USA

Netflix was not born from a $40 Blockbuster late fee, despite the popular story

the gist

A widely told origin story says Netflix co-founder Reed Hastings was hit with a $40 late fee by Blockbuster and decided to start a rental company in response. Hastings has said he invented the story to explain Netflix's value to people, the idea that renting should not come with penalties. The company's founders were actually inspired by Amazon's model of online retail and mail delivery. Netflix began in 1997 as a DVD-by-mail rental service, and it later moved into streaming, which eventually made the original business obsolete.

so what

The story is a useful lesson in how companies explain themselves. A simple anecdote can make a value proposition memorable even when it is not literally true.

fun fact

Netflix began in 1997 as a DVD-by-mail rental service.

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Illustrative photo · Coolcaesar at English Wikipedia, CC BY-SA 3.0, via Wikimedia Commons