December 2, 2025 • 8 mins
50 years ago, Friday nights were all about going to the movie theater. Starting in the 1980s, the weekend plan involved heading to Blockbuster to pick up a movie and watching it at home. Today, we just stay home and watch Netflix. So, how did it all evolve? This is about two guys who asked . . and answered . . one simple question.
Got an idea for a story you’d like me to cover? Feel free to DM me! On Facebook it’s Patty Steele and on Instagram Real Patty Steele
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
If you were born in the nineties or before, you
probably remember going to Blockbuster to rent movies. But that
massive company fell apart for one reason. I'm Patty Steele.
How one idea changed the way we consume entertainment. That's
next on the backstory. The backstory is back. One of
(00:22):
my favorite memories is heading to Blockbuster to rent a movie.
We'd buy some popcorn and giant boxes of movie candy,
but the thrill was being able to see movies that
had cycled out of theaters and only occasionally showed up
on TV. Now I could rent a slew of flicks,
huge films from the nineteen thirties right through to the
(00:42):
very most recent ones a few months after they were
in theaters, Movie night at home or at a pal's house.
Blockbuster was the king of home entertainment. What could be better? Hmm,
what could be better? Well, picture of this, It's nineteen
ninety seven. You rent V eight Chess tapes to watch movies.
You rewind them, or you forget to rewind them. Sometimes
(01:05):
you forget to return them. And when that happens, Blockbuster
charges late fees that add up faster than parking tickets.
In New York city. In those days, the average American
household paid forty bucks a year in late fees. It
was a lot of money. It was annoying, but for
Blockbuster it was an eight hundred million dollar revenue stream.
(01:27):
But then somebody with a better idea comes along. Enter
Read Hastings, a software entrepreneur. The story goes that he
racked up a forty dollars late fee for one movie
that he forgot to return, Apollo thirteen. Read got frustrated
and thought there's got to be a better way. So
he did the smart thing. Rather than just be annoyed,
(01:48):
he came up with a better idea. He saw a
bigger shift going on. The DVD was about to hit
the US market. The discs were thin, light, durable, and unlit.
Like vahs tape, they could be mailed. The problem was
nobody knew if DVDs could survive the journey, and mailing
envelopes at the time totally not designed for them. But
(02:11):
the motivation was what if you could skip the trip
to the strip mall and get the movie sent right
to your house. Keep in mind it was the late
nineteen nineties at this point, a time of dial up modems,
AOL and music on CDs. It really wasn't much in
the way of an Internet to download movies off of right,
the idea of mailing a DVD in a greeting card
(02:35):
envelope set off a chain reaction that would take down
an entire industry and build one of the most powerful
companies on Earth. The Netflix DVD dream should have failed,
but Read Hastings and his pal future Netflix co founder
Mark Randolph decided to do something kind of hilariously simple.
(02:56):
So they walk into a store. They buy a music
because DVDs aren't even commercially available yet, they slip it
into a standard paper greeting card envelope. They put a
stamp on it, and they mail it to Reed's house.
No bubble wrap, no special packaging, no protection, just as
CD floating through the US postal system in a flimsy
(03:20):
envelope being tossed through postal machines like a frisbee at
the beach. A few days go by and it arrives.
It's in perfect condition, not cracked, not scratched, not bent,
not warped. Imagine if it had been cracked or warped
anyway at that moment. These two guys, tiny ridiculous three
(03:40):
dollars experiment proved one thing, movies could be mailed, and
that meant you could build a rental business with no
retail stores, no lake fees, and no annoying employees asking
if you want a pre order next week's releases. So
in August nineteen ninety seven, Netflix launches as a DVD
by mail store. You don't subscribe, you don't stream, You
(04:04):
just buy DVDs online and maybe rent them because then
you'll send them back if you don't want to keep them.
But here's the thing. DVD players were crazy expensive, most
homes didn't even have one, and Blockbusters still owned Friday
Nights with its VHS tapes for a while. Netflix is
basically a cool idea with no customers. So the guys
(04:27):
go and meet with Jeff Bezos and he suggests they
sell Netflix to his company Amazon for around fifteen million dollars.
Mark wants to do it because he's afraid of competing
with Amazon, but since Reid owns seventy percent of the company,
he gives the offer a thumbs down. Smart move, so
(04:47):
they try everything to get Netflix on its feet. Free trials,
DVD sales, partnerships, crazy marketing stunts. They even offered to
run Blockbusters online division for them, which brings us to
the big offer that Blockbuster should have jumped at. In
the year two thousand, Read and Mark flight to Dallas
(05:07):
to meet with Blockbuster's CEO. They suggest a partnership. Netflix
becomes Blockbuster's online arm in their vision, and Blockbuster handles
the brick and mortar stores together, said Read and Mark,
we will dominate. It was simple, perfect balanced. The guys
wanted fifty million dollars for the Netflix Blockbuster partnership, though,
(05:31):
and Blockbuster's CEO takes one look at him and says,
you gotta be joking. No way, the Internet is just
a fad. It's overblown. He literally laughs them out of
the room. What he doesn't know is that the world
is about to change and Netflix is already building the future.
By two thousand and one, Netflix is reworking their business model.
(05:54):
Instead of renting one DVD at a time, instead of
charging late fees, they introduce something new, a monthly subscription,
unlimited rentals, nodw dates, no late fees, just mail it
back when you're done. The movies arrive in what becomes
iconic red envelopes, They show up in mailboxes promising a
(06:15):
really fun Friday night. Customers love it, word spreads, and
suddenly Netflix is everywhere. Now it's two thousand and four
and Blockbuster panics. They eliminate late fees, but it's too late.
The damage is done. Blockbuster eventually declares bankruptcy. Netflix, meantime
(06:36):
takes off, going from DVDs to streaming, to original content,
to becoming the company that pretty much defines modern entertainment,
but the entire empire binge watching, streaming, Wars, Stranger Things,
Squid Game. Everything all traces back to that one unbelievably
simple test, a CD in a paper on sent through
(07:01):
the US postal service. As for Blockbuster, yes, they declared bankruptcy.
At its peak in two thousand and four, Blockbuster had
more than eighty four thousand employees at over nine thousand stores,
with revenue topping six billion dollars a year. Today, there's
only one video store still operating in the entire world.
(07:24):
It is a Blockbuster that it's in Bend, Oregon. What's
fascinating about this story is its simplicity. Sometimes innovation isn't
from some billion dollar lab or some incredibly genius idea
sometimes it's just two guys in a store asking each other,
do you think the CD is going to break if
(07:44):
we mail it? Hope you're enjoying the Backstory with Patty Steele.
Follow or subscribe for free to get new episodes delivered automatically,
and feel free to dm me if you have a
story you'd like me to cover. On Facebook, It's Patty
Steele and on Instagram Real Patty Steele. I'm Patty Steele.
(08:06):
The Backstories a production of iHeartMedia, Premiere Networks, the Elvis
Durand Group, and Steel Trap Productions. Our producer is Doug Fraser.
Our writer Jake Kushner. We have new episodes every Tuesday
and Friday. Feel free to reach out to me with
comments and even story suggestions on Instagram at Real Patty
Steele and on Facebook at Patty Steele. Thanks for listening
(08:28):
to the Backstory with Patty Steele. The pieces of history
you didn't know you needed to know.
If you were born in the nineties or before, you
probably remember going to Blockbuster to rent movies. But that
massive company fell apart for one reason. I'm Patty Steele.
How one idea changed the way we consume entertainment. That's
next on the backstory. The backstory is back. One of
(00:22):
my favorite memories is heading to Blockbuster to rent a movie.
We'd buy some popcorn and giant boxes of movie candy,
but the thrill was being able to see movies that
had cycled out of theaters and only occasionally showed up
on TV. Now I could rent a slew of flicks,
huge films from the nineteen thirties right through to the
(00:42):
very most recent ones a few months after they were
in theaters, Movie night at home or at a pal's house.
Blockbuster was the king of home entertainment. What could be better? Hmm,
what could be better? Well, picture of this, It's nineteen
ninety seven. You rent V eight Chess tapes to watch movies.
You rewind them, or you forget to rewind them. Sometimes
(01:05):
you forget to return them. And when that happens, Blockbuster
charges late fees that add up faster than parking tickets.
In New York city. In those days, the average American
household paid forty bucks a year in late fees. It
was a lot of money. It was annoying, but for
Blockbuster it was an eight hundred million dollar revenue stream.
(01:27):
But then somebody with a better idea comes along. Enter
Read Hastings, a software entrepreneur. The story goes that he
racked up a forty dollars late fee for one movie
that he forgot to return, Apollo thirteen. Read got frustrated
and thought there's got to be a better way. So
he did the smart thing. Rather than just be annoyed,
(01:48):
he came up with a better idea. He saw a
bigger shift going on. The DVD was about to hit
the US market. The discs were thin, light, durable, and unlit.
Like vahs tape, they could be mailed. The problem was
nobody knew if DVDs could survive the journey, and mailing
envelopes at the time totally not designed for them. But
(02:11):
the motivation was what if you could skip the trip
to the strip mall and get the movie sent right
to your house. Keep in mind it was the late
nineteen nineties at this point, a time of dial up modems,
AOL and music on CDs. It really wasn't much in
the way of an Internet to download movies off of right,
the idea of mailing a DVD in a greeting card
(02:35):
envelope set off a chain reaction that would take down
an entire industry and build one of the most powerful
companies on Earth. The Netflix DVD dream should have failed,
but Read Hastings and his pal future Netflix co founder
Mark Randolph decided to do something kind of hilariously simple.
(02:56):
So they walk into a store. They buy a music
because DVDs aren't even commercially available yet, they slip it
into a standard paper greeting card envelope. They put a
stamp on it, and they mail it to Reed's house.
No bubble wrap, no special packaging, no protection, just as
CD floating through the US postal system in a flimsy
(03:20):
envelope being tossed through postal machines like a frisbee at
the beach. A few days go by and it arrives.
It's in perfect condition, not cracked, not scratched, not bent,
not warped. Imagine if it had been cracked or warped
anyway at that moment. These two guys, tiny ridiculous three
(03:40):
dollars experiment proved one thing, movies could be mailed, and
that meant you could build a rental business with no
retail stores, no lake fees, and no annoying employees asking
if you want a pre order next week's releases. So
in August nineteen ninety seven, Netflix launches as a DVD
by mail store. You don't subscribe, you don't stream, You
(04:04):
just buy DVDs online and maybe rent them because then
you'll send them back if you don't want to keep them.
But here's the thing. DVD players were crazy expensive, most
homes didn't even have one, and Blockbusters still owned Friday
Nights with its VHS tapes for a while. Netflix is
basically a cool idea with no customers. So the guys
(04:27):
go and meet with Jeff Bezos and he suggests they
sell Netflix to his company Amazon for around fifteen million dollars.
Mark wants to do it because he's afraid of competing
with Amazon, but since Reid owns seventy percent of the company,
he gives the offer a thumbs down. Smart move, so
(04:47):
they try everything to get Netflix on its feet. Free trials,
DVD sales, partnerships, crazy marketing stunts. They even offered to
run Blockbusters online division for them, which brings us to
the big offer that Blockbuster should have jumped at. In
the year two thousand, Read and Mark flight to Dallas
(05:07):
to meet with Blockbuster's CEO. They suggest a partnership. Netflix
becomes Blockbuster's online arm in their vision, and Blockbuster handles
the brick and mortar stores together, said Read and Mark,
we will dominate. It was simple, perfect balanced. The guys
wanted fifty million dollars for the Netflix Blockbuster partnership, though,
(05:31):
and Blockbuster's CEO takes one look at him and says,
you gotta be joking. No way, the Internet is just
a fad. It's overblown. He literally laughs them out of
the room. What he doesn't know is that the world
is about to change and Netflix is already building the future.
By two thousand and one, Netflix is reworking their business model.
(05:54):
Instead of renting one DVD at a time, instead of
charging late fees, they introduce something new, a monthly subscription,
unlimited rentals, nodw dates, no late fees, just mail it
back when you're done. The movies arrive in what becomes
iconic red envelopes, They show up in mailboxes promising a
(06:15):
really fun Friday night. Customers love it, word spreads, and
suddenly Netflix is everywhere. Now it's two thousand and four
and Blockbuster panics. They eliminate late fees, but it's too late.
The damage is done. Blockbuster eventually declares bankruptcy. Netflix, meantime
(06:36):
takes off, going from DVDs to streaming, to original content,
to becoming the company that pretty much defines modern entertainment,
but the entire empire binge watching, streaming, Wars, Stranger Things,
Squid Game. Everything all traces back to that one unbelievably
simple test, a CD in a paper on sent through
(07:01):
the US postal service. As for Blockbuster, yes, they declared bankruptcy.
At its peak in two thousand and four, Blockbuster had
more than eighty four thousand employees at over nine thousand stores,
with revenue topping six billion dollars a year. Today, there's
only one video store still operating in the entire world.
(07:24):
It is a Blockbuster that it's in Bend, Oregon. What's
fascinating about this story is its simplicity. Sometimes innovation isn't
from some billion dollar lab or some incredibly genius idea
sometimes it's just two guys in a store asking each other,
do you think the CD is going to break if
(07:44):
we mail it? Hope you're enjoying the Backstory with Patty Steele.
Follow or subscribe for free to get new episodes delivered automatically,
and feel free to dm me if you have a
story you'd like me to cover. On Facebook, It's Patty
Steele and on Instagram Real Patty Steele. I'm Patty Steele.
(08:06):
The Backstories a production of iHeartMedia, Premiere Networks, the Elvis
Durand Group, and Steel Trap Productions. Our producer is Doug Fraser.
Our writer Jake Kushner. We have new episodes every Tuesday
and Friday. Feel free to reach out to me with
comments and even story suggestions on Instagram at Real Patty
Steele and on Facebook at Patty Steele. Thanks for listening
(08:28):
to the Backstory with Patty Steele. The pieces of history
you didn't know you needed to know.
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