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NewsTranscript
00:00You may not find an example of Netflix's business even if you look for it.
00:04When Netflix started its business, its competitor Blockbuster had 60,000 employees and more than 9000 stores in the world.
00:14When it comes to sales, they used to make 600 crore dollars a year without doing anything.
00:21On the other hand, Netflix did not have enough money to buy a new sofa in its office.
00:27In this situation, Netflix was fed up and wanted to sell its company Blockbuster.
00:32But from then on, the Blockbuster CEO started laughing out loud.
00:36History is witness that the Blockbuster that was standing in front of them like a mountain,
00:42the same Blockbuster was forced to kneel down.
00:46Just a few years later, Netflix erased the name and mark of Blockbuster.
00:51And today it is a company of 28,000 crore dollars.
00:55And how did all this become possible?
00:58Welcome back to Zem TV's videos.
01:01Viewers, this is the story of 1997 when the internet business was booming.
01:06Jeff Bezos used to sell books on the internet through Amazon and he was getting a lot of success.
01:13Mark Randolph also wanted to start an internet business.
01:17But the problem was which business to start.
01:20For many months, wherever Mark went, he always had a notebook with him
01:24in which he would write new business ideas and then share those ideas with his friend Reed Hastings.
01:31Mark had countless ideas from pet food to baseball bats on the internet.
01:38But Reed Hastings did not like any of these ideas.
01:42Reed wanted him to start a business on the internet
01:46For this, the customer had to find him once and then the same customer earned him again and again.
01:53This process of sharing ideas continued for many months,
01:56but then finally both of them understood an idea.
02:01Videotapes, which was the only means of entertainment in that era.
02:05People would go to their nearest Blockbuster store on weekends.
02:09There, after selecting their favorite movie for hours, they would take it for rent.
02:14And if the videotape was not returned on time, it would be fined.
02:19When he got this idea, it was a $40 fine on Reed Hastings,
02:24which he had to pay to Blockbuster for returning the videotape late.
02:29Reed believed that there was a need for a change in this industry
02:33and the idea of renting movies on the internet would definitely work.
02:37But the problem was that each and every video cassette was very heavy
02:41and it could be very costly to post it.
02:44And the loss of the tapes that would break during the postage was different.
02:48This was a very big problem.
02:50So now Mark and Reed started seeing their new internet business fail before it even started.
02:57A few weeks later, through a tech magazine, they learned about DVD technology for the first time.
03:02It was much lighter and cheaper than a video cassette,
03:05and it could be very cheap to post them.
03:09Reed Hastings thought that instead of videotapes,
03:12if movies were put on DVDs and given for rent, it would be more profitable.
03:17And this is where Netflix's idea began.
03:21Their business model was quite simple.
03:23They would display a very large collection of DVDs on the website,
03:27and whenever an order came, the DVDs would reach the customer's door in two days.
03:33A prepaid return envelope would also be placed in the same envelope,
03:37which would make it easier for the customer to re-post the DVD.
03:41The idea was simple, but to start it, money was needed,
03:45and both Mark and Reed did not have this investment.
03:49Somehow, they set up a small low-budget office,
03:54which included cheap folding tables and second-hand furniture.
03:58Employees were kept on a low salary,
04:00with the promise that if the business went well, they would be given a share in the business.
04:05This small team of Netflix created a website in the first few months
04:10and started buying DVDs.
04:12After months of hard work, they were finally ready to launch Netflix for the first time.
04:19Before the launch, they lined up interviews with news outlets,
04:23so that as soon as the launch, they would get a lot of media coverage.
04:27On August 29, 1997, they published the website at exactly 9 in the morning.
04:33They also installed a bell that would ring on every new order.
04:38Mark placed the first order himself, and the bell started ringing for the first time.
04:43After a minute, the bell rang again, and this time it was a real customer.
04:47The Netflix team unknowingly posted comments on various internet forums,
04:52in which they introduced Netflix's DVD-by-mail service,
04:57which attracted more movie fans to Netflix.
05:01The bell kept ringing for the first 15 minutes, but then the Netflix website crashed.
05:07In those days, servers were kept in the office, not near the professional hosting service.
05:13This was a sign that Netflix's server was not able to handle more traffic,
05:17that is, they had to install more servers.
05:20At the same time, 8 new servers were installed from the local store,
05:24and the website was re-lived.
05:27On the first day, Netflix received 137 orders, which was much more than they expected.
05:34And because the website had been shut down for several hours due to heavy load,
05:39that is, there were actually more orders than this.
05:42They needed to solve their website's problems so that it didn't crash again and again.
05:47The first month of Netflix went well, but what Mark and Reed thought didn't happen.
05:54Because their first month's sale was $94,000,
05:58but from this, the sale to buy a DVD at rent was only $1,000.
06:03Most people were not buying a DVD at rent, but wanted to buy the entire DVD directly.
06:09They had given both options to the customers,
06:12that either they buy a $25 DVD or buy it at rent for $4.
06:18Mark and Reed wanted more people to use their rental service,
06:22because with this, only one DVD will go to rent again and again,
06:25and until it is not damaged, their profit will continue to grow.
06:30They had a good idea that in the beginning they were able to sell DVDs only for this reason,
06:36because there is no other competitor in the market.
06:39A few weeks later, they got a call from Amazon's Jeff Bezos.
06:43Jeff Bezos, who had already set foot in the online book market,
06:49he also wanted to capture the DVD market.
06:52Jeff Bezos wanted to buy Netflix,
06:55which would give him a running business of selling DVDs.
06:59On the other hand, Mark and Reed also wanted to give DVDs at rent,
07:03not sell them.
07:05Therefore, they shared the DVD selling part of Netflix with Amazon,
07:10and in return, if anyone wanted DVDs at rent on Amazon,
07:14they would be sent to Netflix.
07:17On the one hand, there was a long-term benefit in this,
07:19while a near loss,
07:21because the portion of Netflix that was earning them,
07:24they gave it to Amazon.
07:26But even if they didn't give it to Amazon,
07:29Amazon would have set up its own new business,
07:32which would then come in direct competition with Netflix.
07:36Now Mark and Reed put all their focus on renting DVDs.
07:41They started promotional campaigns,
07:44but they failed badly.
07:46Netflix contacted the famous companies that make DVD players,
07:50such as Toshiba and Sony,
07:52and cracked a deal with them.
07:54The deal was that whoever would buy their DVD players,
07:58would be given a Netflix coupon code,
08:01with which they would be able to rent 10 free DVDs.
08:04But this promotion failed because
08:07the coupon code on the DVD players was not stuck inside the box,
08:10but was stuck outside the box.
08:13That is, even if no DVD player bought it,
08:16they could see the Netflix coupon code from the outside.
08:20Because of this, in the beginning,
08:22Netflix had to give a lot of DVDs for free.
08:25And on top of that,
08:26only 5% of these new customers became regular customers of Netflix.
08:31That is, it was a very bad deal.
08:34On top of that, the deal with Amazon,
08:36they were sending customers to Amazon to sell DVDs,
08:40but very few customers were coming to Netflix from Amazon to rent DVDs.
08:46After this, there was an incident in American politics
08:49that Netflix could have completely cashed out.
08:52But something happened here too,
08:54which Netflix had no idea about.
08:57At that time, American President Bill Clinton,
09:00an intern at the White House,
09:02fell in love affair with Monica.
09:04And the secret of this story was revealed.
09:06Hearings were being held in court regarding this matter,
09:09where Bill Clinton's affair was proven.
09:12And Bill Clinton was removed from the presidency.
09:15At that time, the whole of America was looking for a video of this court trial.
09:19Netflix took advantage of the opportunity and wanted to surprise,
09:23and put the trial video on their website through DVDs.
09:27The arrow had hit the target.
09:29And Netflix got countless orders,
09:32but the problem was that the company that was writing this video on DVD,
09:37the same company also worked on adult movies.
09:40And by mistake, instead of the trial video,
09:43they wrote the adult movie on the DVD and sent it to Netflix.
09:47And Netflix, who was rich in gold,
09:49dispatched all these DVDs to its customers without checking.
09:53When this matter was revealed,
09:55Netflix apologized to all the customers,
09:57but by then it had already been damaged.
10:00It was more damaged than the benefit of the promotion.
10:05Netflix had not yet earned the idea of renting DVDs,
10:09and every one of their promotional campaigns was failing badly.
10:13At that moment, an idea came to Mark's mind.
10:17An idea that was probably going to change everything.
10:21So far, Netflix was doing exactly what Blockbuster was doing,
10:25i.e. renting DVDs.
10:27The only difference was the internet,
10:29because this was what Blockbuster was doing through physical stores,
10:33and Netflix through the internet.
10:36Mark got the idea that why don't we start a subscription system,
10:40in which customers will have to pay a fixed monthly fee,
10:43and in return, four DVDs will be given to them.
10:47This will ensure that four DVDs will be with the customers at all times,
10:51and they can return the old one with their favorite DVD whenever they want.
10:56Obviously, this will reduce the pressure of late fees on customers.
11:00Fortunately, this idea worked.
11:03On the very first day, 90% of the people who saw this promotion subscribed.
11:09These were the customers for whom Mark and Reed had worked so hard.
11:14Due to subscription, Netflix's earnings increased rapidly,
11:18and one customer started paying them every month.
11:21On the other hand, Blockbuster, their biggest competitor,
11:25was running more than 9,000 physical stores,
11:28and they used to get $800 million annually in just late fees.
11:33While at that time, Netflix's total sales were only $5 million.
11:39This is a very big difference.
11:41It is said that if anyone was behind Netflix's success,
11:45it was their own competitor, Blockbuster.
11:48Because if Blockbuster wanted, he would have easily defeated Netflix.
11:54But Blockbuster's laziness took him down.
11:57Blockbuster was taking internet business very lightly.
12:01And because they were running their own physical stores,
12:04that's why they didn't feel the need for a small internet business.
12:09Netflix's owners knew very well that their business was only running
12:15until Blockbuster started DVD-by-mail service.
12:19So they made a plan that why don't we sell our entire running business to Blockbuster.
12:26This will give them a lot of money,
12:29and they will continue to work in this business.
12:32Obviously, on Blockbuster's payroll.
12:35So now they fixed a meeting with Blockbuster's CEO.
12:38First, Blockbuster's CEO quietly listened to their offer,
12:42and then demanded their demand.
12:45Reed Hastings said,
12:47$50 million.
12:49Hearing this, Blockbuster's CEO started laughing loudly.
12:53Mark and Reed realized that Blockbuster had no interest in buying Netflix.
13:00And they had to leave empty-handed.
13:03Time passed and Netflix's subscriptions kept increasing.
13:08But Blockbuster was adamant that nothing like an internet business could last long.
13:14But then in 2004, Blockbuster realized for the first time
13:18that gradually their customers were signing up for Netflix.
13:23Where they get their favorite DVD sitting at home.
13:27At this point, Blockbuster started its own DVD-by-mail service.
13:32But now it was too late.
13:34It had taken Netflix 7 years to understand the behavior of its customers.
13:39They installed such algorithms on their website
13:43so that customers could only see the movies they were interested in.
13:48And obviously, Blockbuster couldn't do all this so quickly.
13:53In 2007, when Blockbuster was promoting its DVD-by-mail service,
13:58Netflix was in the process of launching a video-on-demand service.
14:03Like streaming movies on the internet.
14:06That is, not just DVDs.
14:09Come directly, watch a movie, and the story is over.
14:12For the first time in the world, a streaming site was doing this.
14:16With this, Netflix started getting customers from all over the world outside of America.
14:21Because they could only post DVD-by-mail in America.
14:25On the other hand, Blockbuster was counting its last breaths.
14:29They started taking such rapid steps that their business was greatly affected.
14:35Like removing late fees like Netflix,
14:38or even forgiving rewind fees for video cassettes.
14:42When a customer returned the video tape without rewinding,
14:46Blockbuster took separate money to rewind again.
14:50That is, Blockbuster was squeezing customers for so many years to get money out of them.
14:56And at the same time, Netflix was trying to improve its customer experience.
15:01Gradually, more and more customers started signing up for Netflix.
15:05And in 2010, Blockbuster's Diwali came out.
15:08And they filed for bankruptcy.
15:11Blockbuster took a long time to change itself with technology.
15:15And this step was late for its billion-dollar empire.
15:19Actually, what Blockbuster did was a part of human psychology.
15:24When our business is running, we want it to keep running like this.
15:29And they are afraid of changing themselves.
15:31While in the meantime, someone else comes and takes advantage of it.
15:35And fills the gap in the market.
15:38The same happened with Nokia Mobile and Kodak Photography.
15:42They also did not bring change in themselves with technology.
15:46And other companies left them behind.
15:49Today, Netflix has 13,000 employees all over the world.
15:53The company's wealth is more than $28 billion.
15:57And it sells for nearly $1.9 billion annually.
16:01That is, the price at which the entire Netflix Blockbuster was offered.
16:05Netflix has sold more than 380 times more sales than that only last year.
16:11This is the last store of Blockbuster in Oregon.
16:14Which was actually one of those 9,000 stores.
16:18All the company-operated stores are closed.
16:21But this last store still gives DVDs on rent.
16:25Today, people go here to refresh their memories as a tourist spot instead of buying DVDs.
16:32I hope you will like and share this video of ZemTV.
16:37Thank you very much for your loving comments.
16:40See you in the next great video.