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Havish Gupta
Stealth • 6m
How Blockbuster's One Offer Almost Killed Netflix! So Blockbuster was founded in 1985 as a movie DVD rental company. They had huge stores, stocks of all movies, and movie reviews from their employees. It was good place to shop at but the pain point was that they used to charge incredibly high late fees (made over $800 million in revenue in 2004 due to it) Blockbuster was later acquired by Viacom in 1994 for $8.4 billion. Meanwhile, in 1997, Reed Hastings and Marc Randolph observed that every .com company was becoming huge and thus started an online DVD renting startup called Netflix! Their USP was that they shifted to CDs, which were easy to store and didn't charge late fees. This worked well, and Netflix began to grow. Blockbuster was initially not scared of them and also rejected an offer to acquire Netflix for $50 million. That was their biggest mistake, as that same company is now worth $300 billion! By 2006, Netflix had reached 2 million users, but that was going to drop because, as in the same year, Blockbuster launched an offer that allowed subscribers to return DVDs and exchange them for another DVD for free. This offer was awesome, and Netflix started to struggle. The issue here was that Blockbuster still lost $2 every time someone exchanged a DVD, and it was already about a billion dollars in debt. Still, they continued it, thinking that at scale, this would become profitable. But the But the Upcoming 2008 Financial Crises made it hard for them to survive and as a result, Blockbuster had to eventually filed for chapter 11 bankruptcy in 2010 and Finnally closed in 2013. Also That Blockbuster's offer was good that Hasting, Netflix's founder said that, "it hadn’t been for their debt, they could have killed us."
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