Netflix

=== Launch as a mail-based rental business (1997–2006) ===
[[File:Marc Randolph by Gage Skidmore.jpg|right|thumb|Marc Randolph, co-founder of Netflix and the first CEO of the company]]
[[File:Reed Hastings, Web 2.0 Conference.jpg|right|thumb|Reed Hastings, co-founder and Executive Chairman]]
Netflix was founded by [[Marc Randolph]] and [[Reed Hastings]] on August 29, 1997, in [[Scotts Valley, California]]. Hastings, a computer scientist and mathematician, was a co-founder of [[Pure Software]], which was acquired by [[Rational Software]] that year for $750&nbsp;million, the then biggest acquisition in [[Silicon Valley]] history.<ref>{{cite news |url=https://www.inc.com/magazine/20051201/qa-hastings.html |title=How I Did It: Reed Hastings, Netflix |first=Reed |last=Hastings |author-link=Reed Hastings |work=[[Inc. (magazine)|Inc.]] |date=December 1, 2005 |access-date=September 11, 2021 |archive-date=June 19, 2020 |archive-url=https://web.archive.org/web/20200619014719/https://www.inc.com/magazine/20051201/qa-hastings.html |url-status=live}}</ref> Randolph had worked as a marketing director for [[Pure Software]] after Pure Atria acquired a company where Randolph worked. He was previously a co-founder of [[MicroWarehouse]], a computer mail-order company, as well as vice president of marketing for [[Borland]].<ref name="started">{{cite news |url=https://www.bizjournals.com/sanjose/news/2014/01/08/netflixs-first-ceo-on-reed-hastings.html |title=Netflix's first CEO on Reed Hastings and how the company really got started Executive of the Year 2013 |first=Jon |last=Xavier |work=[[American City Business Journals]] |date=January 9, 2014 |access-date=September 11, 2021 |archive-date=January 14, 2021 |archive-url=https://web.archive.org/web/20210114192703/https://www.bizjournals.com/sanjose/news/2014/01/08/netflixs-first-ceo-on-reed-hastings.html |url-status=live}}</ref><ref>{{Cite news |url=https://www.nytimes.com/2019/09/15/business/media/netflix-chief-executive-reed-hastings-marc-randolph.html |archive-url=https://web.archive.org/web/20190915210802/https://www.nytimes.com/2019/09/15/business/media/netflix-chief-executive-reed-hastings-marc-randolph.html |archive-date=September 15, 2019 |url-access=subscription |url-status=live |title=Long Before 'Netflix and Chill,' He Was the Netflix C.E.O. |first=Nicole |last=Sperling |work=[[The New York Times]] |date=September 15, 2019}}</ref> Hastings and Randolph came up with the idea for Netflix while [[carpool]]ing between their homes in [[Santa Cruz, California]], and Pure Atria's headquarters in Sunnyvale.<ref name="Netflixed">{{Cite book |url=https://books.google.com/books?id=sodDcL2yhsIC |title=Netflixed: The Epic Battle for America's Eyeballs |last=Keating |first=Gina |publisher=[[Penguin Books]] |date=October 11, 2012 |isbn=978-1-101-60143-3 |access-date=September 30, 2021 |archive-date=December 18, 2023 |archive-url=https://web.archive.org/web/20231218083417/https://books.google.com/books?id=sodDcL2yhsIC |url-status=live }}</ref> [[Patty McCord]], later head of [[human resources]] at Netflix, was also in the carpool group.<ref>{{cite news |url=https://www.cnbc.com/2017/05/23/netflix-ceo-reed-hastings-on-how-the-company-was-born.html |title=Reed Hastings' story about the founding of Netflix has changed several times |first=Michelle |last=Castillo |date=May 23, 2017 |url-status=live |archive-url=https://web.archive.org/web/20171102211235/https://www.cnbc.com/2017/05/23/netflix-ceo-reed-hastings-on-how-the-company-was-born.html |archive-date=November 2, 2017}}</ref> Randolph admired [[Amazon (company)|Amazon]] and wanted to find a large category of portable items to sell over the [[Internet]] using a similar model. Hastings and Randolph considered and rejected selling and renting [[VHS]] as too expensive to stock and too delicate to ship.<ref name="started" /> When they heard about DVDs, first introduced in the United States in early 1997, they tested the concept of selling or renting DVDs by mail by mailing a compact disc to Hastings's house in Santa Cruz.<ref name="started" /> When the disc arrived intact, they decided to enter the $16&nbsp;billion [[Home video|Home-video]] sales and rental industry.<ref name="started" /><ref name="Netflixed" /> Hastings is often quoted saying that he decided to start Netflix after being fined $40 at a Blockbuster store for being late to return a copy of [[Apollo 13 (film)|''Apollo 13'']].<ref name="Netflixed" /> Hastings invested $2.5&nbsp;million into Netflix from the sale of Pure Atria.<ref>{{cite news |url=https://money.cnn.com/magazines/fsb/fsb_archive/2002/12/01/333870/ |title=The Great Race No startup has cashed in on the DVD's rapid growth more than Netflix. Now Blockbuster and Wal-Mart want in. Can it outrun its big rivals? |first=Alan |last=Cohen |publisher=[[CNN]] |date=December 1, 2002 |access-date=September 11, 2021 |archive-date=July 12, 2023 |archive-url=https://web.archive.org/web/20230712121536/https://money.cnn.com/magazines/fsb/fsb_archive/2002/12/01/333870/ |url-status=live}}</ref><ref name="Netflixed" /> Netflix launched as the first DVD rental and sales website with 30 employees and 925 titles available—nearly all DVDs published.<ref name="Netflixed" /><ref>{{Cite news |url=https://qz.com/1248806/early-images-of-netflix-com-show-how-far-the-service-has-come-in-its-20-years/ |title=Early images of Netflix.com show how far the service has come in its 20 years |first=Ashley |last=Rodriguez |work=[[Quartz (publication)|Quartz]] |date=April 14, 2018 |access-date=September 11, 2021 |archive-date=May 25, 2023 |archive-url=https://web.archive.org/web/20230525163354/https://qz.com/1248806/early-images-of-netflix-com-show-how-far-the-service-has-come-in-its-20-years |url-status=live}}</ref><ref>{{Cite news |url=https://www.wired.com/story/netflix-20th-anniversary/ |title=Netflix Is Turning 20—But Its Birthday Doesn't Matter |first1=Brian |last1=Barrett |first2=Jason |last2=Parham |first3=Brian |last3=Raftery |first4=Peter |last4=Rubin |first5=Angela |last5=Watercutter |magazine=[[Wired (magazine)|Wired]] |date=August 29, 2017 |url-access=limited |access-date=September 11, 2021 |archive-date=November 25, 2023 |archive-url=https://web.archive.org/web/20231125053447/https://www.wired.com/story/netflix-20th-anniversary/ |url-status=live}}</ref> Randolph and Hastings met with [[Jeff Bezos]], where [[Amazon (company)|Amazon]] offered to acquire Netflix for between $14 and $16 million. Fearing competition from Amazon, Randolph at first thought the offer was fair, but Hastings, who owned 70% of the company, turned it down on the plane ride home.<ref name=chaos>{{Cite news |url=https://www.forbes.com/sites/hayleycuccinello/2019/09/17/netflix-cofounder-marc-randolph-memoir/ |title=Netflix Cofounder Marc Randolph On Why He Left, Becoming A Mentor And His Love Of Chaos |first=Hayley C. |last=Cuccinello |work=[[Forbes]] |date=September 17, 2019 |url-access=limited |access-date=September 11, 2021 |archive-date=June 1, 2023 |archive-url=https://web.archive.org/web/20230601140103/https://www.forbes.com/sites/hayleycuccinello/2019/09/17/netflix-cofounder-marc-randolph-memoir/ |url-status=live}}</ref><ref>{{Cite news |url=https://www.cnbc.com/2019/09/21/why-netflix-co-founders-turned-down-jeff-bezos-to-buy-it.html |title=Why Netflix co-founders turned down Jeff Bezos' offer to buy the company |first=Jade |last=Scipioni |publisher=[[CNBC]] |date=September 21, 2019 |access-date=September 11, 2021 |archive-date=April 25, 2023 |archive-url=https://web.archive.org/web/20230425235637/https://www.cnbc.com/2019/09/21/why-netflix-co-founders-turned-down-jeff-bezos-to-buy-it.html |url-status=live}}</ref>

Initially, Netflix offered a per-rental model for each DVD but introduced a monthly subscription concept in September 1999.<ref>{{cite news |first=Jeffrey M. |last=O'Brien |url=https://www.wired.com/2002/12/netflix-6/ |title=The Netflix Effect |magazine=[[Wired (magazine)|Wired]] |date=December 1, 2002 |url-status=live |archive-url=https://web.archive.org/web/20130905045540/http://www.wired.com/wired/archive/10.12/netflix.html |archive-date=September 5, 2013 |url-access=limited}}</ref> The per-rental model was dropped by early 2000, allowing the company to focus on the business model of flat-fee unlimited rentals without due dates, late fees, shipping and handling fees, or per-title rental fees.<ref>{{Cite news |url=https://www.cnbc.com/2020/09/22/how-netflix-almost-lost-the-movie-rental-wars-to-blockbuster.html |title=Netflix didn't kill Blockbuster — how Netflix almost lost the movie rental wars |first=Tom |last=Huddleston Jr. |publisher=[[CNBC]] |date=September 22, 2020 |access-date=September 11, 2021 |archive-date=May 24, 2023 |archive-url=https://web.archive.org/web/20230524072116/https://www.cnbc.com/2020/09/22/how-netflix-almost-lost-the-movie-rental-wars-to-blockbuster.html |url-status=live}}</ref> In September 2000, during the [[dot-com bubble]], while Netflix was suffering losses, Hastings and Randolph offered to sell the company to [[Blockbuster (retailer)|Blockbuster]] for $50 million. [[John Antioco]], CEO of Blockbuster, thought the offer was a joke and declined, saying, "The dot-com hysteria is completely overblown."<ref>{{Cite news |url=https://www.businessinsider.com/blockbuster-ceo-passed-up-chance-to-buy-netflix-for-50-million-2015-7 |title=Blockbuster's CEO once passed up a chance to buy Netflix for only $50 million |first=Celena |last=Chong |work=[[Business Insider]] |date=July 17, 2015 |access-date=September 11, 2021 |archive-date=June 27, 2023 |archive-url=https://web.archive.org/web/20230627005503/https://www.businessinsider.com/blockbuster-ceo-passed-up-chance-to-buy-netflix-for-50-million-2015-7 |url-status=live}}</ref><ref>{{Cite news |url=https://www.inc.com/minda-zetlin/netflix-blockbuster-meeting-marc-randolph-reed-hastings-john-antioco.html |title=Blockbuster Could Have Bought Netflix for $50 Million, but the CEO Thought It Was a Joke |first=MINDA |last=ZETLIN |work=[[Inc. (magazine)|Inc.]] |date=September 20, 2019 |access-date=September 11, 2021 |archive-date=November 16, 2023 |archive-url=https://web.archive.org/web/20231116111041/https://www.inc.com/minda-zetlin/netflix-blockbuster-meeting-marc-randolph-reed-hastings-john-antioco.html |url-status=live}}</ref> While Netflix experienced fast growth in early 2001, the continued effects of the dot-com bubble collapse and the [[September 11 attacks]] caused the company to hold off plans for its [[initial public offering]] (IPO) and to lay off one-third of its 120 employees.<ref>{{cite news |url=https://www.fastcompany.com/3056662/she-created-netflixs-culture-and-it-ultimately-got-her-fired |title=She Created Netflix's Culture And It Ultimately Got Her Fired |first=Vivian |last=Giang |work=[[Fast Company]] |date=February 17, 2016 |access-date=September 11, 2021 |archive-date=July 12, 2023 |archive-url=https://web.archive.org/web/20230712123010/https://www.fastcompany.com/3056662/she-created-netflixs-culture-and-it-ultimately-got-her-fired |url-status=live}}</ref>

[[File:Netflixenvelope.jpg|thumb|Opened Netflix rental envelope containing a DVD copy of ''[[Coach Carter]]'' (2005)|left|250x250px]]
DVD players were a popular gift for holiday sales in late 2001, and demand for DVD subscription services were "growing like crazy", according to chief talent officer [[Patty McCord]].<ref>{{Cite news |url=https://hbr.org/2014/01/how-netflix-reinvented-hr |title=How Netflix Reinvented HR |first=Patty |last=McCord |author-link=Patty McCord |work=[[Harvard Business Review]] |date=September 2014 |access-date=March 28, 2018 |archive-date=May 4, 2020 |archive-url=https://web.archive.org/web/20200504235956/https://hbr.org/2014/01/how-netflix-reinvented-hr |url-status=live}}</ref> The company went [[public company|public]] on May 23, 2002, selling 5.5&nbsp;million shares of [[common stock]] at US$15.00 per share.<ref>{{Cite press release |url=https://ir.netflix.net/investor-news-and-events/financial-releases/press-release-details/2002/Netflix-Announces-Initial-Public-Offering/default.aspx |title=Netflix Announces Initial Public Offering |date=May 22, 2002 |access-date=September 9, 2021 |archive-date=September 9, 2021 |archive-url=https://web.archive.org/web/20210909005749/https://ir.netflix.net/investor-news-and-events/financial-releases/press-release-details/2002/Netflix-Announces-Initial-Public-Offering/default.aspx |url-status=live}}</ref> In 2003, Netflix was issued a patent by the U.S. Patent & Trademark Office to cover its subscription rental service and several extensions.<ref>{{Cite web |url=https://www.cnet.com/culture/netflix-sews-up-rental-patent/ |title=Netflix sews up rental patent |first=Jim |last=Hu |publisher=CNET |date=June 24, 2003 |access-date=December 11, 2023 |archive-date=August 14, 2023 |archive-url=https://web.archive.org/web/20230814075206/https://www.cnet.com/culture/netflix-sews-up-rental-patent/ |url-status=live}}</ref> Netflix posted its first profit in 2003, earning $6.5 million on revenues of $272 million; by 2004, profit had increased to $49 million on over $500 million in revenues.<ref name="nbcnews lowersubs 2007">{{cite news |url=https://www.nbcnews.com/id/wbna19902836 |title=Netflix lowers its online DVD rental fees |agency=[[Associated Press]] |via=[[NBC News]] |date=July 22, 2007 |access-date=October 11, 2021 |archive-date=October 26, 2021 |archive-url=https://web.archive.org/web/20211026120159/https://www.nbcnews.com/id/wbna19902836 |url-status=live}}</ref> In 2005, 35,000 different films were available, and Netflix shipped 1&nbsp;million DVDs out every day.<ref>{{Cite news |url=https://www.economist.com/business/2005/07/07/movies-to-go |title=Movies to go |newspaper=[[The Economist]] |date=July 7, 2005 |url-status=live |archive-url=https://web.archive.org/web/20081206232113/http://www.economist.com/displaystory.cfm?story_id=4149765 |archive-date=December 6, 2008}}</ref>

In 2004, Blockbuster introduced a DVD rental service, which not only allowed users to check out titles through online sites but allowed for them to return them at [[Brick and mortar|brick and-mortar]] stores.<ref name="cnbc blockbuster war" /> By 2006, Blockbuster's service reached two million users, and while trailing Netflix's subscriber count, was drawing business away from Netflix. Netflix lowered fees in 2007.<ref name="nbcnews lowersubs 2007" /> While it was an [[urban legend]] that Netflix ultimately "killed" Blockbuster in the DVD rental market, Blockbuster's debt load and internal disagreements hurt the company.<ref name="cnbc blockbuster war">{{cite web |url=https://www.cnbc.com/2020/09/22/how-netflix-almost-lost-the-movie-rental-wars-to-blockbuster.html |title=Netflix didn't kill Blockbuster — how Netflix almost lost the movie rental wars |first=Tom |last=Huddleston Jr. |publisher=[[CNBC]] |date=September 22, 2020 |access-date=September 11, 2021 |archive-date=May 24, 2023 |archive-url=https://web.archive.org/web/20230524072116/https://www.cnbc.com/2020/09/22/how-netflix-almost-lost-the-movie-rental-wars-to-blockbuster.html |url-status=live}}</ref>

On April 4, 2006, Netflix filed a [[patent infringement]] lawsuit in which it demanded a [[jury trial]] in the [[United States District Court for the Northern District of California]], alleging that [[Blockbuster (retailer)|Blockbuster]]'s [[online DVD rental]] subscription program violated two patents held by Netflix. The first [[cause of action]] alleged Blockbuster's infringement of copying the "dynamic queue" of DVDs available for each customer, Netflix's method of using the ranked preferences in the queue to send DVDs to subscribers, and Netflix's method permitting the queue to be updated and reordered.<ref>{{US patent reference|number=7024381|y=2006|m=04|d=04|inventor=Hastings; W. Reed (Santa Cruz, CA), Randolph; Marc B. (Santa Cruz, CA), Hunt; Neil Duncan |title=Approach for renting items to customers}}</ref> The second cause of action alleged infringement of the subscription rental service as well as Netflix's methods of communication and delivery.<ref>{{US patent reference|number=6584450|y=2003|m=06|d=24|inventor=Hastings; W. Reed (Santa Cruz, CA), Randolph; Marc B. (Santa Cruz, CA), Hunt; Neil Duncan (Mountain View, CA) |title=Method and apparatus for renting items}}</ref> The companies settled their dispute on June 25, 2007; terms were not disclosed.<ref>{{cite news |url=https://www.hollywoodreporter.com/business/business-news/blockbuster-shutter-282-stores-year-141125/ |title=Blockbuster to shutter 282 stores this year |last=Bond |first=Paul |work=[[The Hollywood Reporter]] |date=June 29, 2007 |url-status=live |archive-url=https://web.archive.org/web/20100221131431/http://www.hollywoodreporter.com/hr/content_display/business/news/e3ia59ea0b884067a222dbb829223af9832 |archive-date=February 21, 2010}}</ref><ref>{{Cite news |url=https://www.nytimes.com/2007/06/28/technology/28video.html |archive-url=https://web.archive.org/web/20070701093734/http://www.nytimes.com/2007/06/28/technology/28video.html |archive-date=July 1, 2007 |url-status=live |title=Blockbuster Settles Fight With Netflix |agency=[[Reuters]] |work=[[The New York Times]] |date=June 28, 2007 |url-access=limited}}</ref><ref>{{Cite news |url=https://www.engadget.com/2007-06-27-netflix-blockbuster-settle-patent-dispute.html |title=Netflix, Blockbuster settle patent dispute |first=Nilay |last=Patel |work=[[Engadget]] |date=June 27, 2007 |access-date=November 1, 2021 |archive-date=November 1, 2021 |archive-url=https://web.archive.org/web/20211101055257/https://www.engadget.com/2007-06-27-netflix-blockbuster-settle-patent-dispute.html |url-status=live}}</ref><ref>{{Cite news |url=https://arstechnica.com/tech-policy/2007/06/blockbuster-and-netflix-settle-patent-battle/ |title=Blockbuster and Netflix settle patent battle |first=JACQUI |last=CHENG |work=[[Ars Technica]] |date=June 27, 2007 |access-date=November 1, 2021 |archive-date=November 1, 2021 |archive-url=https://web.archive.org/web/20211101055258/https://arstechnica.com/tech-policy/2007/06/blockbuster-and-netflix-settle-patent-battle/ |url-status=live}}</ref>

On October 1, 2006, Netflix announced the [[Netflix Prize]], $1,000,000 to the first developer of a video-recommendation [[algorithm]] that could beat its existing algorithm Cinematch, at predicting customer ratings by more than 10%. On September 21, 2009, it awarded the $1,000,000 prize to team "BellKor's Pragmatic Chaos".<ref>{{cite web |url=https://www.netflixprize.com/ |title=Netflix Prize Website |url-status=live |archive-url=https://web.archive.org/web/20061210022309/http://netflixprize.com/ |archive-date=December 10, 2006}}</ref> Cinematch, launched in 2000, is a recommendation system that recommended movies to its users, many of which they might not ever had heard of before.<ref>{{Cite news |url=https://www.thrillist.com/entertainment/nation/the-netflix-prize |title=The Netflix Prize: How a $1 Million Contest Changed Binge-Watching Forever |first=Dan |last=Jackson |work=[[Thrillist]] |date=July 7, 2017 |access-date=September 11, 2021 |archive-date=September 1, 2021 |archive-url=https://web.archive.org/web/20210901150944/https://www.thrillist.com/entertainment/nation/the-netflix-prize |url-status=live}}</ref><ref>{{Cite news |url=https://www.wired.com/2009/09/how-the-netflix-prize-was-won/ |title=How the Netflix Prize Was Won |first=Elliott |last=Van Buskirk |magazine=[[Wired (magazine)|Wired]] |date=September 22, 2009 |url-access=limited |access-date=September 11, 2021 |archive-date=September 28, 2021 |archive-url=https://web.archive.org/web/20210928221357/https://www.wired.com/2009/09/how-the-netflix-prize-was-won/ |url-status=live}}</ref>

Through its division [[Red Envelope Entertainment]], Netflix licensed and distributed independent films such as ''[[Born into Brothels]]'' and ''[[Sherrybaby]]''. In late 2006, [[Red Envelope Entertainment]] also expanded into producing original content with filmmakers such as [[John Waters]].<ref>{{cite news |url=https://www.marketplace.org/2006/12/08/netflix-expands-indie-film-biz/ |title=Netflix expands indie film biz |last=Dornhelm |first=Rachel |date=December 8, 2006 |work=[[Marketplace (radio program)|Marketplace]] |publisher=[[American Public Media]] |url-status=live |archive-url=https://web.archive.org/web/20061210040727/http://marketplace.publicradio.org/shows/2006/12/08/AM200612081.html |archive-date=December 10, 2006}}</ref> Netflix closed Red Envelope Entertainment in 2008.<ref>{{cite news |url=https://www.smh.com.au/technology/netflix-shuts-movie-financing-arm-to-focus-on-core-20080724-3k3b.html |title=Netflix shuts movie financing arm to focus on core |last=Jesdanun |first=Anick |work=[[The Sydney Morning Herald]] |agency=[[Associated Press]] |date=July 23, 2008 |url-status=live |archive-url=https://web.archive.org/web/20080726232337/http://ap.google.com/article/ALeqM5iKwZUPaTeYqpyM5ombXf-AXxTVoAD923Q2G01 |archive-date=July 26, 2008}}</ref><ref>{{cite news |url=https://www.hollywoodreporter.com/business/business-news/netflix-closing-red-envelope-116138/ |title=Netflix closing Red Envelope |last=Goldstein |first=Gregg |date=July 22, 2008 |agency=[[Associated Press]] |work=[[The Hollywood Reporter]] |url-status=live |archive-url=https://web.archive.org/web/20141026212257/http://securethoughts.com/netflix-closing-the-red-envelope/ |archive-date=October 26, 2014 |df=mdy-all}}</ref>