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The internet has completely changed the way we watch television. Gone is the days when the whole family would gather in the living room to enjoy the exact same program as everyone else. Technology has advanced to the point where we’ve dumped the old immovable boxes in favor of our phones and computers. In today’s world you can watch whatever you want, whenever you want, on-demand straight from the internet. We are now in the age of Video-on-Demand, and so this week on Behind the Business we’ll be taking a look at the company that lies at the heart of this recent revolution: Netflix. The year is 1991 and Reed Hastings was getting ready to start his first company. Hastings was a rather unusual tech entrepreneur: He came from Minnesota and after graduating from college and serving briefly in the military, he decided to travel to Swaziland with the Peace Corps to teach math. After returning to the U.S. and getting a masters in Computer Science, he and two of his friends started a company in 1991 called Pure Software. The company sold a range of debugging tools for Unix operating systems at a time when there were few good ones on the market, and so it rapidly became a big player in the IT world. It doubled its revenue every year for 4 years in a row and in 1996 it was sold to Rational Software for 700 million dollars. In the span of half a decade Hastings had become a millionaire. Life seemed great, but in 1997 he suffered an inconvenience that would eventually become a world-changer. Hastings had forgotten to return his video-rental of Apollo 13 and as a result was slapped with a 40 dollar late-fee. He was embarrassed and didn't’t want to tell his wife, and that got him to thinking of a solution. Not just a solution to his own late-fee problem, but a solution to everyone’s problem; an entirely new system of film-rental that would make late-fees obsolete. Together with a friend of his, on August 29th 1997 in Scott's Valley, California, Hastings founded a brand new movie-rental service called Netflix, with the idea of mailing DVDs to paying customers. The creation of Netflix was essentially a bet on the DVD player. Now, the DVD player had been invented in Taiwan in 1994 by Sony, but it wouldn't’t be until March 1997 that one was first sold in the US. Back then a player cost over a thousand dollars, and when Netflix was formed, less than 1 percent of Americans actually owned one. In a move that seemed insane at the time, Hastings gambled everything on the potential of DVD technology to replace the bulkier, lower-resolution videotape as the nation’s format of choice. In 1997, it was almost impossible for people to rent DVDs because very few places had any. After trying over 200 different mailing packages and testing them out by mailing them to himself, Hastings discovered that he could safely ship a DVD for the small cost of a first-class mail stamp. This way Netflix could guarantee that most titles would be in stock, and by enclosing a stamped return...
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