Netflix was bought by Amazon? Read the entire story about two streaming giants coming together

Aparnna Hajirnis -

Netflix was bought by Amazon? Read the entire story about two streaming giants coming together

It was 1998 when Netflix had officially launched (back then it was known for being a movies-by-mail subscription service); the start-up’s co-founders — Reed Hastings and Marc Randolph — got a call from Amazon. Back then, Amazon was also relatively young — it was only four years old and a year earlier (in 1997), it had debuted on the stock market, raising $54 million. Jeff Bezos, under pressure from investors, was eager to make aggressive acquisitions to expand the company’s footprint.

Randolph and Hastings knew they had to take the meeting and flew to Seattle to meet with Bezos and his team. But considering Netflix was only two months old, that was a pretty significant number for a short amount of work. Randolph owned 30% of the company, while Reed owned 70%. Both of them would have walked away with several million dollars. On the plane ride home, Randolph says that they discussed the pros and cons of selling.

The biggest pros were that the company wasn’t yet making any money; it didn’t have a repeatable, scalable or profitable business model; and while they were doing plenty of business (most of it through DVD sales), their costs were high. Netflix had a working website, a smart team and deals in place with a handful of DVD manufacturers. They had also figured out how to source virtually every DVD on the market.

The meeting also sparked them to think about new ways to get out of selling DVDs and have people rent them instead, because they knew Amazon would be big competition.

Their decision paid off. Today, Netflix is the world’s sixth-largest internet company by revenue, which exceeded $185 billion in 2018 (a 35% increase from 2017). Amazon is the second-largest internet company behind Alphabet Inc., which owns Google. Netflix has now grown from a movie rental company into a streaming and production company producing award-winning original content, with more than 183 million subscribers worldwide.

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