The Truth Behind Netflix’s Origin: It’s Not About Apollo 13!

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The third planned lunar landing mission by NASA, Apollo 13, initially faced a disastrous mechanical failure in April 1970 that prevented the astronauts, Jim Lovell, Fred Haise, and Jack Swigert, from reaching the moon. Despite these odds, they brilliantly managed to navigate their damaged craft back home and safely landed it in the Pacific Ocean. This remarkable feat earned Apollo 13 the unique title of “a successful failure” by NASA. In 1995, filmmaker Ron Howard accurately portrayed this perilous NASA mission in his movie Apollo 13, with Tom Hanks playing Jim Lovell. The film was a critical success, earning nine Academy Award nominations, including Best Picture.

In the ensuing two years, an awkward mishap related to “Apollo 13” (the movie) would pave the way for a remarkable triumph. Reed Hastings, upon discovering an overdue VHS tape of “Apollo 13” that he had taken from his neighborhood Blockbuster and failed to return, was hit by the substantial late fee. This prompted him to establish his own video rental service that would not charge for late returns. The legend goes that this is how Netflix came into existence, although its veracity remains questionable.

Hastings, We Have a Problem.

In various retellings, Hastings shared the anecdote, one of which was during a 2006 conversation with The New York Times and another in a 2012 discussion at Google Zeitgeist, where Apollo 13 producer Brian Grazer was present. According to the narrative, Hastings rented the VHS tape of Apollo 13 from Blockbuster in 1997, only to forget about returning it until he discovered it hidden under a stack of papers six weeks later. This oversight led to a $40 late fee that left him so embarrassed that he hesitated to inform his wife about it.

Many people, including Hastings, would find Blockbuster’s substantial late fees hard to swallow. As Will Tavlin from the magazine n + 1 points out, a late return could multiply the cost of a rental by three, and losing a tape could cost as much as $200. This enraged so many customers that 23 separate class-action lawsuits were filed over excessive late charges. However, Navin notes that in 2000, at the height of Blockbuster’s success, it earned nearly $800 million from late fees, which accounted for 16% of its total revenue. Remarkably, within the company, executives referred to their business model as one of ‘managed dissatisfaction’.

As Hastings was driving to the gym following his realization of a mistake, an idea struck him: “It dawned on me [that the gym] had a more profitable business strategy [than Blockbuster]. For $30 to $40 a month, you could work out as much or as little as desired.” This insight, according to Hastings, served as the foundation for Netflix’s original business model, which consisted of charging a monthly subscription fee and allowing customers to keep their DVD rentals for an indefinite period. Tavlin notes that this strategy meant reduced shipping costs for Netflix and fewer DVDs for the company to manage and store.

In simpler terms, Tavlin compares the two movie rental companies by saying, “Blockbuster penalized customers for forgetting movies; Netflix appreciated them for not needing physical copies.” This significant distinction explains why Netflix grew into the massive streaming service it is today, while Blockbuster eventually shut down. Hastings’ idea, stemming from his mistake with Apollo 13, certainly appears to be a brilliant move. However…

The ‘Apollo 13’ Story is Apparently Apocryphal

If Hastings’ story about Blockbuster and Apollo 13 appears too implausible, it’s because it is. Marc Randolph, co-creator of Netflix, has since disclosed that Hastings’ account is false. In fact, he went as far as labeling the story as “nonsense” when speaking with journalist Gina Keating for her 2012 book, Netflixed: The Epic Battle for America’s Eyeballs. Contrary to popular belief, Randolph states in his own book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea (2019), that the idea behind Netflix had nothing to do with late fees, and initially, they even charged for them.

Keating claims that Hastings never rented the movie “Apollo 13” from Blockbuster, as the company couldn’t find any record of such a transaction in their database. This lack of evidence caused Blockbuster to ask Hastings to stop telling this story in the mid-2000s, although he continued to share it, including during his Google Zeitgeist appearance in 2012.

Additionally, Randolph’s account in his book reveals that the growth of Netflix was not as swift or straightforward as Hastings portrays in his narrative. In reality, Randolph proposed various concepts to Hastings for their fledgling business, including custom sporting goods, personalized surfboards, and dog food tailored to each dog’s unique needs. These ideas, according to Randolph, were more promising than the one that ultimately evolved into Netflix.

Everyone Loves an Origin Story

What made Hastings create this tale initially, as per Tavlin’s account, was that it started as a “handy fiction” meant to clarify Netflix’s subscription model’s advantages. However, it evolved beyond its original purpose. Tavlin suggests that the story’s enduring appeal — even though it’s not factual — stems from one basic factor: “We are drawn to such narratives because they resonate with a cherished notion of inspiration and genius. We prefer our scientific greats like Isaac Newton to be inspired under an apple tree, and Archimedes in his bathtub.

According to Randolph, Netflix’s beginning was born from deep thought, debates, and experimentation. It turned out that their choice for an online DVD rental service was more a fortunate find than a brilliant idea. However, unlike the captivating tale of “Apollo 13“, this story is not as straightforward or engaging.

Despite the untruthfulness of the narrative, there’s no question that Netflix has revolutionized home movie viewing compared to the Blockbuster era. Interestingly enough, “Apollo 13” can now be streamed…right here on Netflix, as you can see through this link.

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2025-02-23 07:02