How Reed Hastings Went Boring Software Debugger To Billionaire King Of Hollywood

It's hard to remember a time before Netflix. Heck, it's hard to remember that Netflix started out as a DVD delivery service. Streaming has taken over and is here to stay. Netflix is far and away the biggest, best, most content-producing, most powerful streaming service on the planet. The big networks and movie studios basically ignored Netflix for years, and now they are scrambling to catch up, launching their own far-inferior streaming services. The fact is, Netflix has had more than two decades to plan its takeover of Hollywood, and its founder, Reed Hastings, was just the man to make it happen. His pre-Netflix background is in debugging software. Now, he's the billionaire king of Hollywood, grabbing the biggest talent and signing the biggest deals.

Reed Hastings was born in October, 1960, in Boston, Massachusetts. He attended Bowdoin College and entered the Marine Corps officer training. He spent the summer of 1981 in Officer Candidate School at the Marine Corps Base Quantico. He didn't complete that training and after graduating with his B.A. in Math, joined the Peace Corps. In that capacity, Hastings taught high school math in Swaziland from 1983 to 1985. When he returned to the U.S. from the Peace Corps, he enrolled at Stanford. He graduated in 1988 with his master's degree in computer science.

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His first post-grad school job was for a firm called Adaptive Technology, where he was in charge of creating a tool for debugging software. During his time at Adaptive, Audrey MacLean was CEO and Hasting said he learned the value of focus from her. In a 2007 interview with CNN, he said: "I learned it is better to do one product well than two products in a mediocre way." In 1991 he left Adaptive Technology to found Pure Software. The company produced troubleshooting software. Hastings struggled with his role as CEO since he had no managerial experience and had to basically learn the business while being CEO. Pure Software went public in 1995. The following year, it merged with Atria Software. Then in 1997, the new combined company was acquired by Rational Software. Hastings left soon after. He was determined to avoid the problems he had at Pure at his next startup.

Up until this point, Hasting's entire career had been focused on debugging software. He'd also worked at more bureaucratic, less nimble companies. He vowed his next startup would be more agile and able to adapt and change.

In 1997, Hastings co-founded Netflix with Marc Randolph, a former Pure Software employee. The whole idea was based on the fact that he had a big late fee for a VHS of "Apollo 13." He had misplaced the VHS tape and it was six weeks late. He owed the video store $40. He didn't want to tell his wife about it. Later that day, he was on his way to the gym and he realized they had a better business model. Pay $30 a month and work out as much or as little as you want. When he founded Netflix, he was banking on a pair of then-emerging technologies: DVDs and a Website where movie watchers could order with a click of a mouse. For $20 a month, subscribers could rent an unlimited number of DVDs, one at a time. The DVDs arrived in the mail in the now-iconic red envelopes. He had no idea if people would sign up for or use the service.

Hastings and Randolph launched Netflix in 1997 with a $2.5 million initial investment – a chunk of which came from Randolph's mom. The founders intended Netflix to become the media equivalent of Amazon. They realized they couldn't shop VHS tapes cheaply and DVDs were not widely available in 1997, but Hastings and Randolph decided to take a chance on it anyway.

Hastings was convinced that eventually movies could be rented more conveniently (and cheaply) by streaming them over the Internet. However, technology was not quite there yet in 2000. The company had only 300,000 subscribers and they were relying on the USPS to get their movies to their customers.

Three years later, Netflix was losing money, still. So, Hastings decided to get a company to invest in Netflix. He flew to Dallas for a meeting with Blockbuster. At the time, Blockbuster had 7,700 stores worldwide renting mainly VHS.  So, seeking a lifeline and a cash infusion for his struggling new company, Hastings approached Blockbuster with an idea. He wanted Netflix to become Blockbuster's streaming service. He proposed that Blockbuster buy a 49% stake in Netflix and absorb the Blockbuster name for $50 million. Blockbuster passed on the deal. Hastings wasn't going to take no for an answer. He went back to Blockbuster at least three more times to pitch the deal. Blockbuster declined every time.

As insane as this seems in 2020, we have to look at how the world, and specifically the internet, was two decades ago. The tech bubble hadn't burst for the first time yet. Traditional brick and mortar companies did not believe digital media was a threat back then. And finally, in 2000, most Americans still had dial-up internet access. DSL and Broadband were not widely available or affordable back then.

Hastings accepted Blockbuster's decision and got to work promoting Netflix. In 2004, Blockbuster launched its own subscription service, but by then, it was too late.

In 2007, Netflix introduced streaming service, while retaining the DVD and Blue Ray rental business. In 2013, the first Netflix produced show premiered. That was "House of Cards." Netflix introduced streaming services in 2007. In 2013, "House of Cards," the first Netflix produced show, premiered. Today some of the world's most beloved shows – including "Orange Is the New Black," "Bloodline," "Stranger Things, and "Master of None" – are Netflix productions.

Today, Hastings can draw the top talent in Hollywood into exclusive deals with Netflix and he isn't afraid to pay for it. He landed Kenya Barris for $100 million; Shonda Rhimes for $150 million; Adam Sandler for $275 million for four movies; Dave Chappelle for $20 million per comedy special and Ryan Murphy for $300 million.

As this writing, Netflix has nearly 200 million paid subscriptions worldwide, with 73 million of them in the U.S. The service is available across the globe with the exception of mainland China, Syria, North Korea, and Crimea. Netflix is a member of the Motion Picture Association and produces and distributes content from countries all over the world. It has also opened the door for a whole new breed of content creators free of the restrictions of network and cable broadcasts.

Reed Hastings has a net worth of $6.3 billion. This makes him richer than Steven Spielberg, George Lucas, Jeffrey Katzenberg, and Michael Eisner. Among Hollywood power brokers, only David Geffen is wealthier. And just give Hastings a little time, he will catch up.

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