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Netflix faced several initial challenges when implementing the idea of video rentals through the internet. One of the main challenges was the technology infrastructure at that time. The internet was not as advanced as it is today, and streaming videos was a concept far from reality. Another challenge was the dominance of traditional video rental stores like Blockbuster. Convincing customers to switch from the immediate gratification of walking out of a store with a movie to waiting for a DVD to arrive in the mail was a significant hurdle. Additionally, they had to ensure that DVDs could be mailed safely and arrive unscratched at customers' homes. Lastly, they had to secure a large enough movie catalog to attract customers, which involved negotiating with movie studios and distributors.
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Eventually, they came upon the idea of video rentals through the internet. This was at a time when DVD was emerging as a smaller, slimmer medium that would replace bulky VHS tapes. A DVD could fit into a standard business envelope that costed only 32 cents to mail. If it arrived unscratched, renting DVDs through the mail could work. Randolph tested this by mailing Hastings a CD in an envelope, which was delivered unscratched the next day. Hastings and Randolph agreed to start a company that would allow customers to rent DVDs by mail. Hastings made a seed investment of $1.9 million, and Randolph decided to commit his time to build the company. Hastings would own 70% of the company and Randolph 30%.
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Get the insider’s take on how Netflix went from just one in a million ideas to one that revolutionized the entertainment industry. Learn first-hand in...
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