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How the tiniest player could destroy you in business?

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Just ask Netflix. Reed Hastings, the founder of Netflix had a big fight ahead of him. He had just finished watching the movie he rented called “Apollo 13” and he returned it to the then DVD rental giant Blockbuster six weeks late. They charged him for returning the movie late. Hastings launched a new company called Netflix in complete anger. He did not believe people should have to pay for returning a movie late.

Hastings had a plan. Netflix realised that people wanted as many movies as they could get delivered to them. Therefore, Netflix started as a DVD rentals-by-mail service. Netflix was smart and they made a huge discovery - perhaps DVDs don’t have to be delivered physically. Netflix came up with a genius idea that would change the way they did business. They would start a streaming subscription service where someone could watch movies on their computer or another streaming device.

Netflix started to win the market. Hastings believed that he could make money from selling Netflix. Hastings took Netflix and made a pitch to Blockbuster - "Netflix has seen tremendous growth in previous months and we will offer you Netflix for $50 million." Blockbuster laughed. "Nobody wants to go to Netflix. People like to physically go to a shop and pick out the DVD they want to buy."

Hastings walked away with nothing. Once again, he was angry. He started marketing Netflix and grossly undercut Blockbuster on price. Little by little, Netflix grew its customer base and started to outcompete Blockbuster. Blockbuster tried everything to stop Netflix. Hastings famously said that Blockbuster was throwing “everything but the kitchen sink” at Netflix. A few days later, Blockbuster physically delivered a kitchen sink to Hastings’ house. The Blockbuster era was over. In the summer of 2010, Blockbuster declared bankruptcy and Netflix became one of the most recognised brands globally with an annual gross profit of ₹43k crore in 2018.

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