Mistake that nearly brought down Netflix

One huge early setback meant Netflix nearly collapsed altogether. Photo / AP

It's the game-changing entertainment company that taught us how to binge-watch and "Netflix and chill" — but it very nearly failed to take off.

And while today it enjoys over 130 million subscribers across more than 190 countries, Netflix co-founder Marc Randolph said it was anything but an overnight success.

In fact, Randolph, who, with Reed Hastings, founded the business in the US in 1997, said they made almost every mistake in the book in the early days.

"The first thing you have to realise — and this is true with any company — is that any successful company almost never ends up looking like the idea you started with," he told news.com.au.

"There's no eureka moment when the idea springs fully-formed and voila, instant success.

"It ends up being a meal prepared by hundreds of chefs over months."

The entrepreneur — whose great great uncle was Sigmund Freud — said he had decided to start a new company with Hastings, and that he spent months brainstorming and researching before coming up with the concept of video rental by mail.

"It seemed like a good idea at the time — but it was the stupidest idea ever," he said.

But then, DVDs arrived on the scene and all of a sudden, the idea was viable.

"I used a music CD and I mailed it to Reed's house in an envelope, and that was the eureka moment when I thought, 'this actually might work'," he said.

"Thus began two years of suffering. The idea seemed great on paper, but it was anything but. "People either didn't want to rent from us, or when they did, they never rented with us again — we tried everything we could think of."

But they eventually struck upon a winning combination, pairing a program which allowed people to rent movies and keep them until they were ready for the next one, and charging customers a monthly subscription rather than making them pay for every film.

Still, in those early days, it was hard to predict Netflix would end up surpassing Blockbuster — a company which then led the industry, but is now virtually extinct.

"It was the utmost hubris to think we could ever not only compete with but beat Blockbuster — then they had 9000 stores and 60,000 employees and we were nothing," he said.

"Our initial aspiration was, 'Wouldn't it be cool to have the revenue of a big single rental store?' Then we passed by that, and it was to be in the top 10 video rental chains.

"Years later we were all of a sudden celebrating momentarily passing Blockbuster but then there was HBO and Comcast. It's a never-ending thing; once you get over that hill, you look up to see an even bigger hill. We had no clue we could ever do what we do but desperation tends to be a big motivator."

Randolph, who has since left the company, said there wasn't one big mistake made in the early days — rather, they made dozens.

"Most of them were around running out of money, but we're lucky DVDs took off as the standard, and that Blockbuster didn't come after us the first time we attacked," he said.

"Literally most things we tried ended up failing, but I recognise them not really as failure but really as a learning experience."

Randolph will visit Australia later this month where he will share the story of Netflix on stage in Sydney on September 20 and Melbourne on September 24.