Netflix offered to run Blockbuster’s online business
In 2000, Netflix was a small, unprofitable DVD-by-mail service. Its founders approached Blockbuster with a proposal: Blockbuster could buy Netflix for about $50 million, while Netflix would help build and operate Blockbuster’s online rental business. The idea was to pair Blockbuster’s enormous brand and store network with Netflix’s emerging mail-order operation—not to sell a streaming service. Streaming was not yet Netflix’s business.
The pitch clashed with Blockbuster’s model
Blockbuster made money when customers visited stores, rented a movie, and returned it. Netflix’s mail service offered a different bargain: customers chose movies online, received DVDs at home, and avoided store trips and late fees. For a company organized around storefront traffic and rental charges, investing in an online rival’s approach meant accepting a business that could weaken its own familiar model.
The proposal was reportedly met with laughter. Blockbuster passed, and Netflix remained independent. That decision was not simply a failure to predict streaming; the immediate choice concerned whether to take online rentals seriously while stores still generated substantial business.
A missed chance to build the transition
Blockbuster later launched its own online rental service, but the contrast between the companies became increasingly consequential as viewing habits shifted toward digital delivery. Netflix, meanwhile, evolved from mailing discs to streaming video. The irony is that the pitch offered Blockbuster a way to experiment with the new model using a partner already focused on it—while the chain’s established stores still appeared to be the safer bet.
