Netflix co-founder Marc Randolph has shared the mistake that turned the streamer into a success

Netflix co-founder Marc Randolph has revealed the expensive mistake that ended up being the best thing that ever happened to the streaming platform.

Netflix co-founder Marc Randolph has revealed how Netflix came to be a success. Picture: Baxter William/Supplied

Netflix co-founder Marc Randolph has revealed the $150 billion mistake that made the streaming platform the success it is today.

Randolph took to LinkedIn to share a story about a deal with the video chain Blockbuster that went bust, and ended up being a great thing in the long run.

In 2000, Blockbuster dominated the movie rental market and, in America, had more than 9000 stores and 60,000 employees.

Netflix has become a hugely successful streaming service. Picture: istock

Blockbuster is where you would go to pick DVDs in person. Picture: AAP IMAGE/Simon Bullard

Mr Randolph and his business partner Reed Hastings came to the video giant with a DVD-rental-by-mail business.

They had launched the business themselves, and while it had been successful at first, they weren’t set up to be able to handle the growing demand and after spending $50 million on the business, they weren’t sure how to keep it going.

“Running a subscription business takes a lot of cash, since you pay acquisition costs upfront while the revenue comes in over time. But it was the height of the internet boom. Cash was plentiful. Until suddenly, it wasn’t. Over a few short months, the internet bubble finally popped,” Mr Randolph said.

Netflix co-founder Marc Randolph has shared how Netflix came to be such a success Picture: Baxter William/Supplied

Reed Hastings is a co-founder of Netflix. Picture: Akio Kon/Bloomberg

Mr Randolph, Mr Hastings and their CFO Barry McCarthy decided to have a meeting with Blockbuster to see if they could “sell fast” and keep the business going.

“The pitch was simple. We would join forces with Blockbuster. We would run the online business. They would run the stores. We would jointly developing a blended model and everyone would live happily ever after,” he explained.

Mr Randolph revealed that Blockbuster at first was excited by the idea, but once Mr Hastings revealed they wanted $50 million to combine forces, the meeting turned sour.

“Their words were, ‘we’ll consider it,’ but we could tell they were fighting to suppress laughter. After that, the meeting went downhill fast,” he said.

The deal didn’t go through, and although Randolph and Hastings struggled for years, the pair ultimately launched Netflix as a streaming service, changing the way people watch television and movies.

“We knew there was no easy way out. We struggled for years. But we eventually did make it through. We had our IPO. We passed Blockbuster in revenue.

“Today, the company that Blockbuster could have purchased in 2000 for $50 million, has a market cap exceeding $150 billion. And that company with 9000 stores? Now it’s got just one,” he wrote.

So what should we all take away from this? Well, Randolph reckons it is an important business message.

“I think the more important lesson — one that Blockbuster learned too late — is simply this: If you are unwilling to disrupt your business, there will always be someone willing to do it for you,” he shared.