Foundry is a premium business intelligence publication featuring 551 articles from the best founders and investors. Topics cover leadership, strategy, fundraising, growth, AI, and more.

What topics does Foundry cover?

Foundry covers leadership, investing, AI and technology, product development, founder stories, mindset and career, marketing, hiring, fundraising, strategy, and more. Articles feature insights from founders like Elon Musk, Jeff Bezos, Sam Altman, and Jensen Huang.

Can I submit a story to Foundry?

Yes. You can submit a story at thefoundrybrief.com/submit. Foundry publishes articles featuring insights from founders and investors across all industries.

Reed Hastings: When Blockbuster Attacked, We Did Four Clever Things. None of Them Mattered.

By Reed Hastings · Strategy · 1 min read

When Blockbuster attacked, we added a social network, ad sales, used DVD sales, and a film acquisition group. Employees loved them. We felt so clever. We won the war. But none of those four efforts made any contribution to our victory.

Key Points

When Blockbuster attacked at half Netflix's price, they launched 4 counterattack initiatives
None of the 4 initiatives contributed to winning — they should have just made the core better
The lesson: when attacked, retreat to do the core better, not broaden the surface of attack

None of those four efforts made any contribution to our victory. When attacked, we should have retreated to do the core better.

Blockbuster Attacks

Hastings: 2003 and 2004, we were growing really fast. 2005, Blockbuster attacks. They had the same content — it's non-exclusive licensing for DVDs. We could differentiate on fulfillment — 99% versus their 89% — but that's abstract. Then they discounted massively. Half our price. We were losing share.

Same DVDs. Half the price. We were losing share.

Four Clever Things That Didn't Matter

Hastings: We did four big efforts. Netflix Friends — our own social network so members could see what each other were renting. Ad sales — Yahoo-type banners above the choosing interface. Used DVD sales — selling excess DVDs for four bucks a pop. And Red Envelope Entertainment — buying films out of Sundance to publish on DVD.

Each one was a dozen to fifteen people. Employees loved them — tangible differentiators. Wasn't management so clever.

Social network. Ad sales. Used DVDs. Film acquisition. Employees loved them. Management felt clever.

None of Them Contributed to Victory

Hastings: We went through waves of battles in '06 and '07. We won — Blockbuster closed their online thing and went bankrupt two years later. But we looked back and none of those four efforts made any contribution to our victory. We had closed them all down along the way. Every single one.

In hindsight, when attacked we should have retreated to do the core better. Not try to broaden the surface of attack. If we had gone from 98% perfect to 99.9%, we would have done a lot more for the business. We would have beaten Blockbuster sooner.

None of those four efforts contributed to winning. We should have just made the core better.