Why Netflix co-founders turned down Jeff Bezos’ offer to buy the company – CNBC

Why Netflix co-founders turned down Jeff Bezos’ offer to buy the company – CNBC

Jeff Bezos
It was the summer of 1998 and it was just two months after Netflix had officially launched (back then it was a movies-by-mail subscription service); the start-up's co-founders — Reed Hastings and Marc Randolph — got a call from Amazon. "Jeff [Bezos] wanted to meet us, " Randolph tells CNBC Make It. Randolph, who at the time, was the company's CEO, remembers he and Hastings, who served as co-founder and was an investor, were excited to meet the Amazon founder, who was then just starting to expand his e-commerce site beyond books. Back then, Amazon was also relatively young — it was only four years old and a year earlier (in 1997), it had debuted on the stock market, raising $54 million. Bezos, under pressure from investors, was eager to make aggressive acquisitions to expand the company's footprint. He wanted to be an "everything store, " Randolph writes in his new memoir, "That Will Never Work." "At that point, [Amazon] had almost $100 million in revenue in selling books, " Randolph says, with about 600 employees, according to his book. Randolph and Hastings knew they had to take the meeting and flew to Seattle to meet with Bezos and ....

"And Jeff was in an office with four other people." Randolph says it didn't take long for him and Hastings to figure out that Bezos wanted to buy Netflix to jump-start Amazon's entry into the video market. And after the meeting wrapped, Bezos' team offered Netflix "somewhere in the low eight figures" to acquire the company. "When someone uses 'low eight figures, ' that means barely eight-figures. That means probably something between $14 million and $16 million, " Randolph writes in his memoir. But considering Netflix was only two months old, that was a pretty significant number for a short amount of work. Randolph owned 30% of the company, while Reed owned 70%. Both of them would have walked away with several million dollars. On the plane ride home, Randolph says that they discussed the pros and cons of selling. The biggest pros were that the company wasn't yet making any money; it didn't have a repeatable, scalable or profitable business model; and while they were doing plenty of business (most of it through DVD sales), their costs were high. Plus, they both knew that if they didn't sell to Amazon, they would soon be competing with it. "So long, ....

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