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00:00 Mark, Friday, big day.
00:04 You wanna tell everyone what Friday represents
00:07 in the trajectory that is your career?
00:11 - Yeah, it's exciting but bittersweet.
00:15 On Friday, Netflix will be mailing out
00:18 the very last DVDs in their DVD by mail service.
00:23 And as some of you may know,
00:26 and I know some of you have the slightest idea,
00:29 at the beginning, Netflix was not a streaming company.
00:32 If you wanted a movie, we mailed it to you.
00:33 It was a DVD rental by mail business.
00:37 And more importantly, it was a DVD rental by mail business
00:40 for nine years before we finally actually
00:44 did the first streaming.
00:45 And so it's kind of amazing to me
00:49 that Netflix DVD by mail has lasted 25 years.
00:54 When we started, you know, Reed Hastings and I envisioned
00:58 that the DVD by mail business,
01:00 we could limp it along for five or six years,
01:03 long enough to maybe give a jumpstart
01:06 to the inevitable streaming service.
01:08 But wow, something resonated with people.
01:11 And now that's 25 years in,
01:16 Netflix at its peak for the DVD business
01:19 had 40 million subscribers,
01:21 5 billion discs shipped.
01:25 And on Friday, they shipped the last of them.
01:29 - That is amazing.
01:30 Now, you've talked a little bit in previous episodes
01:35 about, you know, starting the company and testing it out.
01:39 Do you remember the first disc that went out?
01:42 - I do as a matter of fact, Dan,
01:46 because it was a big moment.
01:47 I mean, one of the things we've talked about here
01:49 is that starting a company back in 1997, '98,
01:52 it was very different than doing it now,
01:54 especially for an e-commerce company.
01:56 You know, now you just go over to Spotify,
01:58 plunk down your 29.95,
02:00 and you've got an amazingly
02:01 fully functional e-commerce website.
02:04 You're on Amazon Web Services, so it's all fully scalable.
02:07 Well, back in the day,
02:08 back then you actually had to build everything yourself.
02:11 You had to buy the servers and put them in a closet
02:13 and wire them all up and air condition them.
02:15 And you had to write every line of code
02:16 and exhausting even thinking about it.
02:20 But it meant that when we finally got to the point
02:24 where we had a site that was stable enough to take an order,
02:28 process it and ship the disc, it was a big moment.
02:31 And that happened in March of 1997,
02:35 when we actually shipped the very first disc.
02:39 It was Casino, oh, there's the packing slip.
02:41 To me, back to me.
02:44 And if you look up here, you can't quite,
02:45 it's kind of a little hard to see,
02:46 but in the upper right-hand corner,
02:48 it says order number 000001.
02:53 - Wow. - That was it.
02:55 First order and what movie was it?
02:57 It was Casino.
02:58 (laughing)
03:00 I don't know if you can see it clearly,
03:02 but there's a logo in the upper,
03:04 yeah, the logo in the upper right-hand corner.
03:06 That was the original Netflix logo.
03:08 - Wow.
03:09 - You can't tell it was in this beautiful purple color.
03:12 There it is.
03:15 - Wow, that's amazing.
03:16 - First order.
03:17 And then about a month, that was a month before launch,
03:20 a month, in April 14th, 1998,
03:23 we actually shipped the first 137 customer orders.
03:28 I don't know what the first disc was.
03:31 Netflix says it's Beetlejuice.
03:33 Awkward, but good story, so I'm gonna go with that.
03:38 - Now, when you made that first order,
03:40 were you like running out to your mailbox every day?
03:43 Like, please get here, please get here.
03:45 (laughing)
03:47 - Well, I think at that point,
03:48 I mean, we didn't even have a final envelope.
03:52 We didn't have everything.
03:53 You know, we were a lot,
03:54 there was a reason we had another month worth of work to do.
03:57 So I think that one may have,
03:58 I may have just taken it home with me to tell you the truth.
04:01 (laughing)
04:03 - That's incredible.
04:03 So now I know, and we're gonna get to everyone's questions,
04:06 I swear, but just since this is such a big thing,
04:08 you know, I know there's,
04:11 you've got another great story about an interesting disc
04:16 that was just labeled President Clinton Grand Jury Video.
04:20 Now, I don't know the details of this,
04:21 but I hear it's an interesting story.
04:25 - Oh, there it is.
04:26 That's awesome. - There it is, all right.
04:27 Okay.
04:29 - So this is back at the very beginning of the DVD era.
04:32 You know, when Netflix launched,
04:34 there was less than 400,000 DVD players sold.
04:38 So our big challenge was how do you find people
04:41 who actually have a DVD player?
04:43 And one of the other big news items of that summer
04:45 was that President Bill Clinton
04:49 was gonna have to testify in front of a grand jury
04:52 about his, the infamous blue dress episode,
04:55 which this is a family show,
04:56 so I won't go into what exactly that meant.
04:59 But he was in some deep doo-doo.
05:01 And so, but in an interest of having more transparency,
05:06 they were going to broadcast the grand jury testimony live.
05:12 And all the major news outlets would get a feed.
05:16 And Mitch Lowe, who was one of our early people there,
05:21 had this great idea that we should make a DVD
05:24 of the testimony.
05:26 And we could use that to try and like get some publicity.
05:30 And we did this big push, like,
05:32 "Hey, if you wanna get this testimony,
05:33 "we'll send you a DVD.
05:35 "We said we'd give it to you for free."
05:39 But then at the last minute realized
05:41 that we could not process an order at no cost.
05:46 So we changed it to it was gonna cost 2 cents,
05:49 only because we had to charge something.
05:51 And Mitch thought this would be a piece of cake,
05:55 that he'd be able to get it done overnight.
05:57 We'd grab the feed when it came in,
05:59 he'd process, work with a DVD manufacturer,
06:01 process it, press it, be all ready.
06:05 And it took forever, took four days of him,
06:08 day and night, struggling.
06:10 And at one point, Mitch called and said,
06:14 "I think we're almost there, we're running way behind.
06:16 "We've just about got it done.
06:18 "But listen, do we need to do the label?
06:22 "'Cause the label is gonna take us another 24 hours
06:25 "to press those onto the discs."
06:27 And we all said, "Screw it, forget the labels,
06:30 "just take the blank discs,
06:31 "we'll package them up in the sleeves that you saw,
06:34 "and we'll ship them out."
06:36 And then Mitch came in the next morning,
06:38 pretty bleary eyed with a whole spindle of discs,
06:43 which we promptly mailed out, huge thing,
06:46 kind of got us all kinds of press,
06:48 exactly the things an early startup wants.
06:51 Until the next day, and the day later,
06:53 we begin to get some curious emails
06:57 from people who were saying,
06:59 "This isn't quite what I expected
07:01 "the DVD testimony to look like."
07:05 And it turned out that one of the spindles
07:08 that had gotten mixed in,
07:09 and a spindle has about 200 DVDs on it,
07:11 was of this Asian porn that was also one of the products
07:16 that this DVD manufacturer was doing.
07:20 And so we shipped out about 300 copies.
07:24 And I, of course, for research purposes, Dan, I assure you,
07:28 went digging around and found,
07:29 and had someone mail one to me, and watched it,
07:33 and it was like, "Oh my God, I could do it."
07:36 I mean, it was really cringy awful.
07:39 And we were going, "Okay, damage control."
07:42 And I quickly sent an email out to everybody,
07:45 and said, "There's a good chance
07:46 "you may have gotten something you didn't anticipate,
07:48 "that you got some porn, and if you send it back,
07:52 "we, of course, will promptly replace it
07:55 "with the right disc."
07:56 And I don't know, no one sent theirs back.
08:00 (laughing)
08:05 - Wow.
08:06 - Yeah, one more great story from the Netflix table.
08:10 - That is incredible.
08:11 (bright music)
08:14 (chime)