Hastings' intention was not difficult to understand, as many later internet giants did the same, and there was even a professional term for it: "big data price discrimination" against loyal customers.
Such a practice was hard for many rational individuals to comprehend. The benefits and advantages should rightfully be distributed to loyal, revenue-generating old customers.
It was akin to respecting elders and filial piety towards parents – a natural course of action.
Yet, ironically, in the eyes of those giant corporations, existing customers were less important; new customers were paramount.
This was also easy to grasp. For these large enterprises, especially internet companies, their most crucial task was to continuously increase their product's traffic, boost the total number of users, and thereby secure funding from investors and the market, driving up stock prices. These were their true core demands.
For a company to ensure a constant rise in user numbers, the most important thing was not to reward old customers, but to continually attract new ones. Hence, they naturally employed numerous highly attractive benefits to draw these new customers in.
This was also the significant reason why all products in the market offered substantial new user benefits, while old users often received nothing.
This was precisely why Hastings wanted to use these internet boxes to attract new customers. If handled properly, these 500,000 boxes could instantly attract 500,000 prime users, increasing Netflix's total user count from 6 million to 6.5 million. This was data growth that Netflix previously needed half a year to achieve, making this year's performance look exceptionally good.
However, if these boxes were given away for free to users who had subscribed for over three years, no new users would be acquired, and the total user count would remain at 6 million. How could Hastings bear that?
Therefore, Hastings vehemently opposed Boss Huang's request, stating his intention to use these television boxes to attract new users.
Upon comprehending this, Huang He indeed hesitated for a while. He felt that Hastings' reasoning had merit. If Netflix could gain an additional 500,000 new users, it would be a good thing for him personally. All of this was understandable and profitable. It was a correct decision any normal capitalist would make.
But should he really do this?
Huang He recalled his past experiences, being repeatedly exploited by those internet giants through price discrimination. He remembered paying 100 yuan more for plane tickets or a dozen yuan more for Didi rides compared to newcomers.
Ultimately, Huang He stated, "My idea remains unchanged. These 500,000 internet TV boxes will be prioritized for our loyal members who have subscribed for three years!"
"Mr. Huang, why can't you understand?" Hastings, struggling to control his temper, exclaimed, "These long-term subscribers are the least important ones!"
"Since these old members have subscribed for three consecutive years, more than 90% of them will continue to subscribe even without receiving this free TV box. There will be no change!"
"Furthermore, almost all our members have activated automatic credit card payments. Our membership fees are automatically deducted from their credit cards each month. Many members even continue to be charged their membership fees without renting discs, making them like pigs ripe for the slaughter, easily harvested by us. Why would you offer these free boxes to those who bring us no additional profit?"
"As long as we attract 500,000 new users with these boxes, even if only 100,000 of these new users sign up for continuous subscriptions, they will continue to provide us with $12 in membership fees each month, and $144 annually. Can't you see the profit in this?"
Hastings felt he had been remarkably earnest and had explained the logic so clearly. However, Huang He on the other end shook his head and said, "Sir, if you were one of our long-term members and discovered that only newcomers received free TV boxes while you got nothing, would you feel comfortable?"
"If at this time our competitor, Blockbuster Online, extended an olive branch to them, inviting them to become Blockbuster members and abandon Netflix, would you agree?" Huang He retorted directly.
"Blockbuster doesn't have the capability. If Harding were still here, he would be a formidable opponent. But their foolish controlling shareholder, due to various internal struggles and meddling within the company, ultimately refused to pay Harding his bonus, angering Harding to the point of resignation."
"And the new president who took over is foolishly proposing to abandon the online rental business and simultaneously restart all closed stores, rebuilding Blockbuster's great offline business!"
"This company is beyond redemption. They are no longer qualified to be my opponent!" Hastings declared triumphantly, emphasizing the words "controlling shareholder" and "meddling" to subtly hint to the other controlling shareholder how he should behave.
Unfortunately, Boss Huang did not understand English, and all these words were translated by his secretary, Hu Jing. Therefore, Huang He seemed to completely miss Hastings' subtext and insisted, "Without Blockbuster, in the future, there will be Disney, Time Warner, and even Google, Microsoft, and Amazon. They are all eyeing our market and will want to enter this space!"
"If everyone adopts this practice of heavily subsidizing newcomers while completely ignoring old users, what happens when another platform emerges offering even greater subsidies to newcomers? Do you think these old users will be willing to stay with Netflix and remain your 'pigs'?"
"That's impossible. How can these big companies cross over to compete with us? You are worrying about things that are not going to happen!" Hastings was becoming very agitated. He continued, "Sir, I am a professional. I have built Netflix into what it is today, from a small website to an enterprise with 6 million users. I know and understand all my users, and I know how to treat them!"
"Please trust my ability and stop interfering!" Hastings said with a cold expression.
"Oh, but I recall that the person who truly built Netflix from scratch to 6 million users was actually President Randolph?" Huang He said coldly. Hastings' gaze instantly became sharp, fixing on Huang He as if he wanted to kill him.
"Sir, he is a traitor to our company. Please do not mention him again!" Hastings said through gritted teeth.
It was evident that Hastings harbored intense anger towards Randolph. So, what exactly did Randolph do to Hastings?
The story goes that eight years ago, in '97, Randolph rented a videotape from Blockbuster. Due to late return, he was charged a hefty late fee of $40.
This infuriated Randolph. Coincidentally, at that time, the DVD format was introduced. Although not yet widely popular in the market, Randolph sensed that DVDs would eventually replace videotapes.
Thus, Randolph conceived the idea, "Why not start a company specifically for renting DVDs?"
Just then, Amazon, founded by Bezos, became the darling of the stock market. E-commerce, selling goods via mail, also became a market focus. Randolph combined these two ideas, and thus, the concept for Netflix was born.
Then, Randolph approached his former boss. Hastings was a shrewd investor. After analysis, he realized the venture was profitable and invested $2 million in Randolph's venture. He remained a hands-off investor but took a 70% stake in the company.
Randolph was fully responsible for the company's operations and held a 30% stake.
The subsequent story is not detailed here, but under Randolph's operation, Netflix overcame numerous initial challenges, established the basic website structure, invented Netflix's unique mail sorting method, recruited various talented professionals, and groundbreakingly created an algorithm specifically designed to calculate which DVDs customers preferred, and then prioritized recommendations based on inventory.
The pioneering "wish list" model was also all invented by Randolph.
However, around 2002, Blockbuster also entered the market. At that time, Blockbuster had tens of millions of users across the United States, posing a severe threat to Netflix. Netflix was once on the brink of bankruptcy. This was also why Hastings hosted a dinner party at his home, inviting numerous investors to try and raise investment for Netflix.
Netflix was truly struggling to survive under intense competition. If not for the substantial financial support from Boss Huang, Netflix might have… received investment from another major player.
However, Boss Huang was far more generous than the other major player, so Netflix, free from financial concerns, could develop freely.
But at this point, Hastings, who had originally agreed not to interfere with company operations, decided to directly intervene in Netflix's operations after his own business failed and he had nothing to do.
His excuse was that Randolph had caused the company irrecoverable losses. With the investment from Huang He, Hastings easily persuaded Randolph to agree to end their previous agreement. Hastings fully entered the company, becoming Chairman and CEO, solely responsible for operations, while Randolph continued as Vice President.
Subsequently, Hastings launched a series of layoffs, streamlining, and new hiring efforts.
With the massive funding from Boss Huang and Blockbuster's own internal blunders, Netflix emerged from its slump and achieved great success. Randolph, meanwhile, was marginalized to researching the automatic DVD player business.
Ultimately, his diligently prepared research proposal was directly rejected.
Feeling utterly desperate, Randolph sold all his Netflix shares to Hastings and, along with a few old employees, went off to pursue his automatic DVD player venture. From then on, Randolph and his faction were completely removed from Netflix, and Hastings gained complete control of the entire company.
Yes, Randolph was such a traitor.