The Brain Behind Netflix

(CBS)  The way Americans watch movies has changed dramatically in the last few years because of the man who thought up, and started up a company called Netflix. Now more and more of us rent movies by mail.

As correspondent Lesley Stahl reports, Netflix today rakes in about $50 million a month and other companies, like Blockbuster, are trying to get in on the action. Netflix was started by a math teacher-turned-software tycoon. He asks his subscribers to pay a flat monthly fee – most people take the $18-package – and then order the DVDs they want over the Internet. It's an idea that makes a lot of people say: "Why didn't I think of that?"

And when you hear how the CEO Reed Hastings thought it up, you'll really shoot yourself, because you've probably been in the same boat he was in.

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Asked how he came up with the idea for his company, Hastings says, "I was hoping you wouldn't ask that, because it's a little embarrassing! I'd rented a VHS and I had misplaced it and it was six weeks late. So it was a $40 late fee. I remember 'cause I didn't want to tell my wife. Because you know I knew what she would say."

What would she say?

"Just like, you know, an eye roll. An eye roll that could kill! And I thought, 'Oh, great! Now I'm thinking about lying to my wife about a late fee and the sanctity of my marriage for this thing!' I mean it was just crazy. And I was on the way to the gym and I realized – 'Whoa! Video stores could operate like a gym, with a flat membership fee.' And it was like 'I wonder why no one's done that before!'" Hastings explains.

For Hastings, it was the eureka moment.

Most movies were still on VHS nine years ago, and VHS tapes were too bulky and too expensive for the mail. Then a friend told him about a new technology called the DVD and he wondered if those might be a viable option.

"I ran down to Tower and bought a bunch and mailed them to myself and then I waited," Hastings recalls.

He wanted to see if they would get destroyed in the mail. "And I opened them up. And they were fine. And I thought, 'Oh my God. This is gonna work! This is gonna work!' Hastings explains.

And so far, it has: more than five million Americans are getting their movies in skinny red envelopes, by snail mail, and keeping them as long as they want, with no late fees.

Hastings took Stahl to their main warehouse, which is in Silicon Valley. It houses a staggering 26 million DVDs, row after row of big ticket blockbusters, box office bombs, TV shows and thousands of other videos you've never heard of; the company does not carry pornography in its inventory.

There are more than 65,000 different titles. If it's ever been put on DVD, chances are it's in the warehouse.

"There's 40 of these warehouses around the country, so that nearly every customer gets next-day delivery," Hastings explains.

Here's how it works: the warehouse opens at 4 a.m. When the post office delivers the DVDs, Netflix renters send them back after watching them.

"We get 100,000 returns and we open them one by one," Hastings says.

Every DVD is examined for scratches before the ones on order are repacked and shipped out again by late afternoon. Nationally, Netflix moves more than 1.5 million DVDs a day, making Reed Hastings one of the post office's top ten customers for first-class mail.

While 60 Minutes was at the warehouse, one of the employees was stuffing envelopes, at a rate of 1,000 per hour. And so she and all the other workers - associates they call them – break every 90 minutes for mandatory exercises to ward off carpel tunnel syndrome.

Netflix uses the same sorting machines as the post office, which run through 17,000 envelopes an hour, grouping them by zip code; this pre-sorting gets them a postal discount.

Special Netflix software keeps the DVDs in almost constant circulation. Most returns are sent right out again, without going back to the shelves.

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[vwxxyz]

It looks like a sweatshop. Whay are all the envelope stuffers African and Asian women?

[fandbclark]

Your story on Netflix shows that anyone can start up a business but poor organizational skills. When movies are returned they are posted as returned when the individual locations decide to post them. Example: I have taken movies to the post office that they are picked up from and at early pick-up. These movies can be posted the next day to the next week. You receive the movies on Tuesday and return on Wednesday morning the postings are not running true.

At the end of the story the reporter noted that the phone number is know posted on the web site. It must be written in fairy dust because I have gone over every link with the Netflix web site and could not find it, just like the CEO did during the show.

You should have talked to other subscribers than just the couple from Maine. We could have given you some real good stories.

[AHerring]

Corporate Headquarters:
100 Winchester Circle, Los Gatos, CA 95032, [phone], www.netflix.com

Wonder if this is the one he supposedly found. It was in the Consumer Public Relations Press Kit -- a PDF file.

If you ever looking for a phone number this is a good place to start, especially if you are tired of listening to recorded messages or computerized answering services http://www.gethuman.com/

For All......NetFlix 888-638-3549 and Press 0 for a human operator

amnj1 ********** 800-201-7575

amnj1 ********** 800%u2011201%u20117575

[effallah]

Customer service and website usability will always provide businesses a return on their investments and I believe that despite Netflix being there first, the company is doomed unless it can address those details.

I had to laugh when Mr. Hastings was unaware of the missing "contact us" information and unable to use his own company's website. Whether there was a phone number or not, to be so unfamiliar with the web interface to your billion dollar business is shocking, especially if your goal is to increase your customer base.

Maybe its time for Hastings to stop crowing about their cross and upselling features like 'Also Bought' lists and pay more attention to the information architecture, usability and customer service aspects of the Netflix web presence if he plans to scoop the future home movie biz.

[amnj1]

Have you ever tried to find a telephone number for **********???

[wmcsnow]

I also need a phone number for Mr. Reed's customer service department. His email service doesn't work. I have sent emails and they must have a list of stock answers because the answers I get back have nothing what so ever to do with my question. They keep sending me the wrong DVDs and the wrong format. My renewal is coming up and I will not be renewing unless this gets fixed.
Please tell Mr. Reed that he is losing a customer to online movie download. Theirs is the only business I know that has no phone service available.