Business Insider recently noted that Blockbuster passed on the opportunity to buy Netflix in 2000. Apparently, Blockbuster could have bought Netflix for $50M. It is very easy to Monday morning quarterback and see this is as an obviously poor decision. But if you were CEO of Blockbuster in 2000, would you have bought Netflix for $50M? The business looked very different back then, and fortunately for us some of the data is public.
If we assume Blockbuster only had 1999 data to consider, they would have seen a company with 12% gross margins, a $30M operating loss, and a $110 CAC. If they had 2000 data to analyze, they would have seen a company with annual churn exceeding 300%; Netflix added 515k in gross new subscribers in 2000, but at the end of the year only had 292k. Netflix had a $50 CAC, and a LTV of only ~$24 assuming average monthly revenue per subscriber didn’t change between 2000 and 2001. Netflix was on track to post an operating loss of almost $60M. Back then, it certainly wasn’t clear that $50M was a bargain for a company with terrible customer unit economics and bleeding cash. At the time Blockbuster had $4B in revenues, 70% gross margins, and $75M in operating income
You can download the data here.