Netflix initiated the first blow, albeit a silent one, against the goliath Blockbuster by offering its subscribers a no late fee policy. What this meant was that a Netflix subscriber could rent a DVD and keep it for as long as he/she wishes and would never have to worry about paying a late fee. The subscriber would just return the DVD when he/she wishes to rent a new DVD inside his/her Netflix “queue” – subscribers create a list of the movies and TV shows they wanted to rent and Netflix would mail out each DVD in the number order in which they are arranged by the subscriber – and the process would operate seamlessly and conveniently for the subscriber. A late fee by Blockbuster was the main reason why Reed Hastings created Netflix. Talk about sweet revenge. Netflix was now a “player” in the DVD rental business even though Blockbuster didn’t see them as threat…yet!

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