After returning home, Jaesung searched for movie DVD and rental companies.
“Oh! They only recently launched their service. They’re running it on a monthly subscription model.”
Blockbuster, which currently dominated the market, operated much like video rental shops in Korea.
Customers paid a rental fee, had to return items within a fixed period, and were charged steep late fees if they were overdue.
The new company, on the other hand, charged a flat monthly fee and allowed unlimited rentals with no late fees, using that convenience to attract customers.
“Unlimited rentals, but you can only borrow the next movie after returning the previous one. That’s a solid idea.”
The biggest reasons people hated Blockbuster were having to go in person to return movies and the late fees, which were often far higher than the rental fee itself.
Netflix eliminated the single greatest inconvenience of the traditional rental model by introducing mail-in returns.
On top of that, it was offering its service for $7.99 a month, far cheaper than the roughly $50 cable TV subscription fee.
“Internet speeds are still slow, and computer performance hasn’t caught up yet. Online streaming would be unrealistic for now, right?”
At present, most people still rented tapes or DVDs physically, but in just ten years, advances in the internet would turn this entire rental model into a relic of the past.
Netflix currently relied on mail-order rentals, but starting in 2007, it would launch internet streaming.
By anticipating the advantages of the online market and future technological progress early on, Netflix prepared for streaming in advance and jumped into the new market faster than its competitors.
In the end, Blockbuster—the giant dinosaur of the traditional movie industry—would be unable to sustain its high rent, labor costs, and poor turnover rates.
It would surrender its throne to Netflix and go bankrupt in 2010.
“Netflix probably hasn’t turned a profit yet. Judging by how aggressively they’re promoting themselves, their marketing budget must be tight too.”
Reed Hastings, a computer geek and movie enthusiast, founded Netflix out of anger at Blockbuster’s inconvenient return system.
From the start, he planned to distribute movies via the internet, which is why he put “Net” into the company name.
For promotion, they installed rental kiosks in large supermarkets, but their main service operated online.
Customers selected movies on the website, and DVDs—much smaller and lighter than tapes—were delivered by mail.
Returns were just as easy, since customers simply placed the disc back in the provided envelope and dropped it in a mailbox.
It was far more convenient and cost-efficient.
“They’re not operating nationwide yet. They’re only testing the service in the western United States. I need to invest quickly before it’s too late.”
Netflix would go public in 2002, and by 2018, it would surpass the Walt Disney Company to earn the title of the world’s largest entertainment company.
There would be crises along the way, along with interference and pressure from established competitors, but by offering relatively low prices and a wide range of content, Netflix would maintain its top position.
“When competition peaks, they’ll make a perfect comeback by succeeding with original content.”
The COVID-19 pandemic would later give Netflix an unexpected boost, and since Korean culture would spread worldwide through the platform, Jaesung held particularly positive feelings toward the company.
The bear did the tricks while Netflix took the money, but since Jaesung would become a major shareholder, that arrangement might actually work out in his favor.
“Setting up an investment firm really does make things convenient.”
If Netflix had been a pure internet software company, it would have been harder for Jaesung to approach directly.
With an investment corporation in place, all he had to do was tell an employee to send over an investment proposal.
“Come to think of it, Netflix will be the first investment after founding the firm.”
Since he hadn’t set up a formal office yet, Jaesung called an employee who was, ahead of his time, working remotely and issued his first instruction.
“Smith, it’s been a while.”
“Boss, what’s the occasion? You’re calling me yourself.”
“I found a company I want to invest in.”
“Oh! So there’s finally work to do. What kind of internet technology company is it this time? I’ve been studying computers hard myself.”
“It is an internet company, but I want to invest in a DVD rental business.”
When Jaesung said he wanted to invest in a company that rented DVDs by mail through a website, despite Blockbuster dominating the market, Smith sounded doubtful.
“I don’t know much about it, but if you’re investing, there must be a reason. How much are you thinking?”
“It’s still a startup, but judging by the scale of their promotion, they seem fairly well-capitalized. I want a 20% stake, with a budget of around 3 to 6 million dollars.”
“Oh! They have a website. Understood. I’ll contact them and report back.”
Smith, recommended by Warren Buffett, knew Jaesung’s successful investments and assets better than anyone.
He carried out the middle school CEO’s instructions without question.
If Jaesung had contacted Netflix directly, he would have had to waste effort overcoming prejudice against him as a young Asian middle schooler.
By making the offer through Smith, he could finalize the deal comfortably while continuing to attend school.
“We negotiated it to 25% equity for a 5-million-dollar investment. They’re confident their company will succeed. They’re also planning a future service called online streaming.”
“It’ll be difficult with current technology, but it might be possible someday. Even if they can’t beat Blockbuster right away, their operating costs are overwhelmingly lower, so they’re in a strong position for price competition.”
“After hearing the explanation, I feel positive about it too. There are many hurdles ahead, but if things go according to plan, it seems like a company that will definitely succeed.”
It was a shame he couldn’t meet Netflix’s founder in person, but with 25% equity secured, he could always meet him later if needed.
As soon as Netflix was added to the portfolio, the inevitable call from the watchdog came in.
“You invested five million dollars in some strange movie rental company this time.”
“It’s not a strange company. It has a clear vision for the future.”
“Every company claims that. What matters is how likely it is to succeed. I told you not to gamble, yet you keep making reckless investments. Why?”
This investment was only possible because Jaesung knew the future, but since he couldn’t say that outright, he once again had to endure Warren Buffett’s storm of scolding.
“I invested the profits from the horror movie Scream, so please don’t be too hard on me. And this time, I got equity in a company, not just a film budget.”
“Securing 25% equity was well done, but what will you do if the company fails? Blockbuster dominates the market. Do you really think you can beat Goliath?”
“Internet speeds are slow and computer performance is lacking for now, but if we give it a little time, the era of online streaming will come. We need to invest before the market fully opens.”
“Hmph! Didn’t I tell you to focus on steady returns and low risk instead of high-risk, high-reward bets?”
Jaesung agreed to be more careful and proudly mentioned the returns from Amazon.com, which had recently completed a successful IPO.
“I already know about that company. I heard you even helped your neighbor with the startup process. That wasn’t investment skill—it was pure luck, so don’t get arrogant.”
After getting thoroughly scolded by Warren Buffett for investing in an internet-based DVD rental company that common sense said to avoid, Jaesung called Steve Jobs to blow off some steam.
“How’s the Toy Story sequel coming along?”
“Did you really call just to ask me something like that?”
“Something like that? It’s the sequel to Toy Story. You said A Bug’s Life would significantly advance Pixar’s natural-object 3D modeling techniques.”
“That’s true. The story is already outlined, and we’re working on improving the 3D modeling technology. We’re aiming for a release late next year, so there’s nothing concrete to talk about yet. If you have nothing else to say, I’m hanging up.”
As Jobs tried to end the call, Jaesung hurriedly brought up Apple.
“Is Gil Amelio’s removal finalized?”
“How do you know that?”
“I have my own information network. I keep a close eye on your movements.”
“Sounds like you have a spy. The board accepted my opinion and decided to remove Amelio.”
Apple’s CEO, Gil Amelio, had acquired Jobs’s high-performance computer company NeXT late last year and brought Jobs back as a special advisor.
Jobs could have remained an advisor and stayed out of the power struggle, but that wasn’t in his nature.
After returning to work in January, Jobs blamed Amelio for Apple’s decline and pushed the board to oust him.
Before long, Jobs himself was named as the replacement.
“You’re planning to cut down the pointless excess products and focus on core lines, right?”
“Did your ‘spy’ tell you that too?”
Apple, drowning in accumulated losses, was selling too many desktop variants, laptop lines, and server models.
It was also directly producing printers, digital cameras, PDAs, and countless peripherals that barely made any profit.
As soon as Jobs returned, he eliminated nearly 70% of Apple’s hardware and software.
He shut down everything except consumer desktops and laptops and professional computer lines, laying off around 3,000 employees.
During this process, he gained a notorious reputation for firing employees on the spot after asking what they did, even in elevators.
Yet within a year, he performed a miracle by turning Apple from the brink of bankruptcy into a company with 300 million dollars in profit.
“I’m not a spy. If we leave things alone, Apple will collapse. You need massive restructuring. You’ll be under a lot of stress for a while, so don’t be picky with food. Go to Korean restaurants and eat nutritionally balanced dishes like bibimbap and seasoned vegetables.”
“Being told not to be picky by a middle schooler… I must really be stressed. Say one more ridiculous thing, and I’ll come to Seattle to scold you myself.”
Hearing Jobs shout in anger actually lifted Jaesung’s mood, and he ended the call with words of encouragement.
“Oppa, Britney Shakespeare is debuting as a singer next year.”
“Really? That’s great. Tell her congratulations.”
“She invited me to her vocal and dance school during summer break. You should come too.”
Jaesung declined, saying he wasn’t particularly interested in dancing or singing.
However, regardless of his wishes, once vacation began, he ended up heading to New York with his mother.
“I can’t leave you home alone. The classes last a month, so you should stay in New York too.”
His sister enrolled in the vocal school where Britney attended, and since his mother went along, Jaesung had no choice but to come as well.
The one consolation was that Jaesung didn’t have to take any classes himself and could simply spend time in New York with his mother.
“Wow! James, long time no see. You’re taller than me now, aren’t you?”