Farewell Red Envelope

At approximately 3:00 PM on April 14th, 1998, my COO Jim Cook made the two-and-a-half-mile drive to the Santa Cruz post office and mailed the first batch of about 100 Netflix DVDs to customers. This week, after 25 years, and another five billion discs, they will finally mail their last.  

With that final shipment, we’ll come to the end of a remarkable run that brought down Blockbuster, launched the streaming era, changed the way the world consumes video content, and reshaped the way movies and television are produced.

In an age now dominated by streaming and instant gratification, it’s easy to forget that an evening of “Netflix and chill” didn’t always start with a click on a screen. For nearly 10 years, Netflix was known for a different kind of digital delivery: a DVD in an iconic red envelope, delivered by the post office directly to your mailbox. 

Before then, we all queued in video rental shops, struggled to find something interesting to watch, and then hurried home to play, rewind, and return before the late fees kicked in.

In the spring of 1997, Reed Hastings and I sensed that there had to be a better way—that the internet could make it easier to find and enjoy movies. Even then, we knew that digital delivery would be our future, but we also knew that the infrastructure for streaming wasn’t there yet. 

So, our initial focus had to be on mailing DVDs. At the time we predicted that our DVD business would limp along for four or five years: long enough to lay a foundation for the move to streaming.  But to almost everyone’s surprise—ours included—that crazy notion of putting a disc in an envelope and the envelope in the mail didn’t just limp along. It caught on, exploded, and lasted for 25 remarkable years.

For many, including myself, Netflix’s red envelopes were a symbol of excitement and anticipation. Each one held the promise of a new adventure, a gripping story, or a cinematic masterpiece. Without the physical constraints of a brick-and-mortar store, Netflix’s vast library made obscure titles and cult classics as accessible as the latest blockbusters. It turned casual viewers into cinephiles, and made cinephiles’ lives a lot easier and a lot more exciting.

This abundance of choice wasn’t just a luxury; it was a revelation. At a time when choice was limited by the physical shelves of a store, Netflix turned the movie rental model on its head. It was no longer about what the store had in stock that day, but about what you wanted to watch, and coming up with innovative ways of helping you find it. You were no longer tethered to the fleeting, limited stock in the New Releases aisle, a snap judgment based on box art, or a disinterested clerk’s recommendation. With Netflix, desires shaped viewing, not accessibility. The vastness of cinema was ours to explore, one red envelope at a time.

But the charm of DVDs-by-mail was also in its tangible, tactile components. The joy of tearing open a new envelope and popping in the DVD, then craftily transforming the envelope into new packaging for the return trip. There was the magic of mailing back a DVD in the morning, getting the confirmation email that afternoon, and finding a replacement movie in your mailbox the next day. It was personal, intimate…almost ritualistic. 

For someone like me who grew up in the age of VHS tapes, there was a genuine thrill that I was straddling two worlds: digital and physical. I might spend the morning immersed in the world of A/B tests, taste algorithms, and conversion data, but then step into our fulfillment center to watch rows of people shipping and receiving DVDs. Or even better, zip down to the San Jose Post Office to watch envelopes fly through a sorter so quickly they blurred into a ribbon of red.

Despite the fun we had growing our DVD business, we never lost sight of where the world was clearly going. As the service grew from hundreds to thousands of customers, and then eventually millions, we came to know their likes, dislikes, tastes, and preferences. But crucially, we also earned their trust and loyalty. So that when Netflix finally introduced streaming in 2007, we were doing it as a company they’d long known and come to trust as a place that helped them discover great stories. This was just a faster, easier way to get them. 

I can’t understate the importance of those early years. Because without the foundation laid by the DVD-by-mail service, I’m convinced that the rise and global dominance of Netflix’s streaming would never have been possible.

Celebrating 25 years of DVD-by-mail isn’t just nostalgia; it’s an acknowledgment of the profound ways in which it reshaped our engagement with entertainment. The service democratized access to cinema, erasing the geographical and economic barriers that often dictated movie availability. It freed us from the anxiety of due dates and the shameful slap on the wrist of late fees. It showed the world that a subscription model could work for more than just magazines and book clubs. It transformed us from passive consumers into active choosers, and in doing so, set the precedent for the on-demand future. 

But amidst the celebration, it’s Netflix’s social impact that I’m proudest of: the conversations with friends about the latest film they received, the shared anticipation of awaiting a popular new release, and the comfort of knowing that a selection of three or four movies were always waiting for us at home next to the television. As for “Netflix and chill”? I promise I never saw that coming.

Streaming is our present and future, but the legacy of Netflix’s DVD-by-mail service will always remain a testament to risk-taking, innovation, customer-centricity, and the sheer love of cinema. 

But for me, and for dreamers everywhere, it’s proof that sometimes—just sometimes—those crazy ideas actually do work.

Many ideas in this post were first discussed in the Neverland entrepreneurial community. Join us there!

Don’t miss another word. Sign up here to get these posts in your inbox