How a classic math problem gave Reed Hastings the idea for Netflix

Netflix is a behemoth worth more than US$60 billion (S$84 billion), but the idea for the company stemmed from a textbook engineering example, according to its co-founder.

During a session at the Mobile World Congress in Barcelona, Spain, on Monday, Reed Hastings, the company's CEO, discussed how the idea of Netflix came about.

Hastings talked about Andrew Tanenbaum, a computer scientist who wrote a math problem asking students to work out the bandwidth of a station wagon carrying tapes. It required someone to work out how many tapes could fit in the station wagon, how much data the tapes could hold and then how quickly the station wagon could get to the destination.

Netflix CEO Reed HastingsPhoto: AFP

"It turns out that's a very high-speed network," Hastings told an audience during a question and answer session.

Instead of tapes, Hastings thought about how much data a DVD could hold.

"When a friend told me about DVDs and I realised, well that's 5 gigabytes of data and you know you can mail that very inexpensively, I realised that is a digital distribution network. And from that original exercise, it made me think we can build Netflix first on DVD and then eventually the internet would catch up with the postal system and pass it," Hastings said.

Netflix began as a company that sent DVDs of films and TV shows to people. The company, founded in 1997, introduced streaming in 2007. By 2010, the volume of streaming users exceeded the number of DVD mail subscribers.

Hastings said the company has nearly 100 million streaming subscribers and a little under 5 million DVD mail users.

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