Netflix was founded 20 years ago this week—this is how it happened

Netflix has revolutionized the way we watch movies and TV. Gone are the days of waiting all week for must-see TV or hitting up your local Blockbuster on a Friday night to grab the latest new release (which was inevitably out of stock). Instead, we binge-watch entire seasons of shows on the day they premiere, and choose from a seemingly unlimited list of films on-demand.

While you may think of Netflix as simply a streaming service, it started out as (and still offers) a DVD-by-mail rental service. And the reason behind its creation is so very ’90s. Reed Hastings, at least according to legend, had rented the blockbuster hit “Apollo 13” from his local video store. He forgot to return the tape and incurred a $40 late fee.

“I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there’s a big market out there,” Hastings told Fortune back in 2009.

As he pondered the problem while working out at the gym, he wondered if the flat-fee pay structure that health clubs generally used could be applied to the video rental business. Hastings went on to found Netflix in 1997 with Marc Randolph.

Randolph, who was also once CEO of the company, says this convenient narrative is a bitch of a stretch, and that the real origin of Netflix evolved out of several conversations between the two entrepreneurs.

Whether not the simple story about the late fee is 100 percent true, Hastings and Randolph were clearly onto something when they founded the now-booming company. Today, its content is valued at an impressive $11 billion, which surpasses that of other industry giants, including Time Warner as well as the combined assets of Viacom, Discovery Communications, AMC Networks and Scripps Networks Interactive.

People who know him are not surprised by Hastings’ success. Speaking about Hastings, Rich Barton, who sits on the Netflix’s board of directors, told CNBC, “He’s a visionary, long-term guy. There are very few people who can do this.”

We’d have to agree with that. Netflix is certainly a game-changer. Next time you queue up a movie or watch yet another episode of your favorite show in a never-ending marathon, remember Hastings and that fateful late fee that (presumably) started it all!