That night, Dunn spent a passionate evening with Penelope Cruz.
Unfortunately, neither Natalie Portman nor Nicole Kidman accepted his invitation to join.
No matter—his private jet was ready, and come the weekend, Dunn could fly straight to the Unsinkable set, where Charlize Theron and Liv Tyler, both former models with more open-minded attitudes, were filming. Their casual relationship with Dunn meant they wouldn't dare turn him down.
According to the information provided by Reese Witherspoon, Netflix's co-founder and CEO, Reed Hastings, came up with the idea for the company after a frustrating experience at Blockbuster. He rented a video, forgot to return it on time due to work, and was slapped with a $40 late fee.
That steep penalty sparked an idea for a no-late-fee rental model, and thus, Netflix was born!
Now, in addition to its early online payment system, Netflix had introduced a subscription model—a stark contrast to Blockbuster.
For just $19.99 a month, users got unlimited rentals, no late fees, free shipping, and no due dates. It was undeniably appealing.
Blockbuster's model was like that of a landlord: they owned physical assets—stores—and made money by renting them out.
Netflix, on the other hand, was asset-light, with no physical stores, operating entirely online. In modern terms, it was an O2O (online-to-offline) model.
As someone with the benefit of hindsight, Dunn could clearly see the potential in this approach.
That morning, Dunn welcomed Reed Hastings and his team to his office with great fanfare.
"Mr. Walker, I know your time is valuable, so I'll get straight to the point. Netflix's selling price is $50 million, non-negotiable!" Reed Hastings declared confidently.
Dunn chuckled, amused. "$50 million? That simple?"
"What?"
Reed was taken aback. $50 million was no small sum, yet Dunn's tone was so casual.
Dunn smiled. "Reed, I've reviewed all of Netflix's materials, and I'll let you in on something—I'm very close with a lot of Stanford grads, and I'm genuinely interested in Netflix."
Reed's eyes lit up. Reese Witherspoon had mentioned over the phone that Dunn was optimistic about Netflix, but he hadn't expected Dunn to be this enthusiastic, not even questioning the $50 million price tag.
"I… I'm sorry, Mr. Walker, I'm just… surprised."
"Surprised? Don't you have confidence in Netflix's business model?"
"No, I have complete faith in Netflix!" Reed paused, hesitant to admit he'd had doubts about Dunn's judgment.
With that, the biggest hurdle to their partnership was cleared.
The rest were just details—but to Reed Hastings, those details were just as critical.
"Mr. Walker, you can acquire Netflix for $50 million, but not the entire company. You'd get a maximum of 60% of the shares."
Dunn raised an eyebrow, glancing at him. "That sounds less like an acquisition and more like financing. That's not quite what we discussed initially."
Reed, visibly nervous, quickly clarified, "No, no, Mr. Walker, this is the plan we worked out with our investors. The $50 million wouldn't go into anyone's pockets—it would go straight into Netflix's accounts to fuel its growth."
Dunn said coolly, "So, it is financing."
"Regardless, I need to retain operational control of Netflix," Reed said cautiously, watching Dunn's reaction.
Dunn waved a hand dismissively. "That's a given. Look at PayPal—I've never meddled in their operations. But I need an explanation for this financing setup."
Reed took a deep breath and explained slowly, "Mr. Walker, with financing… I mean, acquiring over 50% of the shares is essentially the same as an acquisition. We prepared two plans. If you're not satisfied with this one, there's a second option."
"Let's hear it."
"For $60 million, you can acquire 80% of Netflix's shares."
To Reed, whether Dunn took 60% or 80% made no difference—once the deal was done, Netflix would become a subsidiary of Dunn Capital.
Dunn's eyes brightened. "I'm interested in the second option. Tell me more."
Reed explained, "Netflix has gone through two rounds of funding, with 20% of the shares held by three venture capital funds. They're not optimistic about Netflix's future and declined to participate in a third round. We've spoken with them, and if you offer $10 million, they're willing to sell their 20% stake to you."
In this era, recovering initial investments in tech startups was a dream for many venture capital funds.
Dunn nodded, understanding. "So, you're saying I can hold a maximum of 80% of Netflix's shares, correct?"
Reed confirmed, "Exactly. The management team currently holds 15.3%, and the remaining 4.7% is reserved for an option pool."
Dunn smiled, satisfied. "Sounds like you've got it all figured out."
Reed sighed. "The dot-com crash is hitting hard. I just want Netflix to survive."
Dunn grinned. "Alright, let's say you get the $50 million in financing. What's your plan?"
Reed was clearly prepared, rattling off Netflix's strategy with ease. "Right now, we deliver movies to customers by mail, but delivery times vary due to distance, which creates a poor user experience. With the funding, I plan to build at least 30 distribution warehouses across the U.S. to drastically cut delivery times, ideally so orders placed one day arrive the next."
Dunn fell silent, letting out a long sigh.
It was only 2000, yet American tech companies were already thinking this far ahead. In his past life, some Chinese e-commerce companies touted similar ideas a decade later, claiming their business models were globally groundbreaking. The irony wasn't lost on him.
"Your materials mention Netflix's online streaming business. Is that viable?" Dunn asked, glancing at the documents with curiosity.
Reed explained, "It's just a concept for now. Internet speeds are too slow to make online viewing practical, but as the internet evolves and speeds improve, I believe it's a promising direction."
Streaming didn't truly take off until 2010.
Netflix spent $1 billion to secure five-year streaming rights from Paramount, Lionsgate, and MGM, and signed deals with premium networks like HBO and Showtime to become a paid distributor.
But even in the late '90s, the seeds of streaming were already being planted.
Netflix's current online video-on-demand service had the early makings of a streaming platform.
Dunn nodded. "Narrowband internet will inevitably give way to broadband. Netflix needs to prepare now for the Web 2.0 era. The streaming business, even if it's losing money, cannot be cut."
Reed wasn't sure if Dunn was agreeing with him or asserting authority. Testing the waters, he asked, "Mr. Walker, what do you think of Blockbuster?"
Dunn laughed. "I heard you paid a visit to Blockbuster's headquarters before this?"
Reed's face flushed. "Blockbuster's the giant in the video rental industry. I thought…"
Dunn waved a hand, a flash of disdain crossing his face. "Giant? Nonsense! Sumner Redstone's getting old—he's out of touch with the times. The future belongs to technology, to the internet!"
Reed's face lit up with surprise. He hadn't expected Dunn, an outsider, to share his perspective.
In the midst of the dot-com crisis, even many industry insiders had lost faith in the internet.
Yet Dunn was unwavering.
He wasn't done. "Blockbuster's no threat. They'll be crushed by their heavy assets sooner or later. Netflix needs to think bigger. At its core, Netflix shouldn't be an entertainment company—it should be a tech company."
With that single sentence, Dunn set the tone for Netflix's future strategy.
Netflix's future lay in Silicon Valley, not Hollywood!
Dunn held significant stakes in Apple and Google, ensuring his influence in Silicon Valley would only grow.
And Hollywood? It was a messy, cutthroat world full of shady dealings. Even if Dunn Pictures navigated the Disney hurdle, who knew what challenges awaited?
Netflix was Dunn's final stronghold.
Positioning it in Silicon Valley, far from Hollywood's chaos, was his safest bet.
If things went south in Hollywood, Dunn could rely on Netflix, backed by Silicon Valley, to rise again.
And for Netflix, this was the right move.
The internet was the future, and even mighty Hollywood would have to adapt, leaning into the digital age.
Three days later, Dunn Capital, led by Scott Swift, finalized the deal with Netflix.
Dunn Capital invested $60 million, gaining full control of Netflix!
Reed Hastings got his $50 million in financing and retained a 10.7% stake in Netflix, securing his operational control and a foundation for future wealth when the company went public.
At the same time, Dunn brokered a connection between Netflix and PayPal.
It was a win-win. Netflix could scrap its in-house payment system and use PayPal, the leading, stable, and robust payment platform, to handle online transactions.
PayPal, in turn, could leverage Netflix's platform to grow its user base.
Every Netflix subscriber was also a PayPal user, opening new growth opportunities for PayPal.