In San Jose, in the Santa Clara Valley in the southern part of San Francisco Bay, California, Ronan, Mark Randolph and Jim Cook, accompanied by a middle-aged man in FedEx overalls, arrived at the FedEx cargo hub in San Jose.

Jim Cook is not a former Netflix veteran, having joined the company in 2000 and is currently the head of the warehousing and delivery department.

"Excuse me, Horst. Jim Cook said to the middle-aged man in FedEx overalls.

The middle-aged man named Horst said with a smile: "You're welcome, we're old friends, and Netflix has been supporting FedEx's business." ”

Netflix uses FedEx's overnight delivery business, which has relatively high shipping costs and significant profit margins.

On top of that, he knew that Netflix might be out of the woods and that the business would have a period of upswing.

Horst led the three of them to a working machine and introduced: "This is the cargo roller sorter, which belongs to one of the new cargo handlers that FedEx began to deploy around the world in 2000, mainly used to sort small goods, and transport them to temporary storage stations for goods in different regions according to barcodes. ”

Ronan took a step forward and looked, and behind the entrance of the processor was the high-speed roller belt, which was the most important thing for sorting.

Mark Randolph, who was following him, was affectionate and serious, and whispered: "This is simply a DVD killer." ”

Jim Cook also found out what the problem was, and couldn't help but say, "Horst, have all the old devices been undone?"

"Yes. Horst didn't seem to hear Mark Randolph's words: "The old equipment is too inefficient, and the new high-speed drum sorter can increase the sorting efficiency by 30 percent." ”

Jim Cook put up with what he said later, to improve so much efficiency, FedEx will definitely not pull back the old equipment because of Netflix, let alone use time-consuming and labor-intensive manual sorting.

Mark Randolph looked at Ronan and, seeing that Ronan didn't speak, said to Jim Cook, "Let's get started." ”

Jim Cook picks up a tray and dumps the DVD discs in paper sleeves into a high-speed drum sorter, and as the drum turns, all the paper sleeves move forward.

It didn't take long for all the envelopes to come to an end and fall into the lower tray, where a FedEx sorter quickly walked over.

The tray was quickly brought over, and Ronan, Mark Randolph, and Jim Cook each picked up a few sleeves to look at, and two of the dozen or so sleeves were damaged.

"Change a pack. Mark Randolph said, "Go on. ”

Jim Cook took another tray and emptied the sleeve containing the DVD disc onto the drum sorter, and when he returned it, the sleeve was still broken.

The cost of each pallet is almost the same, and the material and design are different.

The machine that automatically sorts goods by barcode has greatly improved the efficiency and error rate of logistics cargo sorting, but it has caused a lot of inconvenience for Netflix's customary mail business.

Since last year, the breakage rate of Netflix's mailed DVDs has been high, which is a big reason.

FedEx is also actively assisting Netflix in resolving this situation in a responsible manner for its customers.

Ronan has a limited understanding of logistics, and spends most of his time watching, rarely speaking.

Jim Cook tirelessly dumped a dozen pallets of packaged DVDs into the sorter to observe the sorting.

Horst is very conscientious and responsible, always by Jim Cook's side.

Seeing that everyone else was far away, Ronan asked Mark Randolph in a low voice, asking, "Didn't think about solving this before?"

"It's not that I haven't thought about it, it's just that the conditions don't allow it for the time being. Mark Randolph puts it succinctly: "Since 2000, the company's main focus has been on raising capital, and Hastings and I have not paid enough attention to this. In addition, Cook negotiated with FedEx several times to find a solution through on-site inspections, but FedEx refused. ”

He shook his head and said, "In the second half of last year, we worked with the postal service, but the damage was about the same. ”

Hearing this, Ronan only had one feeling that the previous Netflix was not going well everywhere.

Mark Randolph continued: "It wasn't until mid-December that FedEx suddenly agreed. He glanced at Horst: "Netflix was acquired, and then the news of the group company's capital injection and share expansion has just spread, and FedEx ......"

He didn't say any more, but Ronan understood what was going on.

For FedEx, in the past, Netflix proposed to divide between right and wrong, and FedEx naturally had the right to refuse, but seeing that Netflix may usher in a period of rapid business development due to sufficient funds, FedEx agreed to assist Netflix in solving the problem of damaged goods.

In fact, both sides are blameless, Netflix and FedEx are both commercial companies, and the choices they make are all based on their own profits.

The breakage rate of mailed goods can be said to be one of the key problems faced by Netflix, and Ronan also listened to Mark Randolph explain in detail that if the packaging is too thick, the first thing to face is the increase in the cost of FedEx delivery, and secondly, the cost of packaging materials to increase.

At present, the leasing business is already losing money, and if it continues to increase costs, the loss may continue to rise.

Jim Cook's vision is to find a better delivery plan while keeping the cost of freight and packaging materials the same or even low.

To compress shipping costs, the envelopes used by Netflix had to be cheap, lightweight, and hard-wearing.

Ronan has no contact with the logistics industry, except for mailing and receiving.

The ability in this area is basically equal to zero, so naturally there will be no suggestions.

Mark Randolph wasn't much better.

The appearance of the two here is more to show that they take this issue extremely seriously.

After dozens of repetitions, Jim Cook stopped, first carefully examined all the envelopes, chatted carefully with Horst for a while, and then found FedEx's professional sorters and pickers, and asked in detail.

Horst invited Ronan and Mark Randolph into the adjacent office.

Ronan knew that the two of them couldn't help, so he went to the office and waited patiently, which was all morning.

It was close to noon when Jim Cook walked into the office.

"How?" asked Mark Randolph.

Ronan also looked over there, this was already a key issue restricting the development of Netflix, and he and Netflix did not have the strength to make FedEx change the business process at all.

If Netflix ships tens of thousands of shipments a day, these are not problems at all.

"I talked to Horst and two process staff and found a working protocol. Jim Cook picked up the glass, drank the water in one gulp, and said, "That's a stupid idea." ”

Horst didn't follow up, there were only three people from Netflix here, Jim Cook said directly: "Whether it's the postal service, FedEx or other companies, we can't afford to let them design a special process for Netflix for the time being, and the DVD mailing business itself is very rare, this kind of independent DVD mailing, and even only we Netflix carry out it on a large scale." ”

Ronan supported the armrests of his chair with both hands, fully aware that it was ultimately a matter of strength.

Small companies don't have enough weight in front of big companies.

Jim Cook continued: "So, for the time being, I have to deal with it in a stupid way. When we deliver goods to FedEx, we put the mail into different pouches according to FedEx's sorting area standards, bypassing all automated processes and delivering them directly to the freight forward. ”

Mark Randolph said a little helplessly: "It's really a stupid idea. ”

Ronan asked, "Can't you get FedEx or Postal Service to provide more detailed sorting services?"

"There is no way. Jim Cook sighed: "We're mailing too little. ”

But there is hope in his eyes: "If we can increase the average daily shipment volume to more than 20,000, then we can solve this problem with a slight swing between postal and FedEx." ”

Ronan was a little disappointed, but he also knew that even if Relativity Entertainment injected money, Netflix would not be able to become fat in one go, and said: "Jim, you are a professional, and you are directly responsible for this aspect of the business, if you think it is feasible, let's do it for the time being." ”

He added: "In 2002, our business will grow rapidly, and these problems will be solved. ”

Mark Randolph points out the key: "At the end of the day, it's our company's lack of strength. ”

After thanking Horst, Ronan and the three of them left FedEx's logistics center in San Jose, first found a place to have lunch together, and continued to discuss the morning's affairs by the way.

Although Ronan knows the general trend of Netflix's development and even understands many key business policies, there are still many difficulties to face in order to make such a company bigger.

Logistics and transportation should not only consider delivery to the customer, but also take into account the customer's return mail, because the customer places the order together with the postage cost, and then Netflix pays the freight cost to the courier company for the round-trip shipment.

When customers return mail, the automatic sorting process cannot be avoided, so after a morning of trial and error, Jim Cook chose the sleeve with the lowest damage rate, which is made of hard and light cardboard, can hold up to three discs at the same time, and passes through the automatic process of the drum sorter at one time, and is basically undamaged.

However, after the second sorting, individual envelopes began to appear damaged.

Considering that there are other wear and tear problems during transportation, the wear rate of secondary sorting in actual operation will be higher, and there is a greater possibility of injuring DVD discs.

These discs are not Ronan's pirated discs that were cheap enough to buy a bunch of pirated discs in his previous life, and the wholesale price of Netflix was as high as $15.

In addition, there are licensing fees for commercial operations.

As early as 1998, the Copyright Law had a supplementary agreement on digital copyright, and any Internet operator must pay a certain license fee to the producer or copyright owner for the commercial operation of any video content, including short films.

There is no hard and fast fee and can be purchased as a one-time license or spread over each lease.

This is the same as in the traditional video rental and sales industry.

For example, Hollywood's partnership with Pepsi is based on the sale of DVDs and a cut of the lease.

But the treatment of a behemoth like Pepsi in Hollywood is not comparable to Netflix.