But ask Antioco. Netflix’s management is not a group to take too lightly. There were signs of this in 2000 but apparently Blockbuster managers overlooked them. At that point, Netflix had just tweaked the business model and had begun selling subscriptions in September 1999.

“It was Reed’s insight that the subscription model would resonate with consumers in a compelling way,” McCarthy said. “He re-engineered the Web site and software to support a subscription model…we began to grow exponentially overnight. In 1998, I think the business did $1 million in revenue. In 1999, we did $5 million, then $35 million and then $75 million and $150 million and then almost $300 million…We were I think five years to $500 million and another three years to a $1 billion, all because of the subscription model.”

McCarthy told the Unofficial Stanford blog that for Blockbuster it was a classic case of the innovator’s dilemma: “You end up competing with a business that you initially ignored.”

Source: Blockbuster laughed at Netflix partnership offer – CNET