They didn't seem to grasp the importance of building a strong digital presence to the future of Blockbuster's industry. Icahn and the other board members he installed vehemently opposed Antioco's plans to build out Blockbuster's online business and, especially, the decision to ditch the company's lucrative late fees. By 2005, Icahn had acquired a nearly 10% stake in Blockbuster, large enough to entitle him to three seats on the company's board, where he immediately began battling Antioco for control of the company in an attempt to quickly boost its stock price. The other thing that got in the way of Blockbuster squashing Netflix was Wall Street billionaire and activist investor Carl Icahn.

'If it hadn't been for their debt, they could have killed us,' Netflix's Hastings told reporter Gina Keating about Blockbuster in 2009. (Netflix faced similar obstacles, which is why the company took over six years to post its first profit and why it continues to burn through billions of dollars each year while adding new streaming content to grow its subscriber base.)Д«lockbuster's debt rankled shareholders, especially with Blockbuster plowing roughly $200 million into an online business that was not yet profitable while also losing out on hundreds of millions of dollars in late fees. The idea was that Blockbuster would eventually add enough subscribers to make Total Access profitable. For instance, every time a Blockbuster customer actually exchanged a DVD at one of its stores through the Total Access plan, Blockbuster lost about $2. The debt was an especially big problem for Blockbuster, because launching its online subscription business was expensive. A few different factors contributed to Blockbuster eventual demise.ДЇirst of all, Blockbuster was already carrying roughly $1 billion in debt when the company launched its online business, as its former parent company, Viacom, saddled its subsidiary with debt while spinning off Blockbuster into its own public company in 2004. Given Blockbuster's financial might compared to Netflix, it's not hard to imagine an alternate reality where Blockbuster continued to grow its online business and eventually wrote Netflix out of the history books. 'They were hurting us, and they were making tremendous gains,' Randolph says. Netflix co-founder Randolph, who left the company in 2003, tells CNBC Make It that things got 'very scary' for Netflix once Blockbuster finally put serious resources toward its digital business, mustering 'the true strength that they could that we couldn't match, which was a blended model of online and stores.' In one quarter of 2007, Netflix even lost 55,000 subscribers compared to the previous quarter, while Blockbuster's subscriber base continued its growth. That move added a wrinkle to Blockbuster's plan that Netflix could never match, and it finally seemed as if Blockbuster might be able to put Netflix on the ropes. In 2006, Blockbuster launched Blockbuster Total Access, which allowed online subscribers to return DVDs to Blockbuster's brick-and-mortar locations and exchange them for another DVD for free. It was still trailing Netflix in overall online subscribers, but Blockbuster was picking up steam, even adding online subscribers just as quickly as the fast-growing Netflix. In a call with Wall Street analysts at the time, Netflix's Hastings said that Blockbuster and Antioco had 'thrown everything but the kitchen sink at us.' (Not long after, Antioco sent a package containing an actual kitchen sink to Hastings.)Д«lockbuster Online quickly added over 1 million subscribers less than a year after launching, and then succeeded in hitting its online goals by reaching 2 million subscribers by the end of 2006. In 2004, a year in which Netflix's annual revenue hit $500 million, Blockbuster debuted its own online DVD subscription service, called Blockbuster Online. Eventually, Blockbuster and CEO Antioco realized that Netflix was onto something.

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