ILAO 12
Neil Roseman: [00:00:00] I actually started to think as I was reading what other people were doing, that it was time to think differently about developing and releasing software. Yeah. And it taught me a lot about how to do that, that I still use today. And I believe it's a better way to build and ship reliable software that's customer centric.
Dave Schappell: [00:00:29] I'm Dave Chappelle. And I'd like to welcome you to the invent, like an owner podcast, where I talk with the Amazonians who help build Amazon come into one of the world's most valuable companies. This weekly podcast is for entrepreneurs and business leaders. The goal of the podcast is to capture the Amazon creation stories and create, create a historical archive.
On that note, my guests are recalling history as best they can. It's possible. Some of the details are fuzzy or just plain wrong. And by the way, Neil is going to correct something from our prior podcast with Merriam. So that'll be our first correction in, in real time. Uh, so if that happens, it isn't intentional.
I invite you or future guests to help us get the facts as straight as they can be now on with the show. Today, I'm thrilled to be talking with Neil Roseman. Who's a VP of software engineering from 1998 to 2007, and you're at Vander Mulan. Who's a director of product from 99 to oh five. And then he loved it so much.
He returned in 2008 and he's now the VP for managing European retail. They both help launch many products and services over the years. So I was a little surprised when Neil told me he wanted to talk about a few projects that came closer to the end of his career in 2004, 2005 timeframe. Specifically want to talk about the DVD rental business?
Yes. Amazon sent DVDs via post, um, and some related services that were created. The antici in anticipation of that launch today, you'll learn how a subscription service launched to support what turned out to be some smaller businesses. It was later used the power, some of Amazon's most successful subscription products, products of all time, including Amazon prime and digital music and more so long intro, but welcome Neil and yours.
Jorrit Van der Meulen: [00:02:06] Thanks for having us, Dave and Neil. Great to be with you again. 
Neil Roseman: [00:02:10] You know, uh, this is, uh, the, definitely the highlight of my week. Maybe the highlight of my pandemic, getting to actually see your at face to face because we keep missing each other. When we are located on the same continent. Let me try it. 
Dave Schappell: [00:02:25] Um, yeah, so you're, it's based in Luxembourg. Um, and I, I joked to him earlier. It's like, uh, this podcast is like one of the top 20 podcasts for entrepreneurs in Luxembourg. And the joke there is that that's because Amazon employees make up such a hard, a big part of the Luxembourg population. So, uh, good job on hiring. Um, so, so we're going to talk, uh, today quite a bit about the subscription service, I think.
Um, but to set the table for that. Many people who don't live in the UK or Germany, probably aren't aware that Amazon ever had a DVD rental business, uh, via mail. So can one of you tell me like, sort of how, and when, by whom that decision was made. Yeah, I will, uh, start in, I think it probably was early 2004 because, uh, DVD rental launched in the UK in 2004.
And I think it probably either was the OPI one of the previous year at the end of 2003, or sometime early in 2004 Yorick may actually still have the documents to, uh, you know, remind us of that, you know? Look, we had been looking to expand video and enter into more businesses. And obviously the question of what Amazon do, a DVD rental business, like Netflix had been asked for a long time and we finally decided we had enough pieces and it was the right time to do it.
And through a process, mostly driven by your it and his great finance director who wound up kind of being the product owner for it, for trying Bahnsen we decided rather than trying to launch first in the U S. We would launch in other geographies where Netflix wasn't quite as established and we could build it at a scale that would make sense for us.
You know, it's a lot like the way everyone launches a mobile app today, most people launch in a region that's not the U S you launch in. Australia or Canada, because you can geo-fence it and figure it out. We kind of did that. We went to a market where there wasn't, we thought as big of a competitor and what we did could be seen on its in its own light rather than being compared constantly.
And we could do it at a scale. That made sense. So after a lengthy, uh, decision process, we decided to launch first in Europe and we launched ultimately in the UK. Germany and France. And was that the first time Amazon ever did that sort of outside the U S first launch, as far as you know? Well, you know, We did things in Japan that we didn't do elsewhere, that I, you know, I can't think of anything other than like payment methods that were country-specific before that.
But, uh, there had been some mobile initiatives that one of my teams had worked on a couple of years before that were specific to Japan. Uh, particularly they had a different. Mobile interface and mobile commerce was actually a thing in Japan long before it was anywhere. So we had done some things that I think were location specific and I'm sure operationally, there was a lot more that was done that I don't even know about or remember, but, uh, I think this is the first business that was launched exclusively in a geography that was not the U S right.
That was my, that was my recollection too. The other thing that it was, it was designed to launch initially in Europe with fast follows into other geographies where there might've been things that had been launched prior that were. For that geography specifically, um, you know, versus, uh, uh, something that had a global, global lie.
And so was, this, was this Amazon's first sort of consumer subscription business. Like what are the, what I'm trying to think about the things that are sort of unique about it? Like, I think about that, I think about it was a service business sort of versus physical product. I mean, there were physical products arriving, but it was more about the service that you were subscribing to.
Definitely the first subscription billing business, because Amazon couldn't do subscription billing. So, I mean, we had subscription emails right back in when you talk to some of the other early Amazonians and you can talk about that. You know, there was a very robust email program. It used to be able to sign up for in a whole bunch of categories.
Um, you know, and, but that was the closest we did to anything that was subscription was you could subscribe to like an email about science fiction books. Right. And they used to be called eyes at first, I think. And then it was delivered. I think it was I, yeah, it might've been in that order, Amazon I's and then Amazon delivers.
Yeah. Right. And so did, did, uh, this launch, you said Netflix wasn't there, or maybe they were small to this delay. Netflix has launched unit. Do you know if it impacted it at all or did they just skip physical DVDs? Netflix was not in those countries. Right. And I will let your to answer the other part of that question.
I, it was, um, I mean, it was quite fascinating cause you got to go, if you go back in time, like, um, they had a Q3 earnings announcement that was, uh, um, the, the, the subject of the DVD rental, uh, the Amazon's entry and DVD rental was, was the primary topic of that, uh, earnings announcement. Uh, and they made a bunch of strategic changes.
Uh, as a result, which, you know, hats off to Reed and his team, like, you know, they did it, they did a great job. They kind of refocused on the U S um, we went to Europe, um, and, uh, it was, uh, it was, yeah, there was, there was a huge impact. Was it? So we launched in 2004 in the UK, and then I looked, I saw Germany was 2005.
Was it a success? Was it a mild success? Like, how did. What happened to the business after launch. And again, we're going to get to the underlying subscription service and some other things. It's just, I don't really know if a lot of people know, like this never got, I don't think it ever got to the U S is that correct?
That is correct. It did not. It did not. Yeah. So I, uh, I'll, I'll touch on that a little bit. Neil, you jump in, I mean, your, the overall business was, uh, I would say, you know, Relatively successful. Um, it was, it was it, you know, certainly like when, when you look at kind of the plans that we built and what we thought it would do, uh, it did well against those plans.
Um, And, um, you know, I think that the ultimate benefit as you kind of touched on earlier to Amazon was, was, you know, very multifaceted, you know, in not only in terms of technology that we built that enabled, you know, significantly larger businesses later. Um, but kind of the way that this ultimately played out to, uh, led to, um, you know, an acquisition of the business, buy, buy love film, which, you know, was kind of a.
Uh, a conscious choice of us to, to divest of the business, uh, to love film, and to kind of do a partnership with love film, um, and that ultimately came full circle where we ended up purchasing LA film, uh, which was kind of the Genesis of, uh, or at least their first step into, um, you know, streaming video in a big way in Amazon.
What would later become Amazon video? So. You know, I would say that the DVD rental business on its own per se was, was interesting. Um, you know, what it, spine that was, um, was, was even, you know, feel to me like there's a lot of these sort of stories where if you take a really long-term perspective that in hindsight, it all looks very clear.
We did this, we got these services that power, these subscription businesses, and then we knew. Streaming was coming. So, and I'm sure it wasn't as clean as that, you know, but it looks, it looks nice and tidy. Um, but you know, did we think physical DVDs were going to be around as long as they were? I mean that, because in 2004, 2005, that was already, Neil might know, like six years after we launched the DVD business.
And I don't know when streaming sorta hit its stride, but it feels like it would have been around that timeframe. Well, streaming had not hit its stride yet. And it would be a couple of more years before that happened. Although once that happened, it happened very rapidly, you know, but the old saying like the, you know, throughput of a truck full of DVDs, Was hard to beat for a long time.
So even though streaming was possible, the latency, the buffering really limited high quality, you know, movie length streaming for awhile, but then it happened all at once. You know, we probably entered too late. I think the product was successful. It as you're point out, it actually met. You know, most of its financial goals, it didn't become the number one in every country, uh, immediately.
Like we might've been used to, like when I launched the video store in seven weeks in 1998, we were the number one DVD retailer in the world very quickly. So that was a little disappointing when we couldn't get to the top in every area. But it. Created a lot of novel warehouse processes. We never had had to both ship and return things.
We had to invent a new kind of mailer, right? Because in this space, the mailers were very proprietary. And so we had to spend a long time figuring out how we were going to. Physically shipped DVDs and then take them back and put them back into rotation. So operationally, we learned a lot as well, and the product was really good.
So I am very happy with the team that we built. That team went on to do a lot of other things. Uh, many of whom are still there and down is on. Two, two things that I sort of learned. Maybe I should have known this, but learn about in thinking about DVD. So part of the problem with is just the cost of the product, right?
Because the studios charge you a lot of money for every, for every rentable DVD. So then you have a two-pronged at the, the most popular ones. You guys buy a ton of these most popular DVDs in order to have selection and availability. But then on the long end, the long tail, you got to also pay for those expensive DVDs.
They may not rent very often. And so did we know about that part of the business going in? And we said, let's figure it out. We'll learn about it and try to figure it out. Or was, was any of that, a little bit of a rude awakening. It was super well-known. He was, it was, I mean, you're hitting on the hardest thing about the whole entire business model and, you know, just to, to take a step back, like.
You need that top release DVD for about a month, you know, the window of like, you know, when people really, really, really want to watch it super short. And so you're kind of always  you got to go way back in your thought process. Think back on now you remember Netflix had the Q and either they kind of, they were expert at moving you to the back catalog.
Um, th they didn't have to buy that much front catalog because that just totally upside down, you turn your whole PNL upside down. Um, and if you think about the way that the Amazon website works, right, it's all about front list. You know, th the, the traffic to the detail pages of the latest and greatest is significantly higher than the tail.
So like at Amazon, the tail doesn't scare us. It's actually part of our strategy. Um, but it's like, how do you manage that front list? Um, and then in, in, in, in reality, it's like, how do you manage on customer joy or disappointment, um, and kind of operate a PNL, um, you know, with the amount of traffic and the type of traffic you get from the Amazon system.
So like, we spent a lot of time on that, but it was like, that was kind of the majority of our conversation. And we were trying to figure out like the algorithms by which you would kind of allocate. This top product to customers and manage customer disappointment. Uh, and ultimately it led to kind of like how we thought about how we wanted to price the service.
And mean the service understand clearly why Netflix ran to the subscription streaming model, you know, like, cause they were wrestling with it too. Maybe they had bigger scale, but like you said, they had set up their site differently with their queues as well. Cause we would all put 75 movies in our queue and we weren't that upset if we couldn't get the first seven right away, you know?
And so it was right. And subscriber growth helps with that. So if you don't get. High levels of subscriber growth. It gets, you know, more and more difficult to manage that imagery and right. It's, it's like a, you know, a social game where early in its life cycle, you have to drive usage very high, right? In similarly new releases, right.
That you have to buy so much of that inventory to service a very small. Yeah, time frame, you actually have a lot of inventory. One of the things somebody told me about this, which I thought people would find interesting was that, especially because Amazon's sort of well known as, you know, the fulfillment center and logistics experts, but then in the, for DVD rentals in the U S Netflix actually took a different approach where they were.
Optimized for the us postal service, you know, and I guess local, I don't know how you would describe this, but DVD differentials didn't actually at the time with Amazon's fulfillment centers were in these bigger, maybe more remote locations. It wasn't actually the optimal way to fulfill DVDs. Is that something like that?
Yeah, we, well, we, you know, Amazon fulfillment centers at the time were near big injection points, right. Whereas I think at the time Netflix had about 30. Smaller centers closer to, you know, U S P S injection centers to cover their market. Right. Which was one reason that trying to service the U S market out of the gate without learning how the business worked would have been a real challenge.
So, you know, we did it, I think in true Amazon style, less, you know, worrying about competition and more about, we need to learn about this business and do it in a way that makes sense and start. Small and grow like last week you heard about music mini launch or how quickly we launched DVD sales at Amazon with reduced functionality.
Yeah. I don't think we reduced the functionality here. In this case, we reduce the complexity by picking a market that was more solvable. Yeah. Male. Just real quick. You mentioned you wanted to correct something in last week's episode. What was that real quick? Well, you know, I'll briefly cover how I got to Amazon in 1995, through 1997, I was at a very early internet startup in New York that, uh, we had the first streaming audio on the web.
And at the end of 97, I had, you also had the ugliest website ever created on the internet, but that's just my opinion. That was in two K music Boulevard. . I don't agree, but that's okay. Uh, she sent an email to Amazon trying to get a job, but no one responded. And, uh, I, at the end of 1996, excuse me. And at the end of 1997, a recruiter in New York was talking to me about, uh, an employee of mine who was looking to get a job somewhere else.
And she said to me, Hey, what are you thinking of doing? Cause I was leaving. The company I was at. And I said, you know, I think I'm just going to hang out in New York for a while. I have a couple of things to do. She said, anyone you are you interested in? I said, well, yeah, Amazon. I said, that's one company I would talk to.
I tried to, you know, interest in them last year. No one ever wrote back to me. She said, oh, well, they're doing a search for someone to, you know, launch a new product. So I said, great, I'd love to talk to them. And it turned out to be music. So Merriam was one of Marion. Mohit was on my interview loop as was Kim rack Miller.
And I joined Amazon in order to launch to the music store. So last week, Mariam said that Kim was the TPM or technical program manager on music, but it's actually why I joined the company. There were only a small number of TPMS at that time. And all of the others got pulled to work on. The EU launches of the UK and Germany, Sean Welch, who was a TPM at the time had started working on music, but, uh, w needed to switch to Europe.
So we were hiring someone else. So I came in, I did the music mini launch and then classical launch. Then later that year we launched video and then toys, right. And, uh, Electronics in Q4. That's awesome. It's a good year actually right now, but probably before we get into subscriptions, your, can you just talk about how you came to Amazon originally and let's the quick version of, and came back and obviously been there a really long time now?
Sure. Um, well, I, I was introduced to Amazon, um, coming out of business school, doing the interview loops in 98. Um, uh, had an offer, uh, It was, uh, it wasn't that competitive versus other offers. And I thought that I wasn't sure it was a great idea. Um, and I still remember my wife's looking at me going, you know, I dunno selling books on the internet seems like a pretty darn good idea to me.
Um, but what does she know? I I'd gone to business school. She hadn't, um, uh, it turns out to be pretty darn smart. Um, so I, I, in 1999, after going to a startup called trilogy, where in Austin, he was, he was a killer example on college campuses and MBA. Yeah. They came to Wharton as well. It was, yeah, they did.
They did. Okay. They got me. Um, I came back to Amazon in, uh, in 99. Um, and I came there to launch the sporting goods store, um, uh, which is kind of a funny thing because, you know, we didn't do drop ship, which is like 25% of sporting goods. We didn't do apparel, which is like 50% of sporting goods. So, you know, in my first couple months there, I wrote the business plan for sporting goods.
It was like, okay, we can do ping pong paddles, but not much more. Um, doesn't seem like a good idea. Um, and, uh, and they agreed with me. So like, uh, you know, in the first two months I had to find another job. And at that point I went to work for, um, a guy who Neil, you, we all know very well named Harrison Miller, who is, um, launching the, the toys, tablet, uh, toy store that then you'll just talk about.
And so. Uh, I joined on with Harrison and launch toys. Thanks. Kind of did a bunch of things from there or not actually tied directly to the launch of DVD rentals, but Neil, I think you had other people on your team that were investigating, uh, API APIs. Can you describe this sort of service? Uh, the different approach to things with a service or an API as compared to a product launch, but in, in the way we've been talking about them with Amazon.
Yeah. So I will have to cover a teeny bit of Amazon history and then ask you to correct me, especially on the timeline, because I realize I'm old and I don't remember the exact order everything happened because. As, you know, at that period of time and probably still today at Amazon, a lot of things happen at the same time.
And now with the size of the company, I think many, you know, infinitely more things happen at the same time. That's one thing Amazon's actually been really good at is doing many things at once and not having need to be tightly coupled. And one place that's started was I had to back up a teeny bit and talk about.
Amazon's moved to a services oriented architecture. So when I joined Amazon and with many of the people you're talking about, the Amazon application that ran the website was a single monolithic application. And eventually we couldn't build or deploy that software any longer. And so we decided to embark on a major project to break apart Amazons.
Monolith into services. And that project was called . The previous application had been called overdose and group, uh, became a launch requirement for target.com. So we build a services based offering for that. And that was a key input to what happened later with notions of. The PR and fact methodology. So that had also just recently started working backwards, you know, formalizing an API documentation for your service, a press release and an FAQ.
And the third stream I would add into that is agile development. So around this time, and I think 2001, or so the gang of four released the agile manifesto. So a famous document that. Pretty much laid out what became agile development. And I was a big fan of that. I started to Institute that in the teams that I ran.
So I ran a bunch of teams. So all of that came together when we were building this. So when we needed a subscription billing service or when we needed to do subscription billing, rather than try and just add it to existing payment or ordering systems using this new model. We decided to build it as a service.
And this would have been in 2004, leading up to the launch of DVD rental. And I had a team that worked in this. Brian Saltzman was a technical program manager that worked for me. There was a team of both young and older developers, including Pierre Galen and VJ chamber car. And because of Amazon's willingness to have.
You know, like product teams where technical and non-technical folks together, you're actually wound up working for me, a technical guy who has trouble reading a business plan. And you're right. A business guy who would have trouble reading back then I think a technical requirements document. And at least in my mind, one of my first meetings with URS around launching subscriptions in particular, and one reason I wanted to talk about this is talking to him about agile development, because the biggest difference, one of the big differences is you got away from gate driven development and what Amazon was very focused on for a long time as were most companies is we're going to pick a date.
Sometime in the future and we're going to line up everyone to launch on that date. We had war teams. This was mentioned last week, we marched to the same beat. It was very concrete, Gantt chart based. You know, dependency based planning, right. Very waterfall like, and I wanted us to move to agile development, actually using scrum.
Brian learned about being a scrum master. And at least in my mind, I remember talking to your at about, don't worry, there's no date. You're not going to have any dates, but we're going to ship stuff every two weeks. So on average only I have to wait seven days to see something right. And. I tell this story over and over.
Cause I work with lots of great growth companies today. So I use it's one reason I wanted to discuss it here. I make a lot of money off this story is that I said, you know, one of the geniuses is when you have people who realize that and say, okay, I get it. And I'm going to make it work. And in my recollection, you're an initially freaked out a little bit, but disagreed and committed.
And we actually built a very good service in a very short amount of time. But so that's my recollection is that, uh, I pushed agile development on because Europe was managing the development team, not me directly. Uh, and so, but I sort of imposed this process and he was able to actually understand it and make it work.
So that's the story I tell. So we can hear which parts of that is true because I have my own comments on scrum, but yeah, let's hear it. I think that's generally correct. And as Neil, uh, often does, and I appreciate it in this case, uh, he's probably given me a lot more credit than I deserve in this one. Um, but we did run, um, this, this program exactly the way that Neil described it.
And, um, and as he said, initially, I was kind of like, okay, this. It doesn't work because I, you know, I, a date that I can back up, all the kind of other business, you know, the, you know, the, the important things, um, you know, which ultimately ended up just not being that important. And it all kind of gave us time to kind of work things out.
Um, and it allowed us to kind of adaptively move through the process. And so, like, you know, as you're inventing and building, like you're learning so much as it goes through. You know, not having kind of a rigid timeline and a rigid structure allows you to be way more adaptive. And I found us doing that quite a bit.
So how we set up the database, what the calls were like, uh, you know, I still remember some really funny conversations about the get commands in our database, which, you know, at first I was like, okay, what the hell is get command? It's pretty intuitive after you kind of get it for a second. But like the fact that we were going to talk about the business model and for 45 minutes with Jeff, we talked about what our get commands were and what our database tables look like.
Um, you know, it was all Testament to the kind of the process that we had, where we just had, you know, business and tech and everybody, uh, working on figuring out I just want it, cause I want to hear your recollection of this. So we have not talked about this since then. And I tell a story about this. So I've actually been curious, like, Hey, what does your remember about this?
One of my favorite parts of this process, this was early in the PR FAQ. API documentation presentation. So when we were building the subscription service, I'm pretty sure it was subscription and not the DVD rental queue. At least in my head, it was building subscriptions, the tech lead, we wrote an API documentation and a fact, and we reviewed that with Jeff and I have, uh, Memory of, we had this meeting and either yours or I said, we should invite the rest of the team that works on one.
Jeff always liked the person who was there and doing the stuff to be in the room anyway. So we invited several folks, including Brian Saltzman, the TPM, Rob Owen, who was one of the engineers on the team, VJ chamber car might've been in there probably. And Pierre Galen, also other engineers on the team. And it was not a very good document, which is my fault.
Not yours, I would say as the CTO of our little company, but that's really how we got to run it. And let's just say Jeff was not pleased. That's probably the first time that you had heard that, you know, actually critique of the API, this was just reviewing developers documentation and an API manual. And it was horrific and the developers were freaked out because most of them had never been in a meeting with Jeff before.
It was like, oh, I don't ever want to do that again. However, We chatted with Jeff. Cause you know, it was, we were used to that and I was happy to get the feedback and he realized that, you know, this was a first version and we had another meeting with it when we made the document better with the team. And he was incredible as he always was in those kind of meetings when he knew and had been oriented correctly.
But you know, uh, it was the first time that I. After the group launched that we presented an API to Jeff, but that's a meeting that I vividly remember. And I often retell the story about, so I don't know what you remember about that Yara, but yeah. Well, it's, it's funny because I remember exactly what room we were in and where everybody was sitting in that meeting.
That's the kind of impression it made upon me. Um, and there, there were two things. Um, one is. Uh, you know, I thought we were building a DVD rental business. Um, but it became really clear that what we were building was a subscription billing platform. maybe not first and foremost, but in Jeff's mind kind of first and foremost.
And I was initially. Super confused by the detailed questions he was asking about like I said, the database structure, the tables in the database, the get commands, the APIs. And it was only after much reflection later that I realized his vision for what this subscription billing system was actually going to power in the future was far, far, far more substantial than a DVD rental business.
So. that's kind of what I took it out of that, but that meeting was super eye opening to me, for those same reasons about what's important to who, and knowing what was really important to Jeff was obviously, as we say, teaching or learning moment.
Yeah. Haven't gotten, you know, Direct feedback prior to this, I was fine with it and we, and actually it made it a much better product, but I think this is a very early example of both Amazon building a truly decoupled working backwards services model. And that's one reason I think it's really, uh, you know, a valuable lesson because this was very early in that journey that we're, I don't know what, if any other.
Services were available that had not been immediately descended from the original website. This is definitely one of, if not the earliest such example and built using modern agile development. I remember that that same time, but in a different orbit of Amazon, because I was working with Andy on the, the first Amazon web services.
And I remember those meetings with Jeff, where we're talking through S3. Or you see two or payments and some of those didn't go well, you know, or Alva Mulan, who was a Amazon CTO, I think was his title. Like they'd have to go rewrite S3 because you know, Jeff would get into such level of detail. Cause he was thinking 10, 15 years out.
I think, you know, the way like, or how redundant it had to be was beyond what an engineer might think is reasonable for a V1. But anyway, it was just good at finding your mistakes as good leaders are. Then that's what you want. You want someone who can dig deep? Right? I wanted to ask some more about subscription, but just for listeners who might not know what we're talking about, what are some of the key features like it's just like monthly billing, you know, like things that make, get complicated really quickly.
Um, that that most people don't think about like refunds promotions, like is that the type of stuff that was in V1? If you think about, I understand that were a lot of scrum or at lot of agile launches, but when you thought about the product that needed to be ready for magazines and DVD rentals, what were some of the key features that needed to be in there?
I'll start with a couple, I mean, Mo monthly billing was a, big one, which seems so basic right now, but back in the day, we stored credit cards, but we did it for transactional purposes, not on a regular basis. That was a really big one. just building a queue that kind of had to be managed and operated building all of the algorithms around.
How you allocate your precious supply was an important one. and then there were a ton and Neil touched on them earlier on the operation side, where Amazon was, world-class at shipping stuff to customers. And far less than world-class or, far less energy on receiving stuff back from customers.
But we had a continual revolving door through the fulfillment centers in the UK. And so how you set that up, how you manage that and how you operationalize that. Like, those are some of the things that were, completely new to us and that we, had to kind of invent our way around.
Yeah. And simply building reliable, recurring billing at scale. And avoiding fraud in that scenario is challenging. Right? We were, even though we were launching in a smaller geography than the U S yeah. It's a pretty big geography. And we were pretty well established by that point in the UK, we expected it and it was a pretty good size business.
Right. And we didn't have any systems that did that. Let's, you know, let's not forget. And if we talk, if you ever talk about digital purchasing, this will come up again. And the creation of another foundational service that still runs it Amazon today, uh, called the digital order and charge service. Right.
We had to have a physical shipping address, but when you're doing the subscription billing, you're not billing against the shipping address because that's separate from the fulfillment, right. You're billing is for a service, not for that fulfillment. And so we had to build completely different processes than it had been used.
And then, because we were fulfilling a physical good out of our warehouses, those warehouses had to have methods that they could call. Right. That would let them know that this was a subscriber in good standing. And yes, I can send them this DVD. Right. And we were building this as a service and it wasn't the service that was already in use.
Right. So we did have to work in a loosely coupled fashion with other teams that we did not control and still get it delivered on time. So just building an actual user facing restful set of web services to support subscription billing at scale. Non-trivial at the time. Yep. And obviously in the intervening years, there've been quite a few businesses that have grown quite successful and are very large companies.
Now that just have done that. Yeah. And so you launched, you launched DVD rentals and the service was launched. When did you find that SMS is running? When did you find that on about prime and tell that story? Cause I'm a little bit confused about, I, we have some notes there that says subscription service was genericized a little later.
And so I'm assuming it wasn't totally standalone or maybe it just needed a different functionality for prime. I don't think it needed any thing different. There was some work we did. Uh, I'd have to look back at the project documents. So here's my recollection of the timeline and you're, hopefully we'll have other sometime around holiday, 2004, early 2005, somewhere in that end of the 2004 year, I feel like there had been an idea in the idea to, so Amazon had super saver shipping where you could wait till you had an economic shipping quantity, and then we deliver and somebody put in the idea tool, maybe Charlie ward.
If I remember Chris, but somebody put in the idea tool, why don't we have a club for shipping, which would, because we knew customers don't like pay. I mean, none of us, we liked, we don't like to pay shipping. So that was, that was, I think how the idea for prime came up, but there was an idea for prime and at some meeting, you know, people were saying, yeah.
And by the way, in order to do prime, so the hard parts of prime are. All of the fulfillment and promises and all of that, right? Figuring out what products are, prime bubble, that's the hard stuff. The easy stuff would be, would have been. We're also going to charge people an annual fee for this, and it's going to be 79 bucks.
Can we do that? Well, you can't do that through the order pipeline because it's not that kind of purchase. So there was some meeting where they were talking about, well, we need recurring billing and we could put our hand up and say, Hey, we have recurring billing over here. And so we use the, the subscription management service.
I'm sure your its team did some modifications. There were probably some requirements, although for a single annual billing of 79 bucks, you know, we probably had to add another program, but that concept was already in the subscription management service from the get-go right. Cause it was, it was not built for DVD rental.
It was a separate initiative anyway. Uh, so my recollection is one of the small, I will admit one of the small reasons though, that moved an obstacle out of the way to launching prime on the aggressive timeline that we wanted was that we actually had a working loosely, coupled API driven, uh, recurring billing service that was already running and handling millions of transactions a day.
Basically prime launched out of the gate with a $79. And it doesn't matter that we don't have the extra, like what new got added to it. But basically it was pretty well equipped to, uh, you know, cause you had built it the right way, uh, to handle prime and later was used for other things, right? Like digital music and uh, or digital music subscriptions and things like that.
My suspicion is it's used for all other subscriptions. I wouldn't be surprised if some version of it is running today. Right. I don't know for sure. Obviously that's all. And that was, that was a lot of the conversations that, you know, certainly I had with Jeff on the business side, as we were building, it was, you know, the ideas of all the other services that you in businesses that you just talked about, Dave, uh, running on this subscription billing platform magazines, uh, right.
You know, what have you. So we, we definitely built it with the ability to serve as many different products and many different timelines in many different configurations, um, in the structure that you're talking about. So we have about 10 minutes. I want to, uh, at the end, I want to actually get a quick update on what you're both doing.
Cause it's sort of, it's very tied to Amazon in, in your case, but, uh, Neil's been working with summit for awhile. I want to hear. And I think people would like to hear that. So what I, what I ask at the end of every episode is just like, Two two part or like, and Mo mainly here for DVD rentals and then the subscription service, subscription management service, like a, what would you have done differently, if anything?
Um, and then B what do you think the sort of walk away lessons are for entrepreneurs or people, you know, innovators working inside big companies, um, from these businesses or these services? Well, you I'll jump in really quick. I'll start because I still have one that keeps me up at night. Um, Um, and that is, I, I probably would have done a different pricing program.
We rustled with the pricing program, um, ad nauseum and kind of the, the P and L and Netflix had a beautiful, um, pricing program. Cause they called it unlimited, you know, and it was unlimited to a certain degree, but there was some physical constraints of just like the amount of time it takes to ship things back and forth.
And it wasn't really unlimited, but it's such a great route to use. Um, And the problem was, you know, the more you use Netflix, the more you kind of got degraded in terms of getting the stuff you really wanted. And the more you used it, the kind of the less they liked you because, um, you became a less and less profitable customer.
And I just, I really struggled with that concept, being a kind of customer first company, when in fact, most people wouldn't ever use more than four. And so we came up with a pricing plan. That was kind of tailored to like what we thought people would actually use. And, um, and, uh, the trade off was that you couldn't use the word unlimited.
And, um, and I think that if I were to do it again, I w I w I would prob I was very committed to this. We had long debates, but I, I probably do that differently. Um, and then to the second point on, you know, and I kind of make this comment all the time as I talk within Amazon, like, The DVD rental program just proves that you can start a business inside Amazon.
It gets, it's kind of the world's biggest startup incubator. Really. I mean, the thing that we didn't have to do was go out and raise money. Cause we, you know, we just had to convince Jeff and S team that it was a good business to do. Um, And, you know, I blame it for, you know, me leaving Amazon and going to an actual startup because I was like, you know, that was so much damn fun.
Um, I got, I have to go do it without kind of the training wheels, but, you know, even as I'm at Amazon today, back again, there's a ton of businesses that we're still starting with, very entrepreneurial feeling people. And, um, and so like you can do it, um, within a big company that's. Definitely. Well, you can do it within, you can do it within a few big companies.
You know, I describe, I describe Amazon to a lot of people as the world's biggest venture capital firm or incubator or whatever, you know, but that's because Jeff, maybe from the D E Shaw approach to identifying businesses and investing them in launching them, like, it's just it's I think it needs the right CEO, or it obviously needs the right CEO and board and investor, uh, commitment to do it.
But yeah, it's a pretty amazing place. Your, your fundraising process is actually internal, you know, and, and, uh, getting esteem buy off as part of LPWAN and that sort of stuff. And a lot of the other stuff is, again, like, you know, the frugality and the startup, you know, kind of forces that a lot of the same startup feel like I almost feel like at Amazon, you know, it was even more startup-y and a lot of times then it wasn't Zillow.
Uh, when I started there and there were only six of us. Um, and so. Um, and I should you're, you're totally right. I should say only what I know. Um, it feels very startup-y at Amazon. That's what I know. Um, so I shouldn't genericize it, but those are, those are great comments, Neil. I've never heard that anybody taught, like, I never heard that before the frugality principle.
Which Amazon has overall is actually really well adapted to a up, you know, build things, uh, build MVPs and, you know, find out and then iterate Greg Linden early Amazon engineer made that point multiple times is like, what we were good at was getting things out the door in eight weeks and then finding out if it worked and if it did, then we improved upon it.
And if it didn't, we killed it or pivoted. Um, I L I like that. I totally believe that. Yeah, I will amplify all of what you had said on the things, especially on the DVD rental business. I completely agree with them. We spent a lot of time. We all agreed. I think the business thinking was correct at the time about what the right customer offer was.
And I just don't think we got it. Right. Right. I think we built a good product that we were happy with in terms of the way it performed. We actually built an amazing team of people who have gone on to do great things either at Amazon and elsewhere. But w I don't think we, uh, got the right pricing and value proposition to our customers, partly because we were hamstrung by this notion, you know, like some other businesses had that.
We thought we don't, we want to make sure we love our best customers, that we always like the ones using it the most. And we didn't, we probably did not understand the full psychology of how that worked. And what I learned is a lot of what, uh, your, uh, talked about. I would point out that. So I learned a bunch of things there.
One loose coupling works. And we had talked about it, but in the early days of Amazon where your team is small, you can't loosely couple because you're all in one glob anyway. Yeah. And Amazon was the first place that I got to experience that at scale. And we did that. one of the reasons, Not a lot of people know the story of DVD rental. And one reason I wanted to talk about it is that was a reasonable size business for Amazon at the time. People don't talk about it. We ran it. It really was like our own company. Luckily we had a really smart advisor who could comment on our model and our APIs as well as the business plan.
Yeah. But otherwise we pretty much ran the whole thing. this was our show, that I ran a bunch of other engineering teams working on other things as well. Jorrit ran this business and development also that separating product or business and technology. does not have to be done.
You know, I work with lots of companies today. It's still, the model is there's business and there's development. And Amazon did a great job of being able to break that down. And that was very successful. Right. This notion of building services and the PR FAQ method. And then last that agile development works.
So, you know, having come through a few years at Amazon where I worked a few hours and we had top-down planning with definite launch dates, March to award team, you know, a battle kind of metaphor. I actually started to think as I was reading what other people were doing, that it was time to think differently about developing and releasing software.
Yeah. And it taught me a lot about how to do that, that I still use today. And I believe it's a better way to build and ship reliable software that's customer centric. Yeah, I agree. The thing I loved about agile scrum when sort of came to came was introduced to it was just that it re it, it reduced the distraction for new features.
You wanted to get added or reprioritizing things because you always had a chance to do that. At the next, uh, for the next sprint, you know, it wasn't, you had to pick everything and fight for it over a four month launch. It, it allowed you to learn as you go. And, and you know, a lot of times those things that feel really urgent on a Monday by Thursday, you know, you're not as jazzed about it.
It's not as you know, so you don't disrupt the process cause everybody's making their commitment on what they're going to build. When it's going to be done, get much more reliable. Yeah. So I, the other thing is, look, if you rely on heroic effort all of the time. Yeah. Eventually you kill all your hands.
Yeah. So do you know now I think there are times when you still have to do that. Yeah. And in a growth company, but you cannot expect that to be the default mode of operation. And I think build a long-term great company and I. Give Amazon a lot of credit for helping me learn that. And for doing that in many places throughout the company, as it continued to grow, I love it so real quick.
And just in case you are, it has to go, uh, at the, at the 30 minute mark or the 30th, 1130. You're just want to quickly talk about what you're doing now, and then I'm asking you the same thing before we, uh, before we ended up the interview. Sure. I I, uh, currently I run the Amazon retail business here in Europe.
Uh, so, um, pretty big, pretty interesting business, a new challenge for me, I've been doing it for about six months. I had planned to take a year long sabbatical, um, that got waylaid by COVID. And during that time period, this opportunity came up and I, and I, and I jumped at it. So. Um, I've extended. My, I came over here for two years, 10 years ago.
And we're still, yeah. So you've been there almost 20 years in total or not quite 16, 17 years. Yeah, probably I, you know, I just have to do the math and kind of deduct for, but like about 18 years, right? Yeah. Yeah. And how about you, Neil? Actually, I am the technologist in residence at summit partners, which is a growth equity firm.
And I am there because of someone that yarn and I worked very closely with named Harrison Miller, who, when he left Amazon actually rejoined summit partners as a managing director, and I help growth companies get better at building shipping and launching software. So I get to work with great growth companies across our portfolios in a variety of ways.
Right. It was pretty awesome. And all the things types of things we're talking about today, which you not only brought to Amazon, but learned about and learn how Jeff works. You're now able to extend that to, you know, from your its case to teams within Amazon and, and across Europe. And you're doing it with earlier, mid-stage startups that are, you know, summits investing.
It's pretty, it's highly relevant. Yeah, I frequently feel though, I need, I should be paying a fee to people like your at, you know, Kim rack Miller. My first boss who hired me at Amazon, Rick Dalzell, my favorite boss, maybe ever the CIO of Amazon because you know, I am repackaging. Things that they taught me.
And that's one reason I was put in any glad that Yara was able to join today because I learned a lot, uh, getting to work with great business product leaders. Cause I thought I was pretty good at the technology prod, product leadership. So getting to work with people like you are an Ann Harrison and Jody comeback who joined a similar team and ran some of these businesses for me as well.
It's been great education. Awesome. It works both ways. Neil, I remember so much of our interactions that I, you know, feel very lucky for those summit companies that you're working with. It was, uh, it was the first time like, you know, I got managed and worked with a, you know, a technical leader who is super adapted the business side.
It was, um, It was fantastic. It was a, it was definitely been a highlight of my career at Amazon speaking for your it. And some of those other people, Neil, I'm sure they'd all say Venmo does work and you can send them all the money you'd like to, I can use Amazon's subscription platform. I would be remiss in not adding one thing is I think what it taught all of us.
And it's the reason you're doing this. Dave is one of the oldest cliches in both, you know, company building investing is that, you know, people really are. Very important. You know, I, that's still my mind, you know, people process product. And I worked with a lot of great people. There's a lot of love in that room.
And, uh, w we did a good job of finding great people at Amazon back then. And it's why it's still is more important. Great. People will figure out how to do great things, even if it takes them a little while. Yeah. Well, thank you so much for being guests on the podcast. Uh, we coordinated, uh, from, uh, Luxembourg to Seattle and, you know, we got it done in only about, um, Hmm.
So I found it really interesting. I, at every one of these it's weird, like I know a fair amount about this stuff, but I learned a bunch too. So the conversations are really interesting and. And I'm getting just tons of feedback from people that they're liking it too. So it's sort of finding its audience.
So, um, and it was just great to see, catch up with you, but, well, I love that you're doing a Dave and I, I super appreciate that it connected Neil and I, again, um, I I'm, I'm missing a ton, but, uh, thanks for having us awesome. Well, for the audience, you're welcome for the audience. Thank you for listening to the event like an owner podcast.
If you'd like more details about what we discussed today, uh, or not contact me with edits or to suggest future guests or topics, please visit invent like an owner.com to sign up for the weekly newsletter. And that's it for today. Remember no sniveling.