"When You Have the Best Content, You Can Grow a Lot"
Over the past two decades, Founder and Co-CEO Reed Hastings has shaped Netflix from being a DVD rental service to a $270-billion market cap entertainment powerhouse, in the process transforming how the world consumes video entertainment. But while the pandemic came as a huge boost for its business, the terrain is turning trickier as consumers experience home viewing fatigue and rivals with deep pockets such as Disney, Amazon and HBO train their guns on this huge market. In India too, Netflix faces significant challenges from Amazon Prime and Disney+ Hotstar. Hastings talks to BT’s Global Business Editor Udayan Mukherjee about streaming, competition, movies and the India journey, among other things. Edited excerpts:
UM: I want to start from the beginning, Reed. Could you tell viewers in India how the idea of Netflix, one so simple yet transformative, was born in your head?
RH: Yes, a long time ago I used to go and rent a VHS cassette. There was this great movie—Apollo 13, and I forgot all about it for a month and totted up this astronomical late fee of $40! And I felt so stupid. A year later, a friend told me about a DVD, this beautiful, sleek little thing. And I thought, oh my gosh, can you mail this thing to people? It turned out we could and, lo and behold, our business of Netflix began in 1999 as a DVD rental service. So that is our lucky late fee story which got us started!
UM: That’s an amazing way to start one of the most defining stories of our times. But the Netflix story got a massive boost from the pandemic as people stayed home and consumed your content. Now, as things normalise, there is an attention recession and viewer fatigue is creeping in. How badly could this slow you down?
RH: You know we just launched worldwide Season 5 of Money Heist, one of our blockbusters, and the viewership and growth has been off the charts. So, people are always starved for great content. Whether it’s great Indian content, Spanish content or Hollywood, it’s about having something that moves you, feels intense. Yes, you are right, post pandemic people are choosy. They only want the best but when you have the best content, you can grow a lot.
UM: Once you were the pioneer of the streaming business, but the game is getting crowded and there are players who are willing to spend billions on content. There’s Disney, HBO, Amazon. Can Netflix manage to stay ahead of the pack?
RH: We compete with these amazing companies—Amazon and Apple, Disney and HBO, so it’s definitely a big battle and no one knows how it is going to turn out. What we do know is that if we create amazing films and amazing shows, we will surely have a part of the pie. How big that is, is what we are fighting for. Relative to Disney and HBO, we are more innovative, we think forward, we are scrappy and young. And relative to Amazon and Apple, we are more entertainment-oriented than they are. Their strength is to have a little bit of everything. So, yes, Netflix is not the only one, but we want to be a part of everyone’s entertainment.
UM: Of the names you mentioned, who do you see as your biggest rival? Is it Disney, HBO, Amazon or is it YouTube, whose recent ad revenues are eye-popping?
RH: You know, you could be right. YouTube is probably the biggest in time, in terms of viewership hours. And maybe TikTok to an extent. But instead of focussing on the competition, we are more focussed on what is our next big show, what is the next Delhi Crime story that everyone could be talking about, those are the moments we think about.
UM: So far, you have done remarkable TV shows and movies, but sport is an area Netflix has shied away from. But to grow in the future, particularly in markets like India, would you need to consider sports as an option?
RH: Our strength is really around telling stories and we are still getting better and better at it. There is still a huge opportunity there. So, if everyone else is going for cricket and rugby, we are very happy because then all our investment remains focussed on telling stories. That will remain our core focus. So, we may do stuff around sports like Drive to Survive, which tells the back story. But not user-generated content like YouTube or live sports.
UM: On movies, how do you see your relationship with Hollywood now? There was a time when Steven Spielberg famously fought to keep Netflix movies out of the Oscars, and now he has signed a major deal with you. Has your relationship with the Hollywood biggies evolved from being arch enemies?
RH: It’s not only Netflix. Disney and HBO are streaming their biggest movies. So, everyone is realising that streaming is the future. It will be the way for all entertainment as the internet grows. So, yes, Spielberg will be making movies for us and we are thrilled at this embrace, not just from Hollywood but from content producers across the world.
UM: How do you see the future of the movie business? In India, like elsewhere, theatres have mostly been shut and the whole film viewing experience has shifted to streaming platforms. How will it be going forward?
RH: I can’t wait for theatres to come back. I love going and sitting with a crowd and watching films on a big screen, I think everybody does. I am sure it will come back, along with outdoor sports. Theatres will always remain an integral part of the entertainment ecosystem. Our effort is to enhance the in-home part of it.
UM: Given what we just discussed about the competition, and your model of focussing on original content, how aggressively would you need to invest in it, and will the mix between original and acquired content change going forward?
RH: We are totally focussed on producing, and having people like Spielberg produce, the best stories in the world. So, we like to create our own content but we can also buy completed content. For example, last year many good Indian movies could not make it to theatres and we were able to buy them for our subscribers. So, we are flexible, and only want to have the best service.
UM: So, what are the big Netflix launches to look forward to for the rest of 2021?
RH: There’s a whole array but I would say Red Notice, our film with The Rock will be a global sensation. It is the kind which will do a billion dollars in the box office, it’s going to be an amazing hit for us globally, it is so well crafted. So that is our blockbuster for this year.
UM: Where does India fit into your plans, Reed? You have invested quite aggressively here, but the India OTT landscape, too, is fiercely competitive. How do you see Netflix’s prospects in this market?
RH: What’s great about the Indian market is that Hotstar started so early and pioneered streaming there. It has really increased the market size. And then Reliance Jio transformed it with regard to access and cost, democratised it. So they created the base for the market, which is today one of our top global priorities. Sure, it has been harder for us than we initially thought, but our reaction to that is simply to invest even more. It has been harder because there is so much competition with Amazon Prime and Hotstar, and we love that. We remain totally committed and are investing heavily because we see that a great success lies ahead for us in India.
UM: Do you need to get more aggressive with your pricing in India, maybe not position it as a premium offering, if only to create a larger base for Netflix?
RH: Yes, indeed, and we have had great success with expanding our pricing. Now we have a range of Rs 199-799, and on the Rs 199 plan you can get all our content on the mobile-only plan, and lots of people are watching us on mobile. So, we are focussed on providing greater affordability to Indian subscribers.
UM: Shifting to the legendary Netflix corporate culture, let me start by asking if you are a believer in the WFH syndrome. Have you asked Netflix employees to start getting back to office?
RH: We are going back to work three days in office, and two days on Zoom. So, it’s a mixed mode and then it depends on the country; in the UK we are back, in most of Europe we are back, in Los Angeles not quite yet. Personally, I have always worked from home—in the evenings and on weekends, so WFH comes naturally to me. But it’s best complemented by some in-person presence. We probably don’t need to commute to office five days a week, religiously.
UM: Your work culture is remarkable but do people ever tell you that that level of openness and transparency could be quite brutal on employees?
RH: We are very clear upfront that there is a tension between kindness and honesty. We value both as human beings, but in the work context, we are all about excellence and performance, so we are going to lean in on honesty. For some people, it’s too much, and they don’t like it. Others thrive in it, that everyone is so direct and open. So you are right, it is not for everyone but it is very responsible, respectful, productive, and we bank on our honesty not to hurt someone but to extract better performance.
UM: What’s the most honest feedback you have received? Does it extend to you, this honesty?
RH: Oh yes, very much so! In fact, it’s a bit of a sport at Netflix, of who can give the CEOs the most direct feedback. After 20 years, I am really used to it and I know that people mean it well because they want us to do even better. So, I have just learnt to accept it. Just as in sports, you exercise a lot, run, do push-ups and crunches; it hurts but makes you stronger. So, I think of this feedback loop as emotional exercise which makes me stronger.
UM: Is it also true that you ask employees to go out periodically and solicit offers from rivals, so that they know their real market worth, or it’s just a cool story?
RH: It’s an exaggerated story. Am not sure we encourage people to, but we don’t see it as disloyal either to check out what your real market value is. We want to continue paying people at the top of the market. So, it’s a bit like professional sports where you have a bidding system for players, who deserve to get paid at the top of the market to be really great at their work.
UM: How many of these ideas that you are instilling into Netflix have you been able to imbibe yourself in your personal life, as an individual? Do you always practice what you preach?
RH: No. There is the workplace where we are totally focussed on performance, but in my family life I am focussed on kindness. That’s a lifelong commitment and not ‘top of market’. I think of the world of friends and family as unique from the professional world where we are all trying to come together as a team to make a difference. Then it is all about excellence. So, I think of them as two different worlds.
UM: How would you describe yourself, Reed? If someone asked you to sum up Reed Hastings in a few words, what would you say?
RH: I am generous and thoughtful, and able to see ahead of the curve, where I am heading, and that combination has been very helpful to Netflix. On the flip side, sometimes I can be short with people, I don’t listen fully, I think I know what they are going to say and I jump to conclusions. That’s something I am working on.
UM: Is Donald Trump gone for good, or do you fear he could be back in 2024?
RH: I can’t be sure, but we have gone through so many things, over 200 years of democracy, and I am sure we will get it right over the long term. The best we can do is to tell stories that help people understand the world better, as human beings.
UM: Who has been your greatest inspiration?
RH: On the top of the pack, it is [Microsoft Co-founder and philanthropist] Bill Gates; the work he has done philanthropically and how much he has given back. He sets such an amazing example.
