Reed Hastings, Co-Founder and CEO of Netflix, revolutionized the entertainment sector. He is also a very active educational philanthropist. He donated one million dollars to Beacon Education Network to create new charter schools. Hastings is also a member of a political network of Businessmen and Executives called Technology Network.
Netflix is one of the greatest underdog success stories. From humble beginnings to entertaining people all across the globe, especially during the pandemic, one could have only described the service as something god-sent. The marvel behind this genius service is Mr Reed Hastings. He has a master’s degree in Computer Science from Stanford. Hasting first founded a software company named Pure Software before pioneering DVDs by mail with Marc Randolph.
In 1997, Hastings had the idea to create a subscription-based movie-rental service after he unfortunately incurred a sizable late fee when he failed to return a store-rented video cassette. He recalls it was a real lightbulb moment for him. At the time, DVDs were new to the market, but Hastings felt that they would travel well through the mail and potentially turn into a profitable business. He and Marc Randolph, his business partner, incorporated Netflix in California in 1997 and started mail-order DVD operations in 1998.
Hastings became the CEO of Netflix later that year. When Netflix first started, customers were allowed to rent each DVD for a seven-day period only, but by December 1999, their subscribers could pay a set monthly fee to rent an unlimited number of DVDs. Although most of the process was done digitally, they selected DVDs and controlled their accounts via the Netflix Website; the DVDs were sent and returned via mail.
In the early 2000s, the company was incurring huge losses, and they decided to approach Blockbuster for a buyout. They met at the office, and Randolph recalled in an interview, “I had seen him use all the tricks that I’d also learned over the years: lean in, make eye contact, nod slowly when the speaker turns in your direction, frame questions in a way that makes it clear you’re listening. But now that Reed had named a number, I saw something new, something I didn’t recognize, his earnest expression slightly unbalanced by a turning up at the corner of his mouth. It was tiny, involuntary, and vanished almost immediately. But as soon as I saw it, I knew what was happening: John Antioco was struggling not to laugh.” While John Antioco, Former CEO of Blockbuster, could have bought Netflix for 1/2600th of what it is worth today, hardly anyone had ever heard of streaming back then. Instead, the then-three-year-old company was only mailing DVDs but knew the Internet would eventually be the way forward.
“Selling had seemed to be our only way out. And Goliath didn’t want to buy us – he wanted to stomp us into the ground. As long a shot as Blockbuster had been, I had genuinely held out hope that it would save us. Now it was clear that if we were going to get out of the crash alive, it was entirely on us,” said Randolph. The pitch was ultimately rejected. But most importantly, it gave Netflix founders a new sink or swim resolve, which catapulted them to the position the company now finds itself in; pure bliss and streaming in profits.
Hastings eventually expanded the company through movie studio partnerships and aggressive marketing campaigns, emphasizing Netflix’s catalogue of indie films, documentaries, and other movies not readily available through other services. He is a big believer in internet television and had complete faith that it would be prominent in the future. So in 2007, he started streaming movies and TV shows to the users’ laptops and computers directly without the hassle of mail.
Hastings made a rare misstep in 2011 when Netflix announced that it would increase rental prices and split the company in two, with the DVD service rebranded as Qwikster. The announcement resulted in customer confusion and a drop in sales. The situation escalated quickly, and Hastings was even asked to resign, but he refused as he had founded the company, and it was the first time in 12 years that the company was facing such a problem. But Hastings pulled through and managed to salvage the situation by scrapping Qwikster and by diverting his focus on growing Netflix solely.
He managed to craft a delicate balance: focusing Netflix on delivering quality movies while expanding gradually into original content. A few years later, after its transition from DVDs-by-mail to streaming was better established, it had a stronger foundation to build the original content that put it on an equal footing with rivals, like Time Warner’s HBO, in luring customers and to build pricing power for a more profitable future.
The Netflix psyche is often referred to as unorthodox and is described in detail in Mr Hastings’s book, written with Erin Meyer, ‘No Rules Rules: Netflix and the Culture of Reinvention.’ The book was born from the Netflix Culture Deck, a famous — and infamous — show of 127 slides that Mr Hastings put online in 2009. In a 2013 GQ article, it was hailed as possibly ‘the most important document ever to come out of Silicon Valley’ by Ms Sandberg.
Even Erin Meyer, a Business Professor, loathed some of the tenets at first and compared the company culture to the Hunger Games. But Hastings believes it was essential to his revolution and the success of Netflix.
In the book, we see that Netflix generally ends up valuing the personal traits needed in an employee for a team to achieve their goals. This means it hires and promotes only those who fit its culture, and if they don’t, they are asked to leave just as the slideshow dictates. Another key feature of their culture is constructive feedback — up, down, and across the organisation — on a continual basis. At Netflix, it is tantamount to being disloyal to the company if you fail to speak up when you disagree with a colleague or have feedback that could be helpful. After all, you could help the business — but you are choosing not to.
Hastings has a unique philosophy and does not think of his employees as a family but rather as a sports team and has to win trophies. “For people who value job security over winning championships, Netflix is not the right choice, and we try to be clear and non-judgmental about that,” he shared.
One fired Netflix executive shared his view on the topic, “When Reed views somebody’s contribution as less than the problems they’re causing or potential risk, he gets rid of them. He’s an extraordinary guy, but he’s coldly rational and calculating. But the trade-off is, you get to go on this amazing fun ride, make a lot of dough, and when your number’s up, your number’s up.”
Hastings shares about his managers: “To feel good about cutting someone they like and respect requires them to desire to help the organization and to recognize that everyone at Netflix is happier and more successful when there is a star in every position.”
He added: “I find it motivating that I have to play for my position every quarter, and I try to keep improving myself to stay ahead.”
When asked if the Board would go ahead with such a decision, Hastings replied, “They really would do it,” he said of the Board, “if there was a better leader.” But he conceded, “I guess it’s unproven, so I’m sure it doesn’t generate a lot of credibility.”