|From: Glenn Petersen||8/4/2020 6:07:44 PM|
|Disney+ grows to more than 60.5M subscribers|
Anthony Ha @anthonyha /
3:45 pm CDT•August 4, 2020
Disney+ had more than 60.5 million paying subscribers as of yesterday, according to The Walt Disney Company’s CEO Bob Chapek.
Chapek shared the number during a call to discuss the company’s latest earnings report, which covered the company’s most recent quarter ending on June 27. He was essentially offering an update on the 57.5 million paid subscriber figure included in the report, and he said the growth is “far exceeding our initial projections for the service.”
Disney+ launched in November of last year. The company previously announced in April that the service had passed 50 million subscribers. (Those numbers include subscribers acquired through bundling with Hotstar in India, as well as free subscribers through a promotion with TechCrunch’s parent company Verizon.)
The coronavirus pandemic has accelerated growth for some streaming services. Most notably, Netflix added more than 10 million new subscribers in its most recent quarter, bringing its global total to nearly 193 million. As for Disney’s other streaming services, ESPN+ has grown more than 100% year-over-year to 8.5 million subscribers (as of June 26), while Hulu grew 27% to 35.5 million subscribers (3.4 million of them are paying for both video on demand and live TV).
And Disney+ may have gotten an additional bump, thanks to the release of “Hamilton” over the July 4 weekend.
Overall, Disney said revenue for its direct-to-consumer and international division increased 2% year-over-year, to $4.0 billion, while the unit’s operating loss grew from $562 million to $706 million.
Still, streaming likely counts as a relative bright spot compared to many of Disney’s other businesses that have either slowed or paused entirely due to the pandemic. (Parks are gradually reopening, for example.) The company’s total revenue fell 42% YOY to $11.8 billion, and earnings per share for the quarter showed a loss of $2.61.
Update: During the call, Chapek also announced that “Mulan” will be released on Disney+ on September 4, as a “premiere access” title that costs an additional $29.99.
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|From: Glenn Petersen||8/17/2020 9:20:19 AM|
|The Week Old Hollywood Finally, Actually Died|
The streaming services are in charge, and bringing a ruthless new culture with them.
By Ben Smith
New York Times
Published Aug. 16, 2020
Updated Aug. 17, 2020, 7:43 a.m. ET
Bob Greenblatt, the chairman of WarnerMedia Entertainment, was among those ousted this month as Warner Media emptied the executive suite at the once-great studio that built Hollywood. Credit...Mike Segar/Reuters
For decades, the best thing about being a Hollywood executive, really, was how you got fired. Studio executives would be gradually, gently, even lovingly, nudged aside, given months to shape their own narratives and find new work, or even promoted. When Amy Pascal was pushed out of Sony Pictures in 2015, she got an exit package and production deal worth a reported $40 million.
That, of course, was before streaming services arrived, upending everything with a ruthless logic and coldhearted efficiency.
That was never more clear than on Aug. 7, when WarnerMedia abruptly eliminated the jobs of hundreds of employees, emptying the executive suite at the once-great studio that built Hollywood, and is now the subsidiary of AT&T. In a series of brisk video calls, executives who imagined they were studio eminences were reminded that they work — or used to work — at the video division of a phone company. The chairman of WarnerMedia Entertainment, Bob Greenblatt, learned that he’d been fired the morning of the day the news broke, two people he spoke to told me. Jeffrey Schlesinger, a 37-year company veteran who ran the lucrative international licensing business, complained to friends that he had less than an hour’s notice, two other people told me.
“We’re in the brutal final scenes of Hollywood as people here knew it, as streaming investment and infrastructure take precedence,” said Janice Min, the former Hollywood Reporter co-president who did a brief stretch as an executive at the streaming platform Quibi. “Politesse and production deal kiss-offs for those at the top, and, more importantly, the financial fire hose to float a bureaucracy, seem to be disappearing. It’s like a club, already shut down by the pandemic, running out of dues to feed all its members.”
The drama at Warner marked a turning point, in part because of its huge size and the high profile of the iconic companies under its umbrella: Warner Brothers, HBO and CNN among them. And it comes as Hollywood power is conspicuously absent from the national conversation. Washington is consumed by TikTok, the Chinese-owned video-sharing app that’s the most successful new content platform in the world. TikTok has succeeded as Quibi — Hollywood’s premium alternative to user-generated content — struggles to find an audience. The California politician just nominated for the vice presidency comes from San Francisco, and doesn’t particularly advertise her Hollywood ties (though she was all over Hollywood insiders’ Instagram last week).
The most interesting profiles of entertainment executives are, literally, obituaries, notably the catalog of victories and vices that marked the career of Viacom’s founder, Sumner Redstone.
(Like much of his industry, Mr. Redstone, who died last week at age 97, held on far longer than anyone expected. Former Viacom employees recalled that it had been more than six years since, the then- chief executive, Philippe Dauman, asked his aides to draft a stirring eulogy for Mr. Redstone, who was 90 at the time, and to create a website in his memory. But Mr. Dauman was fired four years ago, there are no plans for him to deliver a eulogy and the website remains on some forgotten digital shelf.)
Much of what’s happening now in Hollywood, too, has that feeling of a death so long anticipated that you half assumed you’d just missed the funeral. At WarnerMedia, the executives’ firings came after the company badly botched the introduction of a streaming service whose name — HBO Go, HBO Now, or HBO Max — nobody could figure out. The service has primarily distinguished itself so far by its energetic and unsuccessful attempts to spin about 4 million people who have actually used the service into a number north of 30 million.
“It’s the great reckoning,” another top executive who was abruptly forced out, Kevin Reilly, told The Hollywood Reporter.
When Amy Pascal was pushed out of Sony Pictures in 2015, she got an exit package and production deal worth a reported $40 million. Credit...Mark Sagliocco/Getty Images
That reckoning is mostly driven by the unglamorous economics of streaming, though it also overlaps with this year’s better-known reckoning, over race and gender. Studio executives have been mortified by the “About Us” pages with profiles of their leaders — pages that are full of white faces as the push for representation adds new pressure for change.
But the underlying rationale is economic, and obvious. “The golden rivers of money from cable TV are drying up. With the only growth business for most of the companies coming from streaming, which isn’t a profit maker yet, the companies have no alternative than to cut costs,” The Information wrote. (News of Warner’s planned layoffs leaked to that Silicon Valley-based business publication, not the usual Hollywood trades, adding insult to injury.)
The new leaders in the industry do not come out of old Hollywood, which has seen its clubbiness and values fall into disrepute. The new WarnerMedia chief executive, Jason Kilar, spent the formative years of his career as the senior vice president of worldwide application software at Amazon, known for its grim corporate culture. He ran Hulu, then left it after clashing with its legacy media owners. At WarnerMedia he promoted an executive who hadn’t made her career inside the Hollywood club, Ann Sarnoff, to head his content division.
Many of the new leaders are admirers of the culture at Netflix, which is hardheaded and unsentimental: Executives eat in the cafeteria and have a corporate philosophy that holds, in an admired slide presentation, that employees are like athletes. Managers should always be looking to trade up, and fire even high performers if a better player comes along. (The well-regarded human resources executive who developed the presentation with the company’s chief executive, Reed Hastings, was, herself, eventually fired.)
WarnerMedia’s Mr. Kilar told me in an email that his cuts and reorganizations were aimed at pushing the company “from a wholesaling mind set to a retailing mind set” — that is, from the old studio hitmakers’ handshake deals with distributors to a techie’s focus on user-friendly streaming interfaces and subscriber retention.
That’s an unromantic vision that still rankles many in the industry.
“This is the difference between people who got into the movie business and people who are in the content business,” said Terry Press, the former president of CBS Films, whose division was eliminated in a merger with Viacom earlier this year.
The industry’s cultural shift is also wiping out fiefdoms. A day before the WarnerMedia firings, NBCUniversal forced out the embattled chairman of its entertainment division — a storied role held in the past by, among others, Mr. Greenblatt — and announced it wouldn’t replace him. Instead it’s shearing off executive roles and merging most of what were once separate operations across channels as varied as Syfy and NBC. Similarly, WarnerMedia combined its crown jewel, HBO, and the workaday cable channels TBS and TNT and the struggling new streaming service.
The companies deny that the organizational changes will affect what you see. (“The brands will maintain their distinctiveness, and there won’t be visible differences to the viewer,” an NBC official said.) But that’s not how it usually plays out in declining industries. The moves echo those taken by long-declining publishing industry institutions like the magazine company Condé Nast, which has gradually combined the roles of executives at magazines like Vogue and Vanity Fair, all the while insisting that they weren’t diminishing the inevitably diminished brands.
And at WarnerMedia, the challenge is particularly existential. We won’t know for a couple of years whether this month’s layoffs signaled a successful shift, as Mr. Kilar and AT&T’s chief executive, John Stankey, intend, or whether they were simply a clumsy attempt to mask the company’s remarkable failure in the streaming world. HBO Max has barely been able to compete with Netflix and Disney, despite having a service full of beloved shows and movies, from the best of Alfred Hitchcock to HBO’s long hot streak that includes, this summer, the releases of “Lovecraft Country” and “I May Destroy You."
With the purge of top creative executives completed, the responsibility for what’s inside HBO Max and the cable TV channels will fall largely on Casey Bloys, an HBO veteran who is now overseeing all of WarnerMedia’s entertainment content. He has, he said in a telephone interview, told his new team that he wants programming on the streaming service that will complement the buzzy, complex adult shows like “Watchmen” and “Succession” that HBO is best known for. He is pointed to straightforwardly fun titles that appeal to younger audiences like “Green Lantern” and “Gossip Girl" as models for broadening out the service. His success will depend, in part, on the company’s ability to clearly market its streaming service and perhaps more on whether AT&T is really willing to keep spending on TV like Netflix and Disney.
Mr. Bloys is a great programmer, not a power player or politician of the old model. Indeed, the studio bosses seem to have lost their central place in the American power structure and become simply the well-compensated employees of ordinary companies, with ordinary attention to the bottom line. There is one exception, Disney, which also proves the rule: Bob Iger’s Disney+ started just in time to catch the streaming wave and provide a business that met the coronavirus moment.
“Disney will remain relevant into the future,” said Barry Diller, who once headed Paramount and Fox and is now chief executive of the digital media company IAC. “All of the rest of them are caddies on a golf course they’ll never play.”
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|To: Sr K who wrote (1987)||8/26/2020 3:50:05 PM|
|From: J.F. Sebastian|
|Which goes to show how much algorithms control the market.|
If a rehashed headline from over a month ago can fool (pun intended) the market into buying the stock, than manipulation is alive and well.
I only posted it because it was the most recent headline given at Yahoo for the NFLX run today at the time I put it here. :-)
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|From: Glenn Petersen||9/7/2020 3:39:08 PM|
|How Netflix's Reed Hastings Rewrote the Hollywood Script|
Sep 7, 2020,10:00am EDT
Dawn ChmielewskiForbes Staff
I’m an LA-based senior editor for Forbes, covering streaming video.
The streaming giant had upended show business long before the pandemic hit. But with a highly unusual management style, its billionaire founder has now positioned his entertainment juggernaut to prosper like few companies in the world.
The man responsible for keeping the world entertained does so, at least this day, alone in front of a computer screen, in his son’s largely unadorned childhood bedroom. In some ways, it’s the perfect setting for Reed Hastings, the unpretentious cofounder and co-CEO of Netflix, whose global army of innovators has revolutionized entertainment in the home. While Hollywood measures people’s offices by their totems and grandeur, the analytical Hastings, a Silicon Valley interloper, values functionality over trappings.
Netflix currently functions, by any measure, at a world-class level. As the year of the pandemic upends entertainment companies—Disney’s crippled theme parks, Warner Bros.’ furloughed blockbusters, AMC’s shuttered theaters—Netflix is having a moment. A moment of prestige, with a record 160 Emmy Award nominations, eclipsing the long-dominant HBO, and more Oscar nods than any other media company. A moment of influence, adding almost as many customers in the first six months of the year as in all of 2019, extending its reach to nearly 200 million subscribers in 190 countries. And a moment of profits, with sales up 25% year over year, earnings more than doubled and its stock up 50 percent, as most of the market gyrates wildly just to scratch back to even. Recent market cap: $213.3 billion.
All these data points stem from data points, and a perfect synthesis of Hollywood and Silicon Valley, serving up content informed by a deep understanding of their users’ tastes. “We fundamentally want to be better at creating stories people want to talk about and watch than any of our competitors,” Hastings tells Forbes.
Those competitors have gotten the memo, spending billions to confront Netflix, whether via Disney’s fast-growing Disney+, WarnerMedia’s lurching HBO Max or NBCUniversal’s brand-new Peacock. Says Hastings with a shrug: “What people forget is, it’s always been intense competition. I mean, Amazon did streaming at the same time we did in 2007. So we’ve been competing with Amazon for 13 years.”
Fair enough. But for Amazon, streaming has almost surely been a loss leader that can generate Prime shopping memberships. For Jeff Bezos, entertainment will always be a side hustle. The Hollywood establishment, meanwhile, can leverage its content libraries and know-how all it wants, but what makes Netflix tick is something nearly impossible for companies built on ego and image to replicate: a culture of Vulcan-like dispassion and transparency, combined with perpetual, rapid reinvention.
All this has come to a head amid the most disruptive moment for entertainment in at least a generation. In some ways, Hastings, who clocks in at number 132 on The Forbes 400 with a net worth of $5 billion, has been preparing for this moment for the past two decades. What the 59-year-old does right now, and how he leverages this culture—an unusual one even by tech-industry standards—will determine what you will watch, laugh along with and cry over for the next two decades.
If Hastings seems unnaturally comfortable amid the train wreck that is 2020, perhaps it’s because his company’s culture was forged in crisis. A nascent business in 2001, Netflix saw its funding dry up in the aftermath of the original dot-com bust. Then came 9/11. As the end of that terrible year approached, Hastings needed to cut one-third of his employees.
To do so, he and Patty McCord, Netflix’s chief talent officer, diligently tried to identify the highest performers, terming them the “keepers.” As the day of the painful bloodletting drew near, he was on edge, worried that morale would plummet, with those who remained growing bitter under the increased workload.
The opposite occurred. With the merely competent employees cleared out, the office was energized, “buzzing with passion, energy and ideas.” Hastings describes the painful layoffs as his “road to Damascus experience,” a clarifying moment that changed his understanding of employee motivation and leadership. It would lay the foundation for what might be called the Netflix Way, the web-era successor to the HP Way, Bill Hewlett and David Packard’s pioneering management approach that created one of Silicon Valley’s earliest garage-to-greatness stories.
The Netflix Way starts with building a roster of elite talent. In Hastings’ new book, No Rules Rules, he likens his company’s culture to that of a championship professional sports team—one that works and pulls for one another, but sheds no tears when a teammate is jettisoned in favor of an upgrade. Perennial trophies require perpetual hiring of top performers.
Joe Exotic and one his star tigers. The Netflix documentary became a massive hit after its release during the peak of the pandemic lockdown.
So what does this really mean in terms of how Netflix operates? First, it pays top dollar to secure the right talent. That practice began in 2003, when Netflix began competing with Google, Apple and, soon, Facebook for the “rock stars” whose highly refined coding, debugging and programming skills dramatically outperformed their average peers. It extended this generous compensation to creative executives working in Hollywood, from the well-connected (Matt Thunell, whose ties with the talent community enabled him to read an early draft of the sci-fi series Stranger Things over lunch in Hollywood) to the visionaries (Shonda Rhimes, Joel and Ethan Coen, Martin Scorsese). Those large checks singlehandedly turned streaming from a backwater to an auteur’s paradise, with early hits like House of Cards and Orange Is the New Black. The eyeballs followed.
“In the beginning we were able to attract rebellious folks, the folks that were stifled by the studio environment or hadn’t gone far enough in the system to be ruined,” McCord says. “We just wrote big checks. ‘I know it seems crazy. I know you don’t get a personal assistant. You don’t get a parking spot. How about we give you this big shitpile of money?’?”
Those piles are delivered cleanly. The company’s pay packages come fully as salary, with as much or as little compensation as you wish in stock options; Netflix doesn’t believe in bonuses, which Hastings thinks can reward the wrong things. “It’s the specifics of trying to hold someone accountable that trips you up,” he says, adding, “we do evaluate people, but we don’t micromanage the goals.”
A corollary, though: These stars, all paid like stars, must continue to perform like stars. No part of the company tolerates resting on one’s laurels. “Adequate performance gets a generous severance package,” Hastings and McCord wrote in a 129-page SlideShare presentation on Netflix’s culture that was widely shared a decade ago and remains on the company’s website.
“We describe it as like getting cut from an Olympic team. And it’s super-disappointing. You’ve trained your whole life for it, and you get cut, and it’s heartbreaking,” Hastings says. “But there’s no shame in it at all. You have the guts to try.”
Extending the sports analogy, this team of elite players, in trusting one another’s exceptional skills, will then communicate openly to collectively up their game. It’s akin in some ways to Ray Dalio’s much-promoted “Principles” of brutal transparency at Bridgewater Associates, the world’s largest hedge fund. And it’s not for everyone. One former executive describes the work environment as a “culture of fear” in which “everybody is chipping away at each other at every moment—because you’re rewarded.” The annual review process, called “360,” culminates in dinners at which small groups gather to provide constructive feedback.
“Each one gives feedback about that person, live, in front of everybody else,” says the former executive, who requested anonymity. “You go around the table. It lasts for hours. People cry. Then you have to say ‘Thank you, because it’s making me a better person.’?”
To Hastings, these 360 reviews are a necessary component because of another element of the Netflix Way: a huge amount of autonomy. Like the coach who wins championships by empowering stars to execute the game plan rather than trying to control each play, Hastings encourages the freedom to act in the company’s best interest.
Ted Sarandos, a 20-year Netflix veteran and longtime chief content officer, was named co-CEO in July. Hours of TV viewing as a child and a job as a video store clerk helped him build an encyclopedic knowledge of film and TV. JEMAL COUNTESS/GETTY IMAGES
Again, this can be disconcerting. Ted Sarandos, Hastings’ co-CEO, talks about a coffee break with Hastings in the pre-streaming days, when he was the chief content officer and deciding whether to order 60 copies of a new alien movie or 600. Sarandos casually asked Hastings how many he should order, and Hastings responded, “Oh, I don’t think that’s going to be popular. Just a few.”
Within a month, the movie was in high demand, and Netflix was out of stock. Hastings asked Sarandos why he hadn’t ordered more DVDs. “Because you told me not to!” Sarandos protested. Hastings cut the conversation off immediately, declaring: “You’re not allowed to let me drive us off the cliff!”
“And to me, that was an immediate lesson,” Sarandos now says. “With all that decision-making power comes responsibility. . . . Reed models that over and over again, and he lets you own the win and he makes you own the loss.”
“Normally companies organize around efficiency and error reduction, but that leads to rigidity,” Hastings says. “We’re a creative company. It’s better to organize around flexibility and tolerate chaos.”
Hastings has the kind of background that allows one not to fear failure. His maternal great-grandfather, Alfred Lee Loomis, was a Wall Street tycoon who anticipated the impending stock-market crash of 1929, then turned his attention to science, bankrolling a lab that attracted luminaries such as Albert Einstein, Enrico Fermi and Ernest Lawrence. Hastings grew up in an affluent suburb of Boston—his parents met while his father was at Harvard, his mother at Wellesley—and attended private schools, then Bowdoin College. He spent two years in the Peace Corps in Swaziland, teaching math to high school students, and later obtained a master’s degree in computer science from Stanford.
In 1991, Hastings founded his first company, Pure Software, which specialized in programs for measuring software quality. Back then, he was a “geek’s geek” who would sleep on the floor of the office after an exhausting coding session. “I’d come in in the morning and say, ‘Dude, if you’re going to sleep on the floor, in the morning go brush your teeth and look for blanket fuzz in your beard,’?” recalls McCord, who was with him at Pure before helping him formalize the culture at Netflix.
Patty McCord helped shape Netflix's distinct culture as its chief talent officer, but was forced out when the center of gravity shifted to Hollywood. “I had been there 14 years. I couldn’t imagine not being at Netflix. It was like breathing to me.” COURTESY PATTY MCCORD
McCord watched the entrepreneur mature as a leader. She remembers encountering Hastings in his office late one evening, fixing bugs in the glow of his computer rather than preparing remarks for a company meeting the following day. “Seriously, Reed, if you want them to follow—lead,” McCord remembers telling him. “And I slammed the door. The next day he did a speech . . . and got a standing ovation. I don’t think he knew he had it in him. He realized it was his job to inspire them, not to do the work.”
Pure Software went public in 1995, merged in 1996 with a little-known Massachusetts company, Atria Software, and was subsequently gobbled up by Rational Software in a deal that PitchBook valued at around $700 million. A tremendous success, but one that came with a strain on his marriage. Counseling helped the once conflict-avoidant Hastings open up—and eventually he would incorporate the value of candor as a foundation of Netflix’s culture. “People shy away from the truth, and the truth isn’t so bad,” he says.
By Silicon Valley standards, Pure Software had made a successful exit. But it left Hastings with lingering dissatisfaction. In the early days, it had innovated. As it matured, like pretty much every company, it developed policies to safeguard against mistakes, rather than taking smart risks. Pure ended up promoting people “who were great at coloring within the lines,” Hastings says, while the creative mavericks got frustrated and went to work elsewhere.
That was Hastings’ mindset when, according to popular legend, he had an epiphany after getting socked with a $40 late fee on Apollo 13 at Blockbuster. “What if there were no late fees?” he pondered, and voilà, the idea for Netflix emerged fully formed.
Changing The Channel
Walt Disney remains the world’s largest entertainment company but Netflix is the company to beat when it comes to return on investment.
“It’s a good story,” says Netflix cofounder Marc Randolph, who worked with Hastings at Pure. “And in many ways, Netflix is about telling good stories.”
Netflix’s origin story is more complicated than the convenient narrative. It hatched over countless brainstorming sessions while Hastings and Randolph commuted together over the Santa Cruz Mountains to Pure’s headquarters in Sunnyvale, California.
Launched in 1997, Netflix became known for red envelopes sent by mail, a pivot away from Blockbuster’s brick-and-mortar rental model. Initially, it made most of its money selling DVDs, Randolph says. That put the young startup on an eventual collision course with Amazon’s Bezos.
Instead, Netflix caught fire in 1999 with a subscription model—customers would rent up to three movies at a time without worrying about a specific return date or incurring late fees. A better mousetrap, albeit one that carried a huge burn—Hastings lured customers with month-long free trials. Randolph remembers flying with Hastings to Dallas to try to convince Blockbuster CEO John Antioco to buy Netflix for $50 million. The head of the $6 billion home-entertainment giant rejected the idea out of hand.
“What did we possibly have to offer that they couldn’t do more effectively themselves?” Hastings reflects.
After the 2001 reset, Netflix’s business began to stand on its own and grow, raising $82.5 million through its initial stock offering in 2002. It developed into a very good business, as subscribers would pick DVDs from Netflix’s comprehensive library.
Netflix co-founder Reed Hastings built the streaming giant on a foundation of 14 million U.S. subscribers who once rented DVDs from catalog of about 100,000 titles that were shipped by mail in the company’s iconic red envelopes. JUSTIN SULLIVAN/GETTY IMAGES
Then, in 2007, broadband brought the opportunity for streaming. Keen to ensure that no one did to Netflix what he had done to Blockbuster, Hastings began plowing cash and engineering resources into what was essentially a freebie for existing DVD subscribers. It was a fateful moment. Netflix’s old-fashioned business allowed for pretty much infinite choice, albeit within the confines of inventory availability and delivery lags. Streaming offered instant gratification, but Netflix would not be able to match the breadth of content because of Hollywood’s television deals. For the first time, Hastings had to understand people’s tastes and offer them a compelling proposition.
“When someone sits in front of a TV to watch Netflix, we have a moment of truth—a couple of minutes, maybe as little as 30 seconds, [in which] we need to catch their attention with something interesting,” says former chief product officer Neil Hunt, who deployed his 2,000-member team to solve this riddle—most working independently, in keeping with the company’s culture.
Netflix also needed to find a way to charge for the on-demand service—especially after it began spending as heavily to license streaming content as it did to purchase DVDs.
The race to capitalize on streaming’s future set up what Hastings calls the biggest mistake in the company’s history: the decision in 2011 to hive off the company’s aging DVD business in a separate service called Qwikster. Critics trashed the idea, and Hastings himself became comedic fodder for Saturday Night Live, which parodied his YouTube video apologizing for the misstep. The debacle cost Netflix millions of subscribers, and its stock dropped more than 75 percent.
Hastings tearfully apologized for damaging the company at a weekend management retreat months later. It turns out that dozens of managers had qualms about Qwikster—but had kept their misgivings to themselves. That prompted Hastings to institute a practice of actively seeking out dissent before launching any new initiative.
Even before the misstep, some studio executives scoffed at Netflix as a competitive threat. “It’s a little bit like, is the Albanian army going to take over the world?” Time Warner chief executive Jeff Bewkes said in a 2010 interview. “I don’t think so.”
“During all the critical years, 2010 to 2015, [Bewkes] just thought the internet was foolish, and the prices were foolishness,” Hastings says, noting that he still has the Albanian army dog tags he wore around his neck for motivation. “And so it caused him to ignore it until it was too late.”
By the time Hollywood started to get wise, Netflix had begun financing its own original series—starting with Sarandos’ $100 million bet in 2011 on the political thriller House of Cards, from director David Fincher. “What some people called overpaying for that content at that time, Netflix knew very well what it was worth and what they were building toward,’’ says Tinder CEO Jim Lanzone, a longtime internet entrepreneur who was CBS’ chief digital officer at the time.
“Changing course involves investment and risk that may reduce this year’s profit margin,” Hastings writes in No Rules Rules. “The stock price might go down with it. What executive would do that?” Unlike Hollywood executives, whose bonuses are pegged to delivering operational profits, Hastings ensures that his executives won’t be afraid of suffering a financial hit by taking a risk.
The Covid-19 pandemic gave Netflix’s innovative culture a proper stress test. As film and television production ground to a halt in New York and Hollywood this spring, Netflix’s global content machine began sparking back to life. As at many white-collar companies, meetings resumed from living rooms, bedrooms and kitchens, virtual writers’ rooms were assembling and animators were working remotely. Remote autonomy wasn’t anything the Netflix crew needed to learn. And since Hastings has spent much of the past decade focusing internationally, content production resumed relatively quickly in Iceland and South Korea, which have been aggressive about testing and tracking.
Meanwhile, while rivals lost centerpiece launch shows, such as the Friends reunion special for HBO Max and the Summer Olympics in Tokyo, a tentpole for NBCUniversal’s Peacock, Netflix kept humming along with shows that captured the cultural zeitgeist, whether with crass obsessions like Tiger King: Murder, Mayhem and Madness, a goofy reality show based on the game Floor Is Lava or adrenaline-filled action flicks such as Chris Hems-worth’s Extraction.
Netflix has increased streaming subscriptions more than eight-fold since 2010 and in the past three years has more than doubled its international subscribers.
Yes, those shows were lucky. But Netflix has volume and data to help create luck. “One thing that’s not widely understood is that we work really far out relative to the industry, because we launch all our shows, all episodes, at once,” Sarandos told investors in April. “And we’re working far out all over the world.”
The world has proven receptive. With movie theaters crippled, sports dormant until recently and traditional and cable television offering the equivalent of reheated leftovers, Netflix has added around 1 million subscriptions a month in the U.S. and Canada since the pandemic began and another 2 million a month globally. The coronavirus, which has made so many developments accelerate, will inevitably prove to have ushered in the moment that streaming became the dominant platform for moving entertainment.
While Netflix dominates its space (it reaches 56% of the homes in the U.S. with broadband access, according to Parks Associates), Disney, in particular, is bringing the heat, with more than 100 million subscribers across its three services, Disney+, ESPN+ and Hulu. Disney chief Bob Iger went all in on its direct-to-consumer initiative, assembling its arsenal of powerful entertainment brands—Disney, Pixar Animation, Marvel Entertainment and Star Wars—to attract subscribers to Disney+, betting boldly like Netflix does, most notably deciding to use its $75 million investment in a filmed version of the hit Broadway musical Hamilton on its behalf.
Hastings acknowledges Disney’s extraordinary feat of logging 50 million subscribers in its first five months, a milestone it took Netflix seven years to reach. Meanwhile, he’s focused on Netflix crossing its next significant milepost: 200 million subscribers and beyond. That means more investment in local content around the world—including as much as $400 million by the end of the year in India. And it means continuing to evaluate his talent so he can continue to empower them to make decisions.
“I’m confident that [our culture] will help us serve our members best now, and find ways of serving our members better than HBO does, or better than Disney does,” Hastings says. “Because they’ve got so much internal process around things that slows them down.”
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