Reed Hastings explains the psychology behind Netflix games in an exclusive interview: 'We're unafraid to fail'
Netflixco-CEO Reed Hastingsrecently discussed the multibillion-dollar company's future with Mathias Döpfner.
- Döpfner is the co-CEO of Axel Springer, Insider's parent company, and a board member at Netflix.
You are perceived as a successful entrepreneur, and yet your first idea did not work out. You wanted to invent the foot mouse. Can you tell us what the foot mouse was, and why it did not work?
I have lots of ideas, but not always the best judgment. I was using a keyboard and mouse, and I had this idea that I could use my hands only for the keyboard and use my foot to operate the mouse. It was the mid-1980s. And so, I worked with some designers and came up with the foot mouse. But then we found out that your leg cramps, and the floor is very dirty. After a couple days, it's disgusting. And so, my first big idea was a total failure. I was just as excited about the foot mouse as I was about Netflix. That's why, when I briefly tried to be an investor, I was totally awful at it, because I was just so full of hope for every person that came in. I was like,"Sure, that might work!" I have a very optimistic personality.
Well, the foot mouse did not work out. But Netflix did! It now has over 200 million subscribers worldwide and a market cap of around 250 billion. How did Netflix do during the pandemic?
The internet is becoming very widely adopted for smart TVs, so that has given us a pretty steady line. We gained about 30 million more members a year for five years as smart TVs rolled out. Under COVID, in 2020, we gained 40 million, and this year it will probably be about 20 million. It's all about staying on the same trajectory, but
What did COVID do to movie production?
Shooting stopped it for a while. But we and others figured out how to get back to shooting, with testing, different zones for the teams on set and making it as safe as possible.
Netflix is now entering the video game space. Is it a new strategic priority?
Sure. You know, when you have a small child, a two-year-old, they're always saying "Papa, will you read to me?" They love to be told stories. And they also love playing with their friends and roughhousing with their cousins or their siblings. And these two main aspects of children's psychology - read me a story and I want to play - when they get older, one part grows into watching movies and series. People want to lean back and be told good stories; that's Netflix. And the other part is interactive play, which grows into video gaming.
Until now, you've concentrated on telling good stories.
Exactly. Now that we're big enough, we have been trying to expand from showing original series in the US to showing documentaries, German films, French films, and so on. We've continued to expand, and each one of these is a new area. We have to learn by doing, learn by trying things. We're unafraid to fail, we're willing to try new things. And so, we're going to try video gaming. Maybe the first game will be as good as "Among Us," the big game of last year. But more likely, it will take us many tries. About 10,000 games per year are launched on mobile. So, it's a big, crowded marketplace. We may not succeed, but that doesn't mean we're not going to try. And the thing about mobile games is that you get a lot of ads and upsells, trying to get players to buy this sword, buy this robe. The commerce really distorts the storytelling. But on Netflix, you get to just play the game. There is no upselling, no ads. We just want to provide you with the entertainment and the thrill of playing the game.
Are there any other ideas for future growth pillars at Netflix? Sport or news, for example?
Sports or news are not really compatible with entertainment. News is about trying to get to reality. And we're about escapism. We're on a very different kind of course, even if we offer documentaries. What we want is for people to feel, we want emotion. The main areas where we've still got a long way to go are getting better at films and series from around the world. We've had some great successes like Dark and Barbarians. And we're investing more. And the amazing thing is that the market will be much, much larger in five years than it is today. Before, I mentioned 10,000 video games produced per year. The figure for films is less than 1,000. In the German language alone, 70,000 books per year are published.
And you don't feel overwhelmed by books, do you?
No, of course not. You learn to choose what you want to read, you're perfectly okay with the huge selection. So, this idea that we're going to produce too much, and that the consumers won't love it is just not true. Consumers love greatness. And to get there, you have to try lots of things and give many people a chance to express their voice. For 100 years, you could only watch an episode of a show, say, at 8 o'clock on Thursday night, or you go to the theater. Now, it's much more flexible. You can watch what you want when you want, and you can also go to a theater. We just want to provide people with that choice, and that expands the market a lot.
Netflix got famous, among other things, because it is a no-rule company. And you wrote an important book about that. Nevertheless, there is one unwritten rule, and that is that you don't like to talk about competition. Because you think we should just talk and care about the things that we can really influence ourselves, and not about things that other people are doing. Given the fact that there are now some competitors trying to get pieces of the cake that Netflix took so successfully: Does that rule still apply?
Since I wrote a book titled "No Rules Rule," I can't say that there's a rule about what you talk about.
So among the three categories of potential competitors: the platforms like Apple and Amazon; the original content creators like HBO, and Disney; and the unknown, young, disruptive startup. Which of the three would you take most seriously?
I take all of them seriously. But I would say Disney and HBO eat, sleep, and breathe entertainment. That's what they do, it's what they live, and they have a 100-year history of doing that.
If you talk to the creative community, there are two main reasons - at least that's what I hear - why they love to work with Netflix. The first one is that Netflix is fast, and secondly, it provides a lot of freedom. How do you make sure that an incumbent, which has become as big as Netflix, can still keep these two USPs?
The thing that helps producers most is the big platform, because if you put your film or series on Netflix, the whole world sees it. So, our biggest proposition is that, if you want broad distribution around the world, then Netflix is really the superior platform. But in terms of freedom and being quick, we know that those are very important, as well as all the technical support we provide concerning production.
Certain countries, like Turkey like Hong Kong for example, are now implementing rules that basically makes things very difficult for a freedom-oriented company like Netflix. How do you deal with censorship or more subtle interference with your products?
In the US today, whether you get vaccinated or not is political. Nearly everything has become political. We have a series called "Queer Eye" that stars five LGBTQ men who share heartfelt and emotional makeovers with people all over the world. "Queer Eye" is in Saudi Arabia, in Indonesia, in Russia, and in Hungary. So, our ability to influence culture is not just in documentaries; it's really quite broad. "Sex Education," with season three coming out this week, is in every country in the world. And it's not banned anywhere. We do have about a half dozen or so per year that get banned in a certain country, which is unfortunate. And we would rather not have that, of course. All in all, though, we really do have very few takedowns in very few countries and we do report them annually in our ESG report.
There has been some improvement over the last couple of years in getting data from Netflix to the producers, but it is still minuscule compared to all other exploitation means. What is the problem?
I think that's a good point. We're moving towards providing more and more data and towards standardizing. You know how Spotify has the artist portal and you can look up lots of things. We're moving towards that, but we're not yet there. But we're making steps in that direction on a consistent basis, so you will get more and more information.
You launched the company Netflix more than two decades ago. You had to pivot at least three times. Did you in your early days expect, imagine, dream about creating a company of that size and importance?
I was very fortunate to be in internet companies in the 90s, and so I always believed that the Internet speeds would continue to do this, as they have. And so, when we named the company Netflix 25 years ago, that was because we believed in internet television and that possibility. I'd say what I did not see is us doing original content. The concept that we had is sort of blockbuster online, where you have everything from everybody, and then we would be a retailer. And I didn't understand the value producer, distributor, channels, exclusive content that HBO and others had done. Ted Sarandos, my partner, really figured out that part that if you looked at again, HBO, which was our model for a long time, having exclusive content was essential, and then we ended up pivoting towards that. The first part of that being "House of Cards," and then getting into building our own content. So, it's been a really two-part thing one is, yes, internet entertainment and second, doing original content.
With Ted Sarandos you have established a co-CEO. You're still extremely active in the company but, nevertheless, establishing your co-CEO is also a sign that a kind of mid-term transition is in your mind. A sentence that I would like you to complete, and that is: In five years, I would like to spend much more time…
Spending a little more time on philanthropy, that's where I'm taking time off. Not doing something else commercial. But I've had the great fortune to work with Ted for more than 20 years. He's been my partner and effective co-CEO for a long time and now he's formally co-CEO. Doing global entertainment competing with the people we're competing with, we need all the CEOs we can get. So I'm super happy to have him with me.
And philanthropy? What is the next thing that you would like to do?
Yeah, the project I just made a big investment in is MyAgro. It's a West African farming and savings collective. What they do is help farmers with scratch cards save money when they have the harvest. And then you build up these scratch cards that are mobile validated and then, when the planting time comes, you get fertilizer, or high-quality, great seeds, and some advice. We want to help it go from 100,000 farmers in Senegal and Mali to a million. I was a high school math teacher in southern Africa, which was my first job out of university. I got the chance to travel throughout most countries in Africa and so it's just kind of close to my heart. I love working to help these farmers, you know, with a little bit of fertilizer and good seeds, you can double the output of a small subsistence farmer so it's really a profound impact. So that's the current project.
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