10 The Times Magazinen the late Nineties, Reed Hastings
co-founded a scrappy mail order film
rental firm that was never intended
to remain a mail order film rental firm
for long.
He and his business partner,
Marc Randolph, reached from the
start for the streaming customers of a
broadband-enabled, on demand, 24/7,
binge-viewing future that did not exist
yet but whom they had seen coming more
clearly than anyone.
“Oh yeah,” Hastings says, striding across
the Silicon Valley headquarters of the global
empire built on their idea. “That’s why we
named it Netflix and not DVDs By Post.”
It is now 23 years since Hastings and
Randolph started their business, 20 years since
they tried and failed to sell it to Blockbuster
for $50 million and almost 10 years since the
Albanian army dog tags episode (more later)
underlined how easy it was to underestimate
the company’s prospects.
Nobody is underestimating Netflix now.
Today the company literally looms over
Hollywood: when you drive down the Sunset
Strip in Los Angeles most of the huge
advertising hoardings that used to trumpet
films and TV shows from every studio and
network now tout offerings from just one
entertainment superpower, because Netflix
bought the billboards outright.
In July the company announced that
its subscriber base has swelled to nearly
193 million paying members in 190 countries- more than any rival. A few days later Netflix,
which only began making its own content in
2011, wiped the floor with the competition by
racking up 160 nominations for this year’s
Emmy awards on the back of global hit shows
like The Crown, Ozark and Tiger King, to go
with the 24 Oscar nominations – more than
any Hollywood studio – that it earned in
January for films including The Irishman,
Marriage Story and The Two Popes.
The share price, which was the top-
performing major US stock of the 2010s,
has surged by another 50 per cent this year
thanks to a business model that means that
Netflix is largely impervious to the damaging
effects of coronavirus.
Rather, the company is benefiting from
the unique circumstances of the pandemic
because for much of the world, for much of
this year, there has been nothing to do but
slump on the sofa, fire up Netflix again and
escape into Charlize Theron’s new action film,
The Old Guard, or binge-watch the whole of
Schitt’s Creek, or get addicted to the reality
show Indian Matchmaking, or ponder how the
risible Polish soft porn film 365 Days ended up
a major hit on five continents, or surrender to
whatever the recommendation algorithm tells
you to watch and keep hopping from show to
film to documentary, until life somehow goes
back to normal.
But about those dog tags.
In December 2010 Jeffrey Bewkes, at the
time chief executive of Time Warner, home
of HBO, CNN and Warner Bros, still thought
that the threat Netflix posed to the incumbent
Goliaths of the entertainment industry was
rather exaggerated. “It’s a little bit like, is the
Albanian army going to take over the world?”
he told The New York Times. “I don’t think so.”
He really, really should have thought so.
For a while Hastings, chief executive of
Netflix, wore Albanian army dog tags round
his neck as motivation. He doesn’t need to
any more. His company’s $215 billion market
valuation is almost three times higher than
the price that the telecoms firm AT&T paid
for Time Warner two years ago.
So I ask him: do you still have the
dog tags?
“I do,” he says, chuckling. “They’re at home
in my bedside drawer. Every now and then
I pull them out and kind of fondle them.” It’s
hard to tell if he’s joking, but he adds, with
a note of steel, “That was a challenge at a
certain time that’s now retired.”
He remains dissatisfied with Netflix’s
current standing.
“We’re not big enough. We dream of a
world where we’re much bigger than we
are today.”Getting bigger used to worry him a lot.
Before he started Netflix, Hastings, 59, ran
a technology company called Pure Software
(later Pure Atria). When it was tiny, he loved
it. The business was nimble, flexible and
innovative. He was wildly happy “writing code
at night and being CEO in the day”, when “the
dream” was to get away with pulling an all-
nighter without anybody noticing the next
morning that you had. Then the company
began to encounter growing pains, so, “Every
time something went wrong we put a process
in place to prevent that from happening.”
Hastings was proud of this development.
His engineer’s mindset encouraged him to
believe that “efficiency was goodness” and he
completely failed to notice that the company
was becoming rigid, that its employees were
increasingly “really good at following the
rules” and that more imaginative people
no longer wanted to work there.
Unsurprisingly, when the market shifted,
the business that he refers to as “First
Company” was “unable to adjust because
we were so optimised for one thing”.
He left in 1997 after Pure Atria was bought
by a rival for $750 million.
Hastings was just getting started, though.
“I had the great fortune in my life to do two
companies, and to try to make different
mistakes in each of them,” he says.We are sitting across a table from each
other on an empty terrace between two boxy
office buildings at the Netflix campus on the
edge of Los Gatos, near San Jose. The freeway
buzzes noisily just out of sight.
He is leaning back with his arms folded
and his foot propped up on a chair. He smiles
and laughs and generally looks about as
relaxed as a billionaire ought to do when he
has a bulletproof excuse to be outside in the
Californian morning sunshine and no pressing
decisions to make for at least the next hour.
This is his first visit to the office for months
and the complex is almost deserted.
On the table between us is a new book,
No Rules Rules: Netflix and the Culture of
Reinvention. Hastings has co-written it with
the business academic Erin Meyer to explain
how Netflix’s distinctive, arguably terrifying,
workplace culture has driven its success.
From the start Hastings’ second company
was designed to stay fast-moving, creative
and decisive as it grew.
Any Netflix employee who wishes to
survive for long must convincingly embrace a
cult of “freedom and responsibility”, or “F &
R” as it’s known internally. The approach has
been refined repeatedly, drawing on traumatic
learning experiences that include not just the
demise of Pure Software but also Hastings’
own marriage difficulties in the mid-Nineties,
a brutal early round of Netflix lay-offs in 2001
and a very public humiliation in 2011 when he
separated the original DVD rental business
from the fast-growing streaming business,
charged customers twice to receive both
services, and had to reverse course weeks later
after 800,000 subscribers left in protest. It
turned out that dozens of Netflix leaders had
doubted Hastings’ plan in that last instance
but had not felt able to say so. Now any
employee with misgivings about an idea is
told that they owe it to Netflix to express
their reservation rather than keep silent.I
Reed Hastings with
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