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demand service—especially after it began spending as heav-
ily 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 com-
pany 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 Al-
banian army dog tags he wore around his neck for motiva-
tion. “And so it caused him to ignore it until it was too late.”
By the time Hollywood started to get wise, Netflix had be-
gun financing its own original series—starting with Saran-
dos’ $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 ex-
ecutives, whose bonuses are pegged to delivering opera-
tional profits, Hastings ensures that his executives won’t
be afraid of suffering a financial hit by taking a risk.he Covid-19 pandemic gave Netflix’s innova-
tive culture a proper stress test. As film and
television production ground to a halt in
New York and Hollywood this spring, Net-
flix’s global content machine began spark-
ing back to life. As at many white-collar companies, meetings
resumed from living rooms, bedrooms and kitchens, virtualwriters’ rooms were assembling and animators were work-
ing 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 produc-
tion 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 NBCU-
niversal’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 adren-
aline-filled action flicks such as Chris
Hems worth’s Extraction.
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 re-
ally 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 an-
other 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 be-
came 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 ini-
tiative, assembling its arsenal of powerful entertainment
brands—Disney, Pixar Animation, Marvel Entertainment
and Star Wars—to attract subscribers to Disney+, bet-
ting 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 mile-
post: 200 million subscribers and beyond. That means
more investment in local content around the world—in-
cluding 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 mem-
bers better than HBO does, or better than Disney does,”
Hastings says. “Because they’ve got so much internal pro-
cess around things that slows them down.”T
OCTOBER 20 20ONE FORMER EXECUTIVE DESCRIBES THE WORK
ENVIRONMENT AS A “CULTURE OF FEAR” IN WHICH
“EVERYBODY IS CHIPPING AWAY AT EACH OTHER.”THELIST