#reed hastings

Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we’ve continued to grow our membership every year fairly steadily. We do our best to ignore the volatility in our stock. The progress we’ve made over the last 10 years is stunning. We want to make the next 10 years even more remarkable.

Reed Hastings, after Netflix beat quarterly estimates once again, sending the stock soaring to new all-time highs.

You could certainly argue that Netflix is an even more volatile stock than Apple — because it clearly is. And Hastings is smart to try to calm the furor in a time of exuberance. You’re never neither as good nor as bad as they say you are — but you can only really say that when they’re saying you’re good.

Great profile of Reed Hastings by Ashlee Vance for Bloomberg Businessweek. Three standouts:

The master copies of all the shows and movies available to Netflix take up 3.14 petabytes of storage space. (In comparison, Facebook uses about 1.5 petabytes to store about 10 billion photos.) Hollywood studios used to send individual films and shows to Netflix on a disc or thumb drive; now they use a Netflix system called Backlot to send encrypted files via the Internet. Netflix then compresses the files and creates more than 100 different versions, each tuned for the varying bandwidth, device, and language needs of its customers. (An hour of video for the iPhone would be about 150 megabytes.) This compressed catalog comes to about 2.75 petabytes.

Wow — also, Pi.


Netflix began to experiment with cloud services from Amazon and Microsoft, where Hastings served as a board member. In 2009 he bet his company’s future on Amazon. Up to that point, nothing the size of Netflix had placed so much of its crucial technology on Amazon’s systems. Hastings sent an e-mail to Amazon CEO Jeff Bezos, announcing his plans. “I asked him if he was comfortable with that idea,” Hastings says. “If not, there was no point going forward.” Bezos gave the go-ahead.

That seems like a pretty large diss of a company where he’s a board member — especially when you consider that Amazon is now a very direct rival.

And finally, the best for last:

Qwikster was a fiasco, but far less threatening than a debacle that preceded it. In August 2008, Netflix’s technology infrastructure melted down. This was when the company was still known for DVDs-by-mail, and for three days it could not send discs because a crucial Oracle database kept malfunctioning. Reporters and customers took notice. Netflix traced the problem to an expensive, third-party storage system that went haywire after a software update. The incident still annoys Hastings. When the subject comes up in the watchtower, Chief Product Officer Neil Hunt, who’s also gathered at the table, suggests they not mention the storage-system vendor by name. Hastings responds, “Let IBM have it, baby.” (An IBM spokesman declined to comment.)

Said another way.

Austin Carr for Fast Company looks back at the project that started as “The Netflix Player” but was eventually spun out into the Roku box/company:

It was December 2007, and the device was just weeks away from launching. Yet after all the years and resources and talent invested in the project (a team of roughly 20 had been working on it around the clock, from ironing out the industrial design and user interface to taking trips to Foxconn to finalize production details), Netflix CEO Reed Hastings was having serious second thoughts. The problem? Hastings realized that if Netflix shipped its own hardware, it would complicate potential partnerships with other hardware makers. “Reed said to me one day, ‘I want to be able to call Steve Jobs and talk to him about putting Netflix on Apple TV,’” recalls one high-level source. “‘But if I’m making my own hardware, Steve’s not going to take my call.’”

In hindsight, good call.


But ultimately, Wood says, “It was totally the right decision. Licensing [digital content] has been hugely successful for Netflix. [The Netflix Player] would’ve created tension with partners, and increasingly decisions would come up where Netflix would have to decide, ‘Should we make decisions based on what’s best for licensing, or what’s best for our own hardware?’”

Sounds eerily similar to the dilemmas that both Google (with Motorola) and Microsoft (with Surface) now face, no?

Netflix CEO Reed Hastings first apologizes for a lack of communication, and then gives his thoughts about the recent price changes and separation of DVDs and streaming (which is still the right move, as Hastings reiterates).

The wording is good. Amazingly, it doesn’t sound like the total bullshit you usually read in such posts. But here’s my favorite part:

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business.

When I read this, I have one larger thought than Hastings: Microsoft. 

Why is legacy Windows and all its baggage a part of Windows 8? Because of Hastings’ last sentence above. 

He continues: 

Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

We see this time and time again. Complacency. These thoughts are nothing new. But what’s great is Netflix’s gumption to execute — stupid name or not.

Also great: Hastings is on Microsoft’s board. There is still hope.