We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Tue 8 May 2018 01:07 PM

Font Size

- Aa +

What is the secret to Netflix's phenomenal growth?

In an exclusive interview, Netflix founder Reed Hastings tells CEO Middle East that the secret to his company's success is simply "having great shows"

What is the secret to Netflix's phenomenal growth?
Netflix’s CEO, Reed Hastings

It would be fair to say that Netflix’s CEO, Reed Hastings, is a man of few words. But the man who grew a mail-order DVD business into a $140 billion global entertainment company doesn’t need to say much.

Netflix is now among the hottest companies in the world, with a share price that is constantly growing.

Hastings himself is a billionaire nearly four times over, and his platform is also a studio, funding productions, hiring actors and in many ways challenging the traditional way content has always been consumed: in cinemas or on TV.

Much has been made about the factors behind the company’s success.

One of them is, undoubtedly, the amount of data at Netflix’s disposal and how granular it can get in terms of what it can glean from users consuming content on the platform. With that information, Netflix can make more accurate bets on what its customers would want to watch.

However, greenlighting shows isn’t a matter of incredible complexity it seems; Hastings himself doesn’t feel the need to greenlight which shows come on the platform: “A lot of our executives do that,” he told CEO Middle East in an exclusive interview in Rome last month.

The keys to Netflix’s kingdom,  it seems, rest with its executives. And figuring out which executives man the fort however is something Hastings made sure to get right himself.

Spelled out in the company’s ‘Culture Deck’, a set of now legendary guidelines created by him and others in 1998, when the company was in its infancy, are key attributes Netflix looks for in its employees before it hires them.

If whom Netflix hires meet those criteria, they are entitled to top grade pay, and as much time off as they’d like. Provided, of course they come back with the one demand Netflix has: exceptionall performance.

Those attributes, among others , include: integrity, a constant third to deliver better results, quick decision making and importantly, conciseness. The result? Well, the term ‘Binging on…’ has only one solid contender vying for you to put its name in the blank.

Twenty years later... Netflix began as a mail order DVD service in California in 1991. Today it’s worth over $136 billion

Do you consider yourself a technology guy, an idea guy, or a content guy? What takes up most of your time?
You know when you look at great companies they combine multiple skills, like Apple is very good at both fashion and technology. And what we’re trying to be is very good at content and technology. So of course we want the best shows like The End of the ******* World, Thirteen Reasons Why, but we also want incredible technology to make it smooth and easy to watch those shows on a television or on a phone.

What can you tell us about how data affects what you commission in terms of the kind of content, and the tone of the programming?
Not so much tone, but we do get feedback when something is very successful and what we should do you more of. But it doesn’t solve the problem. There’s still a lot of judgment for us on what to do.

Money Heist had a phenomenal reaction in Saudi Arabia, where the shows fans turned up at football games dressed as characters from the show. How can you capitalise on the sudden viral take-off on so many of the shows on your platform?
You know, I don’t know whether we can capitalise on it. It’s really a natural phenomenon coming out of the show and the fans will have their authentic expression in organizing things around Money Heist and shows like that.

You announced Jinn and another standup special would be coming to the Middle East in 2019. What sort of content have you found works in the Middle East that you’d want to source more of?
Well we’re looking at many options. So it’s really great stories that travel and they could be of many different types.

Does that mean you are also looking to produce content from budding filmmakers who aren’t able to get their ideas onto TV for lack of an industry as developed as it is in say Europe?
You know for the first time filmmaker Youtube is probably the best bet. We’re really focused on professional storytelling. People who have done many things, who have a great insight. And so that’s kind of our specialty. And if we do our part well then as they get to be successful they too can do these big Netflix productions.

New content Netflix is now experimenting with unscripted content

It’s something that there seems to be a market for in the region, going by the number of Youtube subscribers. Is it something to keep an eye on?
I think we’ll be successful with how we’re doing it right now because we keep investing in these local shows and that helps us connect with people and grow. We’ve got a new show called The Rain out of Denmark, for instance, that’s quite successful in the region and it’s an example of that.

What we’ve seen is young people watching Netflix shows. Yes, they are also watching other things that are short form, but there’s still a taste for real storytelling. Like Money Heist as we’ve seen is a great example.

So it’s high-quality content that will remain the growth driver in the company’s revenues then?
Definitely. Quality content that’s widely distributed, that’s what helps us grow and grow. Year after year starting with House of Cards six years ago we focus on great content. Now we have The Crown, 13 Reasons Why Stranger Things, Money Heist. All of those are helping us grow.

Do you consider you might ever need to take a different path and appeal to broader audiences in the future in order to continue growing?
Well we never know for sure. That’s what makes it exciting. What we can do is carry the best shows we possibly can with movies and documentaries and kids titles. But by focusing on making our current members happy is how we grow really. It’s through  word of mouth.

So word of mouth is the essence of the business model?
Yes, it is fundamental to how we grow and also retain members. Stranger Things was a surprise success.

How closely can you predict from the success of one show how successful something  similar would be?
Stranger things is infinitely valuable. It is so fantastic it’s such a great show and it’s really unique because families can enjoy the show all together. You know it’s got something for the kids something for the adults.

Now no one really joins the platform for just one show, I don’t think. The audiences have been hearing about Netflix for a while perhaps. And then they want to go see one of the more popular shows. But that’s just the trigger that gets them over.

Across demographics Netflix’s catalogue focuses on movies, TV shows, documentaries and kid’s titles

Data privacy is a big topic of late. How do you see what’s going on and how does Netflix work with user data?
Well, we’re very much privacy-centric and we have been for a long time. We don’t have any advertising and we don’t integrate data. We don’t do anything like that. So it’s just a viewing history  that we rely on, and we keep that very private.

You’re now starting to get into unscripted content?
We’re just really getting started. It’s looking very promising so expect more. We’ve had some great success with Nailed It, and other shows so we’ll continue to invest in those areas.

What have you found is the secret to retain users on the platform?
We’ve learned that when people use Netflix a lot and watch a lot then we are able to retain them as customers. If people stop watching Netflix then they may decide to cancel. So you need to keep having great shows, shows that everyone’s talking about.

What do you think of newer viewing technologies such as VR?
I think VR is really a gaming format for now, Xbox and PlayStation type usage. We will focus on movies and TV shows, and even just making the TV work well.

How much TV do you watch yourself?
It varies, probably five-10 hours a week.

What’s your favorite show on Netflix?
Maybe Bojack Horseman. It’s Hollywood insider baseball comedy, so, it’s very clever writing and lot of inside jokes.

Is it true that you don’t have an office?
I don’t.

How does that work?
I’m travelling around the world so much that even if I had an office I would never be in it. So my office is really my laptop. And it gives me great freedom to work in in any of our buildings or just on the road or at home.

Finally, Netflix in the region continues to operate in an EMEA unit based in the Netherlands. Do you have plans to split that into a regional office here?
I imagine that eventually we will have a Dubai office. Right now it works well to have everyone together in Amsterdam where they are all learning from each other. It may be a few years but I imagine over time that will make sense.

Arabian Business: why we're going behind a paywall