Vanity Fair Takes a Close Look at Netflix CEO Reed Hastings

Vanity Fair has an interesting article about Netflix, Reed Hastings on Netflix's Recent Rise and Fall. 

“We weren’t doing the price change to raise profits or something,” he elaborated to me. “We were doing it because we were so focused on becoming the streaming company and the global streaming company that we always wanted to be, and always have wanted to be.” He said that he sees the future of Netflix similarly to how big telephone companies see their futures in wireless, rather than in landline, phones. “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,” he wrote on the blog.

Hastings took the blame for the failure to communicate better with customers. “In hindsight, I slid into arrogance based upon past success,” he wrote. “But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.”

The long article is an interesting read, and concludes with the following:

During our interview, Hastings insisted on putting the whole mess into perspective. “When I look at the challenges that Gandhi had, or the various leaders through history, our challenges pale in comparison to this,” he said. “Over the last 10 years, I’ve read a ton about Winston Churchill and Abraham Lincoln. I’ve worked very hard, but my life’s always been fun. It’s not been the Civil War of 1862. That was dark, and how you hold things together at a time like that is completely different than what we experienced. When we had our stumble—in comparison to a health crisis—I slept well every night. I didn’t get all tense. Our issues were ones that were unfortunate business judgments, not of morality or ethics or scandal.”

Comments

[IMACynic]

I should have personally given a full justification to our members....

An honest approach would have been:

"Reed Hastings, here; CEO of Netflix. We will soon be raising your prices, splitting the company in two (letting half of it rot) and taking away almost everything you have loved about us...because we can. And I need the extra money to fund my "vision" of the future, which is unlikely to come to fruition no matter how much money I raise because everything I need is owned by huge, tyrannical corporations that don't like to share and you spoiled consumers will never be satisfied with a meager collection of second rate digital entertainment when you are used to having it all on physical media. But, I'm gonna go down trying and take the company with me. If you don't like it, tough! There's nothing any of you can do about it. Have a nice day!"

[Nate]

Holy $#!t guy, step back from the ledge.

[IMACynic]

???

Was it something I said?

[gir]

The fake quote is a bit sensational, but also a bit accurate. Parse each sentence. Some are clearly true, the rest arguably so.

[bluenowait]

You think YOU can do a better job?

[Ironbalut]

There is only one thing Hastings should say...we are sorry for the big screw up and we will drop the prices back 40 percent effective today to show our appreciation to our loyal customers.

[Keep it reel]

The thing that Netflix management will never come to grips with is that they were simply in the right place at the right time with the rental biz model. No cleverness, no big brains - just a very large library of DVD's.

[wbad]

The AOL comparison gets old and is B.S.

AOL failed because they didn't get into broadband (the future), Netflix got into Streaming (the future), and customers loved the future and the present (discs) they offered.

Netflix was apple pie until the summer of 2011 screw up. I do like some of the things NF has been "doing" ("doing": ACTION speaks louder then words) the past month. I'm tired of storys about Hastings excuses for his screw-ups.

Hastings: "I believe in showing our customers through actions." AMEN I say.

[UghBadName]

@Keep it reel,

If a very large library of DVD's was all that was necessary to make Netflix a success, Blockbuster would still have three stores within a mile of your house.

But they don't. Because it's not about how many DVDs you have.

[Nate]

I just don't understand how anybody can gripe about Netflix. Before the splitting of plans, the unlimited 1-disc at a time plan w/streaming was an absolute STEAL. Now, it is "just" a great deal. It was a needed move. Netflix was negotiating deals for streaming content and the studios were trying to negotiate on the total number of Netflix subs, Netflix countered with not all of our subs stream, the studios countered with BUT THEY CAN if they choose to. To negotiate properly they had to cut the business in two. I've never had a single problem with the DVDs by mail side. Literally been a customer for years now and never gotten a bad disc, never had a disc shipped but never show up, never had to wait more than a week or two after I put it in my queue. On top of that I don't know how anyone can gripe about the streaming. Uncensored, no commercials, on demand, on hundreds of devices from your TV to your phone and the library is getting better and better (this year will be big for streaming as content deals signed last year finally start to pay off). It's still just 8 bucks a month for each side, I bet most folks pay more for that in a week for coffee or fast food.

[Tino]

"If a very large library of DVD's was all that was necessary to make Netflix a success, Blockbuster would still have three stores within a mile of your house."

There is a difference between having 50,000 titles vs. 10,000 copies each of The Rock's five comedies.

[Mrmanmac]

What made Netflix a success, was "No Late Fee's" and the fact that you could order what you wanted to see and it didn't take any more than a few days to get it.

Blockbuster's profit was all in the Late Fee's! And all you could get was what was in the store, first come first serve.

Even if Netflix had never existed, the Local library has as much selection and much better pricing than Blockbuster.

[Jack]

It helped that on Netflix I could get classics, cult films, obscure older movies, and uncensored versions of R or NC-17 movies (like "A Dirty Shame" or "Evil Dead 2", for example).

Blockbuster screwed up by cutting out older movies in favor of having tons of newer ones on the shelves for new release days, and by forcing studios to give them edited versions of movies. Do you know they actually carried a "family friendly" version of "The Mask" that had all the death and swear words removed? And that they wouldn't touch NC-17 or certain unrated or R-rated movies if they disagreed with the content?

Blockbuster lost customers because they failed to fulfill their primary mission: PROVIDE CUSTOMERS WITH MOVIES. Not just the movies Blockbuster wanted, but the movies the CUSTOMERS wanted.

Meanwhile, Netflix screwed up by just being kind of rude about the whole price change/split thing. They could have been more straightforward about, less condescending, and not so sudden or dramatic in the presentation.

The Blu-ray fee is also a bad idea.

[Ritch]

That's all well and fine, Reed, but what I would like from you is an acknowledgement that the reasl issue is that your streaming library selection sucks donkey d*ck compared to your DVD selection.

[Jay]

I never have, and never will, understand the insistence of Netflix in killing off its DVD business.

Yes, the DVD will one day go away. I don't think (or hope!) it will be soon, but it seems to be going that way.

But you know what? Ipods don't make much sense if you have an iphone, and Apple would rather you have an iphone. Until it is entirely played out, however, you'll never hear Apple dismiss the ipod and say iphones alone are the future. They're too well run a business for that.

[Scott Baker]

I have recently seen some DVDs that were in my "saved" section go back into my regular queue. Netflix is apparently restocking some of its "out of stock" DVD titles. Examples include "The Adventure of English" "The Adventures of Mark Twain" "Mail Call" "Cat Girl Kiki" and others.

[Keep it reel]

@UghBadName

Not sure you got my point, so I'll go into more detail. Marketing 101 is you want to have a 'moat' around your biz model. In other words, a very steep barrier to entry. Netflix has a very large investment in DVD's with 10's of thousands of titles shipping out of many distribution centers around the country. This is a huge barrier to entry.

Just by sampling the responses here, customers still want the wide selection of DVD's offered by Netflix rather than the crappy selection available on streaming.

Reed Hastings wishing for another reality just doesn't make it so.

[Nate]

Hugo, Rango, Transformers 3, Captain America, Thor, Lincoln Lawyer, Everything Must Go, Drive, Footloose Remake, Immortals, Conan The Barbarian, Warrior, The Artist, The Rum Diary, The adventures of Tintin will all be on Netflix streaming before the end of the year. More than likely Haywire and the The Grey will hit before the end of the year also. Those are just the films I can think of off the top of my head, I have no idea how people can be unhappy with the deals Netflix has signed for streaming. It's been slow(er) for new releases, but all those deals signed last year start paying off this year and will only get better.

[Tvaddic]

I'm astound people think they can watch ANYTHING/EVERYTHING ever, for $8.

[yobagoya]

Tvaddic, couldn't agree more. It's a quarter a day and if the selection is so bad, how come no other service comes anywhere near the size of it without charging per title viewed? There are much more financially influential companies trying to get into the streaming game, why have none surpassed Netflix? People need to stop bitching about what the WANT and start appreciating what they have. 5 years ago streaming didn't exist, now it does and and gets better by the day, thank you Reed Hastings for changing the way America watches movies!

[Jeff]

There are two problems with the defenses of Netflix's streaming library.

1. Not only is it not TOP movies, but you can measure that. Look at the "Top 100" list right on Netflix itself. There are 6 out of 100 movies on that list available for streaming. I've never seen that number in the double digits.

2. Many of the screw-ups and mis-steps were made in the name of IMPROVING the streaming library. We're agreeing to a 28 day delay so we can license more content. We're raising rates so we can spend more on content. We're going to a 56 day delay so we can license more Warner Bros content. We're going to pretend certain movies aren't available at all until at least 28 days so... wait, where are the customers going?

[TomFresh]

But isn't that exactly why they wanted to split the two services, so that the studios couldn't play one side off the other. Instead Netflix and Quikster (still a stupid name) would have competed with each other and been able to work their own deals to best benefit themselves without worrying about the other. I never really understood all the outrage over two websites. It's not like I had to drive around town to get from one to the other. They're websites, I can get to all of them from my couch. Yet people tout RedBox all the time and you often have to drive to multiple machines if you want to rent more than one specific movie a night. Until someone does discs by mail better, or offers a better streaming library for anywhere near the same price, I'm more than happy with the service Netflix has provided me for years.

[wbad]

@Tvaddic, Yes, 8 bucks a month for streaming is a good deal for TV reruns and B-movies. But those of us have the moohla want more.

I got rid of my streaming (poor folk T.V.) and added an extra disc for a few bulks a month. Dr. Phil once said "you either get it or you don't." Well I have seen many posters like you that just don't "get it".

Character counts. Some people still believe in old school principles of business (like a hand shake) and many of you (the sheep) follow the dictators. Do you get what I just said? probably not....

I want NF to succeed. But they will only do that by listening to their customers. It's the consumer that knows the future (what they want).

I believe NF has awoke and is listening to their customers again. It's the only way they will succeed into the future.

[Nate]

IMO to be truly appreciative of what Netflix offers & for the price they offer it, one has to be a cord cutter. If someone is paying big cable/sat and then complaining about what they're getting from Netflix streaming it pushes them beyond hypocritical and into some weird creepy Netflix hater/stalker realm. People will pay $100+ for commercials and edited crap, be forced into buying/renting hardware that is single purposed and channels they don't use and just let it roll off their back. But by god, if they can't watch Ghost Rider 2 the day it's DVD streets on NF streaming the service is just pure crap.

[FormerNetflixEmploye]

Oh, Nate. How foolish of you to be so level-headed. How ridiculous of you to understand the concept of sustainable business practices moving forward. How ignorant of you to be appreciative of inexpensive entertainment options, and not project your wants over simple reality.

I'll bet you actually graduated high school. That almost makes you almost un-american. How dare you.

*snicker*

[FormerNetflixEmploye]

mea culpa on the sad extra "almost". I had one I wasn't using.

[TomFresh]

wbad, if you are willing to pay more to stream the new releases sooner why don't you just go to iTunes or Amazon On-Demand? Why does Netflix have to be the one and only place you go. These sites are like networks that you can subscribe to individually. Netflix is the low cost, large library option. If you want premium, and are willing to pay for it, the options are out there. Netflix has over 20 millions subscribers, obviously they are doing something right.

[Judy_]

I cancelled the Netflix streaming part of my account because there wasn't anything left that I wanted to see - all the better movies were taken down from streaming (even the popular documentaries and classic oldies and foreign films) Also you can't stream a playlist at Netflix [when my arms are up to the wrist in bread dough in the kitchen I really hate to have to browse again for a movie - why can't it just play my instant queue???). And that new user interface for browsing streaming was just sooo annoying. I have found an online source for streaming movies and so far it is free unless you want HD. [Some choice picks yesterday were Next, Hugo, Sherlock Holmes (Downey and Law), the series of X-men movies and similar fare. They please me.) And no bread dough in the computer keys. :)

Since the change I have received more disks that won't play and there are more in my queue with "long wait" annotated.

So Hastings thinks of himself as Ghandi or Churchill - he's gone insanely into a midlife crisis and is taking his company with him. I'm surprised the board has let him.

[S]

And the astroturfing continues...