Where Does Netflix Go from Here? With C.E.O. Reed Hastings

please welcome back Andrew Ross Sorkin and his guest the founder and co-ceo of Netflix Reed Hastings [Applause] Reed Hastings doesn't need an introduction he is the co-founder of Netflix and um he has now been at this event with us a handful of times most recently in 2019 the last time we were all here pre-covered together in person and since then the media landscape has shifted remarkably and one of the phrases that is used in the entertainment business is What's called the Netflix correction everybody was chasing you for all of these last several years is they've all tried to jump into the streaming space and spending an enormous amount of money doing it and now everybody's asking some big questions about the model and does it work and what does it look like so let's go there where I want to start this is when I saw you in 2019 I don't know if you knew that this was a coming because we talked about the competition out there you used to talk about the competition was sleep you would compete with sleep she's probably still true to some degree but I wonder how much you think that has actually changed now and you actually now think about Disney and you now think about Apple and you know think about Amazon and you think about HBO and that whole dynamic I stayed up late last night watching episodes of our new show Wednesday so we still compete with sleep but you know broadly entertainment we compete with Tick Tock with fortnite with HBO with Disney but four years ago when I was here nobody was in streaming like you know we did streaming and they did Lenny Aaron broadly there was Hulu but broadly that was the lines and Bob Iger to his credit um saw back in 2017 or so that Disney's future was going to have to be streaming um and he moved we had been paying him a lot of money on a pay one deal and he moved to cut that off and to build the Disney plus service super aggressive pricing and then they exploded and because of their enormous success everyone else Paramount Etc piled in um and yeah it's become a brawl now in a streaming of Premium content and then of course we've got you know on the user generated side tremendous competition there and on the gaming side and then sleep a lot of competition but what do you think about the fact that the market cap of this company I mean we were at 700 billion dollars at one point well 700 stock price but well go ahead and here we are and people have sort of reevaluated all of this the metrics with which they measure your success the idea that Subs the the the the race for more subs is the way to do this and now people are actually looking at the underlying economics in a new way yeah well I would say uh investors have always been pretty thoughtful about focusing on earnings potential and um you know that's been the core focus and that's the core Focus for us which is you know engagement how do we please consumers revenue and operating income I would say media trying to serve you trying to serve consumers talk about subscribers because it's easier to understand than 32 billion in Revenue you know Etc so the simplification you know in the Press is streaming Wars subscriber battles and that tells a good story so that makes sense but an investors have really been quite thoughtful about earnings potential and what they work were down by more than half uh and that's because they're scared that the competition may you know have a really big impact and beat us and we have to show no actually that you know we're going to have the most incredible set of films Slumberland Glass Onion again the show Wednesday I was watching last night which is the biggest English language show we've ever had in our history just launched but don't you think that this has caused a reevaluation for you I mean we talk about advertising the idea that you would ever put advertising on Netflix and you I think stone-faced would say to me absolutely not never we would never do that and yet here we are and it's happening what's the lesson of that when did that happen for you I dare you to find that quote where I said never look I I've got two religions customer satisfaction and operating income and everything else is a tactic okay so you're right to say I didn't believe in the ad supported tactic for us and I was wrong about that Hulu really proved that you could do that at scale and offer consumers lower prices and that that was a better model so we did switch on that and credit to Hulu and Jason kylar are figuring that out and I wish we had flipped a few years earlier on it but we'll catch up in a couple years we won't remember when we started it so that's a good tactic because then you get to offer consumers lower prices the other piece of this is passwords for a very long time you used to say you know what if your cousin or your uncle or your brother or whomever was sharing passwords stealing past whatever we're cool with it because we want as many people engaged with us as humanly possible and if that's the cost of it great now you're saying nope you got to pay me no one's listening so just tell me your password um yeah no honestly uh that was a a thing that we grew with not you know not really understanding how to think about internet streaming because it's partially a a TV based service that you want you know your instinct is if your friends are over uh you know borrowing your house or something they should be able to watch TV and you should be able to watch when you travel and so it's a it's a weird thing between pay TV and and a personal service and we probably haven't done the best job of that and you're right that next year we're going to be asking you know people who are borrowing someone else's account to have their own account but we're you know setting it up so it's between seven dollars and twenty dollars so they get to choose where they want to be but you're right we are drawing an end to that year but I want to understand the shift these are a lot of big shifts for you and what happened meaning you weren't doing this because I would argue you wanted to you were doing this because you felt you had to because growth had slowed because the market had said this isn't working the way we thought it was going to work the valuation was too high just bring us inside that well let's see on the account sharing we kicked off The Big effort in 2019 so you know we were growing at record levels then so um but we recognized you know look account sharing um when you share with your spouse that you live with it's fine but when you spare share with your cousin who's across the country that's a little different and so there's some Nuance there so you know it took us some time to really develop those and then we've been testing the Solutions in Latin America so that's made great progress and then on Advertising you know that was really driven to credit to our CFO who joined us who knew a bunch about Hulu and was like look this model works we got to pay attention but were you pushing back yeah I was and then what that's what I'm trying to get was there a day where you're like driving to work and you're like you know what I got to give up the ghost no we've got a CFO who's like puppy dog but like dog with a bone you know so he's like easy to spend time with um but boy you know if he's got conviction he does not give up and so I would say he just got us to really see that the big thing that I missed is I was on the Facebook board so I kind of bought into for a decade uh to the to the belief that systems with a lot of data we're going to be able to do higher cpms higher effective advertising than anybody else so Google and Facebook we're gonna like mop up the world okay and then you know and they have a lot in non-tv advertising what I failed to understand is that there's a lot of TV advertising that now couldn't find the viewers because the 18 to 49 segment had moved online they were not watching linear TV and so the advertisers are desperate for connected TV or Internet TV Solutions so that's the real thing that I missed and that it we didn't have to steal away the advertising Revenue in fact it was pouring into connected TV if the inventory is there how worried were you though about the creative side of this the creative Community we had Ben Affleck here earlier this morning there were reports at the time that you did this that people like Shonda Rhimes you have massive overall deal with of course you you previously makes Bridgerton and venting Anna and so many others was very unhappy about the idea of advertising on this platform what's been the pushback what are the conversations like that you're having yeah I mean I think all the talent wants a great experience for consumers and for some people a great experience is a lower price because they just don't have as much money and you know and ads and you want the ad breaks to be thoughtful and where they happen and you know television has grown up with advertising in it so it's not like people aren't used to it so look I think that's some of these change Dynamics and we'll get people through that you go to the you know TV and your many people are comfortable with ads but Netflix will have a non-add option that's our you know current model so you're going to be able to choose you don't have to get ads right now you get ads if on the seven dollar plan I want to talk a little about the chess board that is the media landscape and there's been a lot of of speculation even about the future of Netflix one of the things you did as it relates to advertising was you partnered with Microsoft you had talked I understand to Google at one point you'd also talk to Comcast at one point why did you choose to go with Microsoft and does it portend but I think some people have speculated about that perhaps long term you would actually merge with them well look Microsoft's a great company we talked to many Beyond those three and Microsoft was very strategically motivated but they'd never been in this business before that's what it is they're strategically motivated okay you know because they they're not in the business and they want to be in it and so for them to have great success is that they get good at selling video ads and they pick up other inventory from other players you know they're not an outsourcer for Netflix that's not a great future for them but to really expand and to challenge their competitors say Google or others by building big inventory so they were willing to be very aggressive in the deal and they do sell Bill tens of billions of advertising in other areas so it wasn't you know again an Xbox and in uh bing so I wasn't tote they haven't had Salesforce in they have Xander they bought from atnt so it's a big Focus for them and um no it's not normal to do commercial deals with people you're trying to acquire them except more complicated not less that's like zero of the motor Invasion it's like zero of the motivation but but walk us through what you think is going to happen in this space and I should say by the way uh the Bob Iger of it all we haven't even raised his name just happened in the past week and you went you you first thing on Twitter you do your own tweets yeah you wrote ugh I've been hoping Iger would run for president he's amazing um what were you thinking when you when you saw that news exactly what I wrote I mean I was encouraging I was ready to be a fundraiser for him I mean I think he'd be an amazing it'd be you know obviously hard to win the Democratic primary but uh he'd be an amazing leader for the country um so I think very highly of them uh and the uh was darn you know but again Chase back from our point of view was very good very disciplined 25-year Disney guy it's not like we saw any cracks whatever those easy cracks yeah and what do you think of the hand that Bob Iger now has it's very strong and again it was strong before um so uh Disney is very likely to be a big success in streaming they've got incredible IP they've got you know hundreds of millions of subscribers they're they're they're often it'll be at least the two of us duking it out for a long time and that's very positive for us because that's what creates strong content against Tick Tock YouTube video gaming Etc let me ask you though about a couple that you haven't mentioned so you're thinking of this as a a Netflix Disney Battle of sorts um David zazlov now running Warner Brothers Discovery owns HBO of course Sherry redstone Paramount yep uh Comcast company of NBC of course on CNBC I should say um and peacock what happens to those guys that's awesome I mean it's a 110 billion dollars of entertainment Revenue that um we're going to try to earn away from that we're going to try to do the most incredible shows and most incredible films and hopefully some fantastic games too and then earn that earned consumer Revenue what happens to the three of them and you're in this in this sort of constellation of companies it's hard to tell I mean you know if you look at the consolidation there's been Fox and Disney CBS and Viacom you know Discovery and Warner Brothers so there's likely more of that you know do you think would you ever see all three of them come together that's a long shot but you know I think Regulators would allow two of them to come together well they certainly have so far so you know again I think what you're going to see there is is them trying to figure out streaming it and some may become like Sony and becomes arms Merchants to all of us and then they focus on producing incredible shows like Ben Affleck is doing right let me ask you about this this is John Malone uh John of course is the investor behind Discovery and now Warner Brothers he had a lot of good things to say about you first he said let's face it everybody went through this mad Oklahoma Land Rush which was in reference to the Netflix land rush and he said Reed Hastings shareholders should build a huge Monument he got out in the lead saw the opportunity exploited the opportunity and went for scale Netflix was there early does an excellent job but he says here's the here's the but comma uh broadening out the service quote by spending so much on so much content is not likely to be successful his argument is that everybody is just spending too much including you what do you think of that I think he's wrong um but you know uh he's a brilliant guy but again we are committed to spend a lot to produce you know the most exciting series films and games the world's ever seen so that's like our singular Focus can we do that again with Incredible variety from countries all over the world and if we can do that we're going to do incredibly well where does Amazon live in this we were just here with Andy jassy yeah that's a name that has not come up on this on the stage yet when we were just talking also Apple you know my problem is I love our competitors so Jesse and I go to Sundance together see films together there and you know it's uh he's a fantastic guy but you but you have not included him in your in your constellation or do you oh absolutely I mean they're huge investors uh in content they've been competing with us since 2007 and streaming and before that in DVD by mail they commended with us in the UK so we've been long-term both competitors and friends um you know and it uh it's exciting to compete with them and you know their model is let's make prime a little bit better uh with video um and then they get people watching now in the U.S we win about eight percent of Television viewing and they win about three percent okay so they're a third of us um you know which is impressive but again their service is free to Consumers um and uh so you know they invest billions and get a three percent we invest billions and get uh eight percent let me see what content spend in this regard you invented the idea of binging I actually wonder whether you'll you'll change on this one potentially over time longer term which is that binging is fabulous insofar as people will watch and watch it quickly and they're invested in the program but then they have to wake up the next morning and potentially have to watch an entire new series and so you have to show up with even more content a lot of the the old model as you know so very well was to effectively window it there on Sunday night the next episode the next Sunday night they could you could drag somebody onto your service over the course of a 10 or 12 uh week season and you'd capture them for three months in your model you might capture them for two nights do you see a period of time where you could say to yourself you know what enough of this we're going to actually uh air show on Sunday night or Wednesday night or Friday whatever and I think you're already starting to do this a little bit I saw this with stranger things you know after 20 years ago you could make a business of selling yesterday's news and that was a big business whoa okay whoa and gloves come off the opposite direction now now that's not a viable business model right you got to sell today's news well you guys are doing fantastic at it 10 million subscribers it's awesome and growing so I'm thrilled for you and think about binge viewing wow today's shows our model is we do a show every week right and you've got a new great channel that you get to watch and we don't have to stretch it out now if you've only got three shows that are great you better stretch it out so that's where our competitors are right so they're trying to say oh it's better to stretch it out so you just ask people would you rather read yesterday's news or today would you rather have binge-chooing or not well let me ask you than this because it does goes back to this sort of windowing model we were actually talking to uh to ban about this earlier um you guys by the way have not the knives out SQL Glass Onion out in theaters and apparently made a bunch of money we did but there's a question which is to say should have you gone wider with that was there money left on the table lots lots of money left on the table how much money did you do that but yes because we're interested in customer satisfaction on our service so with film we released it typically in film festivals early to stimulate conversation and demand right but not to fulfill that demand except when it launches on Netflix and everybody watches so are weak in the theaters with a small number of theaters that's done exactly that everyone's talking about it it's exciting about Glass Onion it's going to be huge and December 23rd the whole world's going to get to see it and I think it'll be one of our biggest films and so it's a promotional tactic like film festivals and if it works well we'll do more of it um so but is there ever going to be a day where so this will this went to 638 theaters across the country where a big release in the US is 3 000. right could you see a day where you would do a week at 3 000 or two weeks two religions member satisfaction operating income you know so that's what we're focused on so we use this as a promotional technique so then more people watch it on Netflix because that's member satisfaction right we're not trying to like build a theatrical business we're trying to get people so excited and break through the noise that like everybody's like oh my god when is I didn't see Glass Onion that week it was on and everyone's talking about it when is it going to come and it's like then everyone's going to watch it you know December 23rd we talk about live that's new assume that's new that's like more like being TV I remember when Ted sarandos famously said the goal is to become HBO fashion HBO can become us well that that was finished that that was back in 2013 oh you finished that one yeah that's when we're moving on from there look lives gonna be great for us for doing contestant shows um you know comedy specials we'll experiment with it um but you know there's a lot of speculation that we're doing that because of sports and that's not show like we're really focused on series films and games which all have creative risk right we have to spend like 20 to 200 million developing a property and then sometimes it works great and sometimes it doesn't the reason I mentioned the Ted tarantis quote is you remember HBO's slogan is it's not TV it's HBO are you trying to become not just HBO but to become TV and what does that mean and the reason I say that is you're going to have this live programming you're going to start to have more sort of broader sitcoms you're going to have more what I describe as Network sitcoms even um procedurals and the like it's it's a shift and I wonder what that brand means uh to you today as it may have related to what you thought it meant three four five years ago well we want the brain to be the most exciting entertainment on Earth the place you go when you really want emotional stimulation and for us that's around film series and games two of those were strong and one were just beginning on games and the fact that people if you look at the Nielsen data YouTube on TV is equal to us in viewing like there's a lot that doesn't mean we're going to get into the user generated business right and then there's Sports there's news so there's a lot of things on the big screen but again what we want to do is embody the most exciting entertainment on Earth be the best creative company and that's why Disney is so inspiring to like even be in the same league as them because they're such an amazing creative company where are you on Sports we were talking to Jandy jassy he's doing sports Apple's now doing sports no Sports to you yet or at least classically yeah I mean we're really getting focused on you know talk to us after we're like a big leader in games you know we got a lot of investment to do in games and what does that mean when you say there's there's the mobile gaming piece of this you know you're now partnered with Microsoft Microsoft now is selling Xbox streaming where you can actually play straight off of a television ostensibly yeah from the outside it's odd because again where we build on Amazon web services right that's where all those Services based on and we compete with them and that's been true from the beginning that we compete with them and we rely on them and then at Microsoft we rely on them on the ad sales we compete with them in gaming I mean that's normal we're I mean a rounding error competitor to them in games at this point um but you know we are focused you know partially in mobile games and we've done some Acquisitions there which is also a new thing for us last you know three years and we want to have you know incredibly compelling mobile games that are really most mobile games have a lot of upsell the monetization strategy is to get you to spend money to get clothing or weapons or these things and that distracts from the engagement and our theory is we can build games just around engagement that are like really awesome would you anticipate being in the gaming business on TV eventually sure on TV for that's just a screen yeah and we'll have uh you know lots of games that are mobile based we'll have some that are TV based and you know the in the modern world like fortnite it's on all the platforms so think of it as the screen size is important but you know it's a smaller distinction and you know to a degree we would have loved I I berate our M A team that we didn't buy Wordle that you guys bought it um and we would have loved to have that it'd be a perfect mobile game for us obviously you guys have strength in that um and so you know again we'll compete in lots of places how do you feel about Microsoft buying Activision I had no no particular opinion fine we're not involved in it but you don't worry about I mean this go this this is a big sort of regulatory question about companies we were talking Angie jassy about this earlier that the idea of companies that may not actually be in a business I mean they actually are in the gaming business already but may not have a overwhelming stake in a business yet but are able to use the profits of of a one side of their business to effectively get into another business good bad thing how do you think about Society it's great because then you get companies that attack each other and that creates lower prices think about all the companies that are attacking us right and that's lower prices for consumers I mean that's a big positive so that's what you want you want them to be aggressive and I think about uh Tesla getting into Trucking you know they don't have to do that but then you know it's like new entrance so you know think of it as when companies get outside they're thinking about Mark Zuckerberg so you know I got to see some of your despite I think the world should be saying thank you Mark for advancing this technology I don't know if it's great for Facebook shareholders you know that's debatable what do you think he thinks that it is what do you think I think I wouldn't bet against them I mean it's been an amazing track record that he's had so it's gonna you know I think there's good odds for it but whether it works out or not commercially it's incredible Advance the technology and the quest and Quest Pro are and they're really moving it ahead so that's going to benefit all of us what do you think about the other part of that conversation was about platforming not just platforming people which is an issue but platforms like Apple um and we keep talking about it all all day Elon Musk has now gone to battle what do you think of that battle you've been into that battle too my answer will make you think I'm obsessed with the New York Times but you you and us share the same reader exemption that Apple has where we can sign up people anywhere and they can consume on the Apple platform uh without getting taxed and so you know our businesses have a benefit that other businesses for example Twitter don't so it's not a big deal to us we have never had we've got great relations with Apple and Google but it's partially because of the subscription business model that the times that Netflix have are advantageous no but you like to get people to go to the website to subscribe correct and that works well but not through Apple pay no it actually works well through mobile if you do Mobile sign up with mobile web which is what we do it works fine and so we have we have no battle so other people Spotify Etc have big battles with apple we don't since you are a Twitter user I should ask and you're on there all the time what do you think what's going on I'm excited I'm excited um Elon Musk is the bravest most creative person on the planet I mean you know what he's done in multiple areas is phenomenal um you know his style is different than like I'm trying to be like a really steady respectable leader you know he doesn't care he's just like out there you know but think of a guy who's spending 44 billion he could have built the biggest he could have built a mile long Yacht for 44 billion okay but it's like not good for the planet doesn't so he's not interested he's in front do you think what he's doing he's good for the planet I I am a 100 convinced that he is trying to help the world in all of his Endeavors okay and he's trying to help the world on that one because he believes in free speech and it's power for democracy and that there's an option now how he goes about it again you know it's not how I would do it um but I'm deeply respectful and I'm amazed that people are like so nitpicky on them on yeah sure the blue check mark he's making a mess of some things or not you know but it's like give the guy a break he just spend all this money to try to make it much better for democracy and Society to have a more open platform and I am sympathetic to that agenda well that's what I was gonna ask you about because the Dave Chappelle created some controversy as you know on your platform and we were talking we've been talking also about platforming sometimes hate speech or anti-semitic speech or other kinds of speech how do you think about that today yeah our brand is trying to be the most exciting entertainment company in the world and Chappelle is dead center for us he is the best or one of the best and that special was one of the most entertaining and watch specials we've ever had we would do it again and again so we clearly need to be more uh obvious and direct about that which we've done since you know with employees and with people who care about Netflix that were about entertainment and Chappelle is very entertaining and and you know provocative and again that's it that's the core of what we're doing um I want to go back to cost and maybe Ben Affleck we were talking about how much people are going to spend and I know you said you're going to spend the same I wonder whether you're going to spend the same amount of money that you were spending before or even more on the same volume it's a volume business or do you think it shifts to higher cost projects I'm curious how you think about the success of Shonda Rhimes and the Ryan Murphy deal I'm also curious what you think of like the Barack Obama Barack and Michelle Obama deal or for example you have to deal with Megan and Harry those are very expensive deals I mean we have some very expensive deals we have some other deals that are more speculative we've got a wide range the show that we just broke is with MGM television you know now owned by Amazon producing for us that's a general Ortega and Wednesday uh Adams Family reboot and it's incredible it's going to be the biggest show it's going to be in the top three you think these big Mega overall deals remain yes or less of them as part of the portfolio overall deals but as many I don't know of as many we've got lots but you know that's a it's a very that's just like a deal structure thing are we going to continue to invest in stories that we think can be breakout entertaining and and fascinating yes what about the idea of uh not just being a distributor World Garden but the idea of being uh what's described as an arms dealer from the content perspective would you sell your stuff off platform I think Sony is doing that right they're selling to all the streamers and that's a great business we're not in that business we're in the business of building amazing shows and and films and eventually games and having them for our members it's pretty simple business if we do it well I wouldn't open up for questions there's a lot of people from the media industry here um and hopefully we can get to them let me see if we got some hands uh around I see one uh right here in the front I'm going to go here if we can get that microphone to him and then we'll see if we can't take two two others real quick if we can sneak them in because I know we have prime minister Netanyahu joining us in just a moment awesome go ahead Cody Rojas from Toronto Canada and thank you for the amazing Investments that you've made into uh into Canada I was talking to Ted your co-ceo a little while ago in Los Angeles and what stood out to me from the conversation is the long-term orientation of Netflix which I've seen for a very long time and you commented on Elon Musk you commented on Mark Zuckerberg when you think about these founder run companies these founder-centric companies that have really allowed America to um to lead in The Innovation space globally can you speak to the capacity of founder-run companies to plan for the long term in a way in which a hired CEO might might be challenged yeah let's say I don't buy that theory at all I think um there's some very long-term thinkers that um we're not the founder and sometimes the founders make disastrous mistakes I've made a few myself um so I I think that's uh unintentionally simplistic way to think about it and it's Andy jassy is a wildly long-term thinking and Amazon's going to stay a long-term oriented company partially because if you say what you're about long term you'll get the investors that support that so it's called you get the investors you deserve okay and so if you say we're going to make these trade us so long term you've got investors who appreciate that and then you're expected to operate in that way and be successful in that way um so uh I uh well I think I answered that I see Matt blank up there uh former AMC CEO former Showtime CEO green lighter of billions Batman and Mike and and therein lies the reason I get a free conference administering every year Reid how are you great I want to go back to the Cross thing for a moment because you did something very unusual it's it's it's usually the established players who can spend more to keep people out of the marketplace uh you preempted the marketplace by spending more than the the Legacy players to build your business and been incredibly successful doing that but going back to you know keep spending to serve your members as best you can one of the things that happened as you built this business so successfully is you really raise the cost of playing you raise the cost per hour significantly it wouldn't it be in everybody's interest if we could have more control on the cost of playing and still serve those members from a volume standpoint I mean if you could deliver the same product you're delivering by being more aggressive on that front and you told Wall Street and you told your various publics that you're going to save four billion dollars a year in doing that I think uh you'd make Bob iger's job for instance much easier yeah I would say that the corporations are thrilled and the talent is upset so it's not a great trade-off um you know the expansion uh so typically television was you know two to six million dollars an episode and then really big things early Game of Thrones was eight to ten and now you're seeing a bunch of 20 million dollars an hour uh television and that's incredibly exciting because it's getting closer to film film you can sometimes see hundred million dollars an hour films that are wildly spectacular so again we want to take that up um we know that it does you know hurt operating income but our ability to then attract the best talent like Shonda Rhimes is hi um and then you know it but it does have that effect and there's no um there's no going back and then now Apple's doing the same play which is they're like you know we'll pay a lot um and and we sit around a month can you believe what Apple's paid you know so again it comes around but it's great for talent to be able to see uh you know these amazing um you know modern monetization strategies and paychecks and then you're getting new companies like Ben Affleck's company you know wanting to be the next hello sunshine and build a great production company and then eventually get bought broadly so you know it's again it's it's creating this very strong artistic ecosystem um I think we have to end it here unfortunately I'm going to let Bill Ackman off the hook because I see him up there he was he was a big owner of your shares at one point and I also see making Del Raheem over here we should talk some antitrust in just a little bit but I want to thank you so very much for being here today I'm so glad to not thank you trust part thank you so much

Channel: New York Times Events

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Length: 34min 26sec (2066 seconds)

Published: Thu Dec 01 2022