On the day the 2020 Emmy nominations were released, Reed Hastings, the co-CEO of Netflix, had been in back-to-back meetings all morning, so he had not heard the good news by the time we spoke.
The world’s biggest video-streaming service, the home of everything from Stranger Things to The Crown, had managed to achieve something that no other network had done before: an unprecedented 160 nominations. The traditional king of high-class TV, HBO, came in second, with 107.
“Oh, awesome – now you’re gonna make me go look for this …” Hastings said, as I revealed the gist of the results.
The subject of our interview was supposed to be Hastings’ newly published tome, No Rules Rules, which aims to deconstruct the idiosyncratic corporate culture of Netflix. It is a place where annual leave is unlimited and employees can be subjected at any time to a controversial “keeper test”, which has been criticised as a kind of Hunger Games-style, survival-of-the-fittest employee evaluation system, but which Hastings says is nothing of the sort.
(The title of the book, by the way, may seem a bit inscrutable, but the idea is that having no rules absolutely rules! Get it?)
But now he was distracted; he had found the results. “I just looked at the Emmy record,” he noted aloud, ignoring an unrelated question from me. “Oh my gosh … wow … Setting a new record, oh God! Thank you for that little bit of good news there.”
And that was that. “Go ahead. Let’s talk about the book.”
So much for small talk. Then again, an aversion to chit-chat is probably to be expected from the boss of a $230bn (£175bn) entertainment colossus that has enjoyed an improbably outsized share of success. Since its founding, Netflix has outfought an entrenched legacy player (Blockbuster), correctly anticipated the consumer shift away from DVDs to streaming, woken up before most of its rivals to the importance of original content and established itself as a Hollywood studio. It rakes in armfuls of statuettes at each year’s award shows – yet also proved ideally placed to take advantage of a pandemic, with the global population forced to spend more time at home than ever before. Netflix had amassed 193 million subscribers worldwide by this summer, almost 26 million of whom were added between January and June. That was more than double the subscriber gain over the same period in 2019.
This was the year in which the battlefield of the so-called streaming war in the US became more chock-a-block than ever, thanks to new players including Quibi, Disney+, Peacock and HBO Max. Alongside similar streaming products from brands such as Amazon and Apple, the fight for consumers’ eyeballs had never been more keenly fought. Yet Netflix binges have become part of the collective experience associated with the stay-at-home orders and lockdowns that have made 2020 the year we can’t wait to forget.
But despite the success, the desire to improve and innovate never stops. Hastings reigns over the company’s subscription-based empire like a philosopher king, ruminating over the future in a never-ending quest to imagine and pre-empt what threats may come.
“The phrase I use internally is: ‘We suck,’” Hastings says proudly. “We’re pretty good. But we suck, compared with how we’re going to be in three years.”
It is an attitude of perpetual dissatisfaction and constant motion. Hastings tells me his job today consists of prodding the company to try new things, to challenge old assumptions and to figure out when and where the streaming giant should take its next great leap forward: “Think of me as a peacetime instead of a wartime CEO.”
Accordingly, Netflix no longer sees the creation of its own TV shows and movies as a side bet – it is the game. As the former Amazon Studios executive Matthew Ball has opined, Netflix has been “quite open about the fact they are going after all people’s time spent watching video (and as much non-video free time as they can get, including ‘enjoying a glass of wine with [your] partner’)”. In shareholder communications, Netflix has stressed that it thinks about the game differently from almost all of its rivals. It is not only Netflix versus HBO; it is also Netflix versus “reading a book, surfing YouTube, playing video games, socialising on Facebook [and] going out to dinner with friends”.
Which is why, for example, the chatter is that Netflix is on the hunt for a talent competition series that could rival something like American Idol. It is also making a deeper push into the reality genre, thanks to new series this year such as Too Hot to Handle, Love Is Blind, Floor Is Lava and a US version of the British show The Circle. Not exactly the kind of content that seemed on the horizon in the early days of Netflix’s push into prestige original programming, such Orange Is the New Black.
Hastings uses the release this year of Tiger King to illustrate how the company chooses what is next. That particular documentary series exploded in popularity and became a cultural touchstone of the coronavirus pandemic. Everyone was either talking about or aware of Joe Exotic, to the point that a reporter in the White House scrum asked President Trump if he would consider pardoning the exotic-animal showman (who is serving a 22-year sentence for his role in a 2017 murder-for-hire plot) for his various misdeeds.
“Think of it as: each person on the content team has budget authority, so somebody believed in Tiger King,” Hastings says. “And then they get to build a track record. So we’re able to, essentially, bet in parallel. It’s not like we’re putting a billion dollars into it and it’s one shot at the future of the company.
“Think of Elon Musk and SpaceX. They’ve got one shot, right? And so then everybody, including Elon – he’s like the chief engineer. He’s personally reviewing, I don’t know, propellant. And that’s what’s necessary if you’ve got one big thing. But, with Netflix, we’ve got the business model where it’s many different titles and many different product features. So we get to empower lots of people to make those decisions.”
No Rules Rules also makes clear how different Netflix is from the companies most of us work for. Nowhere is that idea brought into starker relief than in the form of the keeper test. Hastings explains it: “If someone was quitting, would you work hard to keep them, to get them to change their mind and stay? If [a manager] says yes, I definitely would, then it’s like: great, and we move on. OK?
“It’s not like The Hunger Games at all … The Hunger Games false impression comes from this idea that there must be a fixed number – I mean, in The Hunger Games, it gets down to one, right? Everyone else gets killed. In our case, there’s no fixed number. If everyone is successful, everyone’s happy … It’s not like a once-a-year review. It’s just an ongoing [process]; that’s what people think about.”
Of course, not everyone is successful – and if you fail the test you are let go with a “generous severance package”.Hastings has said before that there should be no shame in Netflix not being the right company for you.
For those who do survive, the most urgent thing on their minds is what the future might hold. It is why the company is bringing its considerable cash hoard to bear to outbid local channels in places such as the UK, to take advantage of the fact that not much new TV is being made at present. The streamer is buying up shows that traditional broadcasters might normally have purchased, which makes it harder for those broadcasters to plug holes in their Covid-wrecked schedules.
John McVay, the head of the trade group Pact, which represents the UK’s independent TV production companies, says outlets such as Netflix are making a challenging situation even more so for local channels. “I know a lot of people who work for streamers in acquisitions and they are buying everything,” he said. “Unless we can get new, fresh content into the British schedules that is engaging and resonates with our experience of the world we’re living through, then I fear for our broadcasters.”
The pandemic has affected Netflix, too, with productions being paused or ended. Last month, it cancelled the young-adult drama The Society after originally green-lighting a second season, attributing the reversal to Covid-related headaches such as uncertainty around the production schedule and cast availability.
“Our productions, where we’re actually filming – that’s been highly impacted,” Hastings says. “Because there’s no virtual substitute. We just finished, two nights ago, a Ryan Murphy movie. We’re doing well in Europe. But think of it as productions, being on set, actors being up close with each other – that’s highly impacted. Our office work, by comparison, it’s the same flow, it’s the same meetings, they’re just online instead of in person.”
Nonetheless, Netflix’s dominance seems almost insurmountable. A recent Piper Sandler survey asked 1,000 US consumers: “What video services will you use after stay-at-home rules ease?” Netflix was the runaway winner, with 41% of respondents naming it, compared with 28% for Amazon Prime Video, 20% for Hulu, 17% for Disney+ and 7% for HBO Max. A separate survey of 600 consumers from Piper Sandler found that 52% of Netflix subscribers are so happy with the service that they would pay more for it each month.
Does Hastings feel confident, then, or does he subscribe to the maxim of the late Intel CEO Andy Grove that “only the paranoid survive”?
“The paranoid are delusional and they can’t tell reality from the imaginary,” counters Hastings. “If you’re paranoid, you’ll be fighting all kinds of false threats. Maybe spacemen are going to arrive and change entertainment. So, let’s start working on the anti-spacemen programme. The real hard part about business is like chess – you’ve got to figure out which avenues you’re going to explore and where the game might go, and if you don’t explore one that you should have you can get checkmated. And your ability as a human to prune the tree of possibility is the essence of being a great chess player.
“Business is not just about being paranoid about all threats. You have to figure out which threats are material and focus on them ... Of course, individual threats will come. Maybe it’s augmented reality. Maybe it’s a new kind of drug and you take it and it’s much better than TV? And it’s safe and effective and personalised. There will be eventual substitutes [for Netflix]. But, at our core, we’re trying to get the culture right so that we can adapt to those.”
No Rules Rules by Reed Hastings and Erin Meyer is published by Virgin Books on 8 September
