Reed Hastings, Netflix: Stanford GSB 2014 Entrepreneurial Company of the Year | Summary and Q&A

Transcript

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Summary

• Netflix has won the Entrepreneurial Company of the Year award for 2015
• The company has gone through multiple iterations to get to where it is today
• Entrepreneurship is thriving at Stanford University and the Graduate School of Business
• The future of TV viewing will be internet-centric and on-demand
• Netflix is focused on freedom and responsibility in its management style
• The company is expanding globally and investing in original content
• The nature of content will continue to evolve and become more personalized
• Netflix competes with other content providers but also sees them as allies
• The cable bundle is likely to continue with some disaggregation over time
• Netflix does not plan to enter the sports market
• The company looks up to those who support its mission and values, rather than specific individuals

Questions & Answers

Q: Why did Netflix win the Entrepreneurial Company of the Year award?

Netflix won the award because of its constant reinvention and entrepreneurial spirit. The company has gone through multiple iterations to get to where it is today and has shown innovation and adaptability.

Q: How has entrepreneurship been thriving at Stanford University?

Almost one in five graduates from the Graduate School of Business start their own company straight out of business school. This is a big increase from previous years and shows a promising trend. Additionally, a quarter of the class takes jobs in the technology sector, leading to almost 50-60% of the class going into technology overall.

Q: How has Netflix been innovating in entrepreneurship on a global scale?

Netflix has launched programs like Start-Up Garage and Stanford Ignite in different locations around the world. These programs allow students to collaborate across continents and gain entrepreneurial skills. The use of educational technology has enabled this expansion and innovation.

Q: How does Netflix rely on its ecosystem for success?

Netflix relies on a network of mentors, guest speakers, and industry experts who contribute to its educational programs and provide guidance to students. They also help create content and provide resources for the company. The ecosystem is an integral part of Netflix's success.

Q: How did Reed Hastings, the founder of Netflix, transition from his previous ventures to starting Netflix?

Reed Hastings had previous experiences in the software and AI industries before starting Netflix. He recognized the potential of DVD as a distribution method and saw the opportunity to evolve the company into an online streaming platform. The idea of on-demand content was present from the beginning.

Q: What challenges did Netflix face in its early years?

One of the biggest challenges was becoming profitable and overcoming the cash-intensive nature of the DVD rental business. It took several years for Netflix to break even and become a sustainable company. Another challenge was competing with Blockbuster, but Netflix ultimately prevailed and became a dominant player in the industry.

Q: How did Netflix enter the streaming market?

Netflix launched its first streaming product in 2007, but it had limited content and availability at that time. The company gradually expanded its streaming offerings and signed important deals with content providers like Starz and Xbox. These partnerships helped Netflix gain a significant foothold in the streaming market.

Q: Why did Netflix decide to pursue original content?

Netflix believed that owning and creating its own original content would help differentiate the company and build strong brands. Ted Sarandos, an executive at Netflix, saw the potential of original content and convinced others at the company to invest in it. Original content allows Netflix to create global brands and attract new subscribers.

Q: How did Netflix change the way people consume content with binge viewing?

Binge viewing, or watching multiple episodes of a TV show in one sitting, was not planned by Netflix but emerged as a popular behavior among subscribers. Binge viewing became possible with the DVD rental service and was accelerated when Netflix introduced streaming. The concept of binge viewing is based on the idea of on-demand, personalized content consumption.

Q: How does Netflix's management style support freedom and responsibility?

Netflix empowers its employees by giving them freedom to make decisions and take ownership of their work. The company focuses on setting context and providing support, rather than micromanaging. This management style allows for innovation and high performance, creating a culture of trust and responsibility.

Q: How does Netflix plan to modernize the TV viewing experience?

Netflix sees the future of TV as internet-centric, with movies and TV shows available on demand. The experience will be personalized and accessible on various devices, such as phones, tablets, laptops, and TVs. The goal is to provide a seamless, user-friendly experience that gives viewers control over their content consumption.

Q: What are some challenges and opportunities for the future of Netflix?

Netflix faces challenges in terms of expanding globally and investing in original content. The company's success rate in producing original shows has been high, but there will inevitably be some flops. The opportunity lies in continuing to grow and dominate the global market for movies and TV shows, as well as exploring new avenues for content consumption.

Q: How does Netflix view its competitors and allies in the entertainment industry?

Netflix competes with other content providers, such as HBO and FX, but also recognizes that they are all competing for a share of the overall entertainment market. The company sees these entities as allies in the sense that they all contribute to the overall growth and demand for content consumption.

Q: Will the cable bundle continue or will disaggregation occur?

The likely scenario is that the cable bundle will continue but with some disaggregation over time. The number of cable subscribers has remained relatively stable, although there may be a slight decline. The future of TV viewing is moving towards an internet-centric model, but the cable bundle will still be relevant for a significant portion of the population.

Q: Who does Reed Hastings look up to as a personal hero?

Reed Hastings shared a story about his CEO at a previous company who showed humility and dedication by cleaning up coffee cups for him. This CEO became a personal hero for Hastings because of his selflessness and willingness to do small tasks to support others.