He built a DVD rental company into one of the most influential entertainment companies in the world. A look back at the error-filled journey of Netflix founder Reed Hastings.
He doesn’t hesitate to say that the boss of X (ex-Twitter), Elon Musk, is “a hundred times more interesting” than him. That he will never be the brilliant person that Steve Jobs, the founder of Apple, was. Or that he doesn’t hold a candle to Bob Iger, the CEO of Disney, whom he describes as a “statesman”.
Yet, Reed Hastings, 64, has nothing to envy these big names in tech and entertainment. From a simple DVD rental company, the boss of Netflix has managed to build a giant in video on demand and content production.
Today, Netflix brings together more than 277 million Internet users around the world, including more than 12 million in France. The company is also celebrating its 10th anniversary on French soil on September 15. A success shaped by the leadership and subversive style of its founder who has become, in less than thirty years, a key player in the audiovisual landscape.
Poinca’s Portrait: Who is Netflix Founder Reed Hastings? – 04/23
Maths teacher in Africa becomes DVD rental company
To explain his success, Reed Hastings often talks about the mistakes that helped him build his empire. It’s because he wasn’t cut out for Marine boot camp that he starts selling vacuum cleaners door-to-door or becomes a math teacher at Swaziland (Africa) in the Peac Corp, an American volunteer corps.
The Netflix founder remains fairly discreet about this part of his life. He explains in a letter to his former professors at Bowdoin College (United States), relayed by Bowdoin Orient, that he “loved his experience” in Swaziland.
“The first year I loved it. I lived with a family about 2 miles from the school and walked through beautiful valleys twice a day,” he wrote in a letter. “The second year I lived at the school with the other teachers and spent my afternoons playing cards and drinking beer.”
But “I would never spend my days at home like that,” he says. Indeed, his life in Swaziland is much more monotonous than his daily routine in Boston, and the future boss sometimes feels stagnant. “There was a strong feeling that I was not really being challenged,” he writes.
To break his boredom, he seeks new challenges and already begins to undertake. “The answer to my boredom and underutilization has been to involve myself in the community at large instead of limiting myself to the school grounds,” Reed Hastings states in another letter.
He will develop a plan to build rainwater tanks on top of a hill to help locals fetch water. This is a much cheaper solution than water pumps. He will also help locals start their own beekeeping businesses to harvest honey from killer bees.
An off-the-beaten-track journey, therefore, which will give this son of a prosperous Boston lawyer the courage to try the entrepreneurial adventure.
“Once you’ve hitchhiked across Africa with $10 in your pocket, starting a business doesn’t seem as intimidating,” he told Fortune.
So that’s what he did. In 1991, he co-founded Pure Software, a company that specialized in detecting and fixing software bugs. “I was a bad manager. I tried to get fired twice,” he recalls. Business InsiderAt just 26 years old, he sold the company for 700 million dollars.
A nice jackpot that he invested in a DVD rental service called… Netflix. Legend has it that the idea came to him after yet another mistake when he returned a cassette he had rented too late.
“It all started when I returned a VHS tape of the movie Apollo 13 that I had rented from the local video store six weeks late. It cost me a $40 penalty. I felt really stupid,” Hastings tells Paris Match in 2014.
The group, co-founded by Reed Hastings and Marc Randolph, made a bold bet: offering DVD delivery by mail, rather than relying on a network of stores. Success was rapid. In 2005, the company sent a million films per day. In 2007, it shipped its billionth DVD. A project that went against the grain of everything that was being done at the time, which allowed it to overthrow the main video rental brands in just a few years.
“I messed up”
Convinced that DVD rentals have only a limited future, he launched a streaming service in 2007. The principle is simple: to offer an entertainment platform on which Internet users can freely access a catalog of films and series.
“We were born with DVD and knew it was going to be temporary, no one thought we would be shipping DVDs for years,” he explained in a 2018 TED talk.
Growth defies forecasts. Gradually, Netflix’s rise ends up cannibalizing DVD sales. His greatest test, Reed Hastings knows it fourteen years later, in 2011. At the time, his streaming service is a hit.
BFM : 28/09 – GMB : Reed Hastings
Enthusiastic, the business leader wants to accelerate. And for that, he needs money. He then decides to increase the price of his subscriptions by 60%. A decision that will cause the company’s stock price to plummet by 80% in a few months.
The boss admits his mistake, without managing to stop the decline in business. “I messed up,” Reed Hastings then says, without further ado. This episode will become “the symbol of Netflix not wanting to listen to people,” Reed Hastings will later admit.
Since then, the man who looks more like a professor than a CEO, whose personal fortune exceeds 4.4 billion dollars according to Forbeshas learned from his mistakes. He now surrounds himself with a team that he listens to more. He also does not hesitate to eat sandwiches in the cafeteria alongside his employees or to hand out his business card to students at Xavier Niel’s Ecole 42 to chat with them.
Sense of contact and revolutionary management
This ability to listen and trust is precisely what will save Netflix. In 2011, while the company is entangled in its descent into hell, Ted Sarandos proposes a crazy bet. The one that will become co-CEO of the company in 2023 after the retirement of Reed Hastings wants to produce Netflix films and series.
The platform then decided to invest 100 million dollars in the production of two seasons of thirty-six episodes of House of Cardsdont success was programmed. Indeed, the entertainment giant relied on its famous recommendation algorithm to predict users’ viewing behaviors and ensure the popularity of his show. Reed Hastings won’t even bother shooting a pilot.
The series quickly became a global success and laid the foundations for what would make Netflix successful: the production of feature films and original series whose episodes are available in one go. This is what we call binge-watching, or unlimited viewing, which will change the way we consume content.
A revolution that will bring with it the rest of the players in the audiovisual and world cinema. As proof, all will rush to copy the streaming giant’s model and launch their own platform. Among them, Disney with Disney+, Amazon with Prime Video or even Apple with Apple TV+.
Dinners and self-criticism
Not content with having revolutionized the audiovisual industry, Reed Hastings also stands out for his equally innovative methods. An iconoclastic management that Reed Hastings, 64 next month, places under the sign of freedom and responsibility. The streaming king is known for letting employees choose their number of vacation days in exchange for big performances. Annual dinners where the teams of the Californian company are invited to criticize each other with all sincerity and without concession are also organized. Within the company, he is the one who is the subject of the most criticism.
The Netflix founder has since relinquished the reins of his company, after 25 years at the helm. In January 2023, he handed over his position as co-CEO to Greg Peters, alongside Ted Sarandos. A sign of a change in management? Not for Reed Hastings. “If every time the CEO changes, we have to change the culture, it’s chaos,” he explained in an interview with Echos. Especially since the entrepreneur has not completely disappeared from the radar. He is now the executive chairman of the group, at the head of the board of directors.
