Reed Hastings: Streaming Video Still in Growth Phase

Coming off its slowest fiscal quarter in subscriber growth, Netflix co-founder Reed Hastings contends the SVOD pioneer has plenty of runway left to significantly increase subscribers and revenue over the coming years.

While the service lost 430,000 net subs in North America in the second quarter (ended June 30), Hastings, speaking on the July 20 fiscal interview, said streaming video represents just 27% of the U.S. home entertainment market behind leader linear television. Of that streaming percentage, Netflix holds a market-leading 7% share followed by YouTube TV (6%), Hulu (3%), Amazon Prime Video (2%) and Disney+ (2%), according to Nielsen.

To Hastings, those numbers suggest Netflix’s future is still in the early innings, with unlimited potential.

“Does Internet streaming slow down? That’s seems pretty unlikely,” he said. “At least for the next several years, the growth story as a whole is very intact.”

The CEO said that when it comes to increased secular competition from platforms such as Disney+, Amazon Prime Video, HBO Max and Peacock, Netflix is not seeing a negative impact on its domestic Nielsen weekly streaming metrics (which the streamer has dominated since inception), or in foreign markets.

“That gives us comfort,” Hastings said, adding that when streaming video represents 50% to 60% of home entertainment in the United States, there will be “shakeout” among the competition.

The executive believes the global streaming market could tally more than 800 million before reaching saturation. Netflix ended the quarter with almost 210 million.

“We want to be prepared and lead in that,” Hastings said. “But in the next several years, streaming is still in the early stages.”

CFO Spencer Neumann agreed that the streamer’s growth across multiple indices remains “remarkably” steady despite the ongoing “choppiness” brought on by the pandemic. He said the business continues to perform well, with viewer engagement up nearly 20%, subscriber churn down and comparable to the pre-COVID period in 2019.

But we still feel a little bit of that drag in terms of our acquisition growth as we’re kind of working through.

Neumann says the streamer is on track to add 54 million subs over the past two years through the end of the year, which he said translates to 27 million annually — a benchmark comparable to 2018 and 2019.

“We remain on that growth trajectory,” he said, adding that once the market overcomes the pandemic and Netflix moves into its second half-year content slate, smoother waters await.

“We expect to end the year on a much-more normalized growth trajectory,” Neumann said.

Reed Hastings Wants Rival HBO Max on Weekly Nielsen Chart

Netflix co-founder/co-CEO Reed Hastings has made a career thinking outside the box. But when it comes to quantifying streaming video on the household TV, Hastings apparently opts for old-school Nielsen — a brand synonymous with broadcast ratings.

Responding to Nielsen’s June 18 market report that found streaming video use across all television homes in May climbed to 26% of total viewer spent watching TV, Hastings seemed surprised that pay-TV and broadcast combined still dominate viewership time.

Indeed, Netflix captured just 6% of total TV viewing time, on par with YouTube TV, but ahead of Hulu (3%), Amazon Prime Video (2%) and Disney+ (1%).

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“Wild that most TV time in USA is still legacy linear,” Hastings tweeted on social media. “Stream team needs to up its game.”

Hastings added that he wished HBO Max was included in the results. Max is noticeably absent from Nielsen’s weekly Top 10 streaming charts, which include Disney+, Prime Video and Hulu — and is regularly dominated by SVOD pioneer Netflix.

“@jasonkilar we need you on the board too,” Hastings tweeted in reference to WarnerMedia CEO Jason Kilar.

Kilar, the founding CEO of Hulu, responded (with lots emojis) that WarnerMedia was indeed represented in the Nielsen chart, albeit in dominating linear TV.  Kilar, who plans to remain in his position into 2022 following Discovery’s acquisition of WarnerMedia, said HBO Max has been the strongest growing domestic SVOD service in 2021.

HBO and HBO Max ended the most-recent fiscal period with 44 million combined subscribers, including 11.1 million Max subs since the service launched a year ago.

“@WarnerMedia is already on the board strongly in that largest green pie piece Reed (TNT, TBS, CNN, HBO, CN …). Proud to serve customers in whatever way they choose,” Kilar tweeted.”  Slightly smiling faceThumbs up “Fun to also be the crazy fast(est) growing upstart in @hbomax (2 Qs straight of 2.5M+ U.S. sub adds).” Fisted handClapper board

 

Netflix’s Reed Hastings Jumpstarts CA Gov. Newsom’s Anti-Recall Campaign With $3 Million Personal Donation

Netflix co-founder/co-CEO Reed Hastings has contributed $3 million to California Gov. Gavin Newsom’s campaign against a recall election set for this fall. Newsom, a Democrat, is being challenged by numerous political opponents, including celebrity Caitlyn Jenner and former San Diego Mayor Kevin Faulkner, over his handling of the COVID-19 pandemic in the state.

Hastings’ contribution, disclosed in a May 20 state filing, dwarfs other contributions in a political battle that is expected to cost in excess of $100 million. Interestingly, Hastings supported Newsom’s Democrat opponent, former Los Angeles Mayor Antonio Villaraigosa, in the 2018 governor election.

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With a personal fortune reportedly worth nearly $5 billion, Hastings is no stranger to backing political, public educational and social causes. The longtime Democrat and his wife Patty Quillin last year donated $120 million to educational institutions in support of students of color. The contributions included $40 million each to the United Negro College Fund and private colleges Spelman and Morehouse in Atlanta.

After a stint in the Peace Corps in Africa teaching high school math in Swaziland, Hastings pursued a career in tech before launching Netflix as the first by-mail movie disc rental service with business partner Marc Randolph. Along the way, he’s been a big contributor to charter schools, including spending almost $9 million campaigning for select school measures. In 2016, Hastings pledged a $100 million philanthropic fund for children’s education.

 

Reed Hastings Takes Self-Deprecating Shot at Soccer’s Super League

Who knew Reed Hastings was such a soccer fan? The Netflix co-founder/co-CEO took to social media to weigh in on the European Super League Company, or Super League, an upstart group of 12 of soccer’s most well-known and wealthiest clubs launching a private annual tournament in which they keep all revenue, including TV rights, ticket sales, concessions, etc., among themselves.

As word of the Super League spread, backlash from fans exploded, with many dubbing the concept “Super Greed,” or the “Americanization” of soccer, among other criticisms. Already several clubs have backtracked their involvement, putting in doubt whether the league will even happen.

That apparently struck close to home for Hastings, who tweeted on April 23: “Should the Super League Have Been Named Qwikster?”

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It was 10 years ago this summer when Hastings, seemingly unilaterally, from his home sent out a message on social media announcing the launch of Qwikster, a standalone separate business handling Netflix’s legacy by-mail disc-rental service. Netflix, going forward, would just focus on streaming video.

“DVD by mail may not last forever, but we want it to last as long as possible,” Hastings tweeted in the Qwikster blog post, setting off a public relations nightmare in the process.

The pushback from subscribers and investors was immediate. Netflix’s most-popular plan at the time was a hybrid streaming/disc option that resonated with more than 12 million users. More than 800,000 subs dropped the service overnight in protest, sending the company’s stock freefalling. The move, which some suggest should be enshrined into the “Dumb Ideas Hall of Fame” along with New Coke and Prohibition, made global headlines with some calls for Hastings to step down.

To his credit, Hastings took personal responsibility for the decision, apologizing for not respecting subscriber interests and market reality. Disc rental at the time represented Netflix’s most lucrative business, financially supporting the company’s aggressive international forays into subscription streaming video.

A lone silver lining to the mess: Netflix never had to deal with Jason Castillo, the reported former high-schooler who shrewdly already owned the Twitter handle @Qwikster.

 

 

Reed Hastings: Linear TV, YouTube Biggest Netflix Competitors — Not Disney+

Following a quarter in which global subscriber growth failed to meet internal and market projections, Netflix executives found themselves on the defensive explaining why 43% fewer subs signed up for the service than expected.

Speaking on the investor webcast, CFO Spencer Neumann said COVID-19 skewed the playing field as the record subscription growth from a year ago could not be replicated — also due in part to production of new content coming to a halt for much of 2020.

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“The combination of those two things does create some noise,” Neumann said, adding that when removing the pandemic from the equation, Netflix sub growth over the past two years has increased more than 20%.

“So, the business remains healthy and that’s because the long-term drivers, this big transition from linear-TV to streaming entertainment, remains as healthy as ever,” he said.

Co-founder/co-CEO Reed Hastings said Netflix’s biggest competitors for viewing time remain linear TV and YouTube — with the latter considerably larger than Netflix in viewing time.

“Disney [viewing time] is considerably smaller,” Hastings said.

He said Netflix remains preoccupied with subscriber satisfaction, retention, and word of mouth, which Hastings said drives sub growth.

The executive said Netflix’s goal remains finding stories subscribers can connect with, improving content selections, the best recommendations, and then ultimately, stories that are incredibly compelling.

“We are just quarter-by-quarter, learning more lessons on each one of those which is what improves the member satisfaction, which is what really drives the growth,” he said.

“We have been competing with Amazon Prime Video for 13 years, with Hulu for 14 years,” he said. “It’s always been very competitive with linear TV, too. So there is no real change that we can detect in the competitive environment. It’s always been high and remains high.”

Separately, COO/CPO Greg Peters said the streamer remains upbeat on video games, which is rolling out with interactive children’s programming and the 2018 original movie Bandersnatch.

“We’re going to continue working in that space for sure,” Peters said. “We’ve actually launched games themselves. It’s part of our licensing and merchandising effort, and we’re happy with what we’ve seen so far. And there is no doubt that games are going to be an important form of entertainment and an important sort of modality to deepen that fan experience. So we’re going to keep going, and we will continue to learn and figure it out as we go.”

Netflix Chief Talent Officer Jessica Neal Leaving

Netflix April 13 disclosed that longtime executive Jessica Neal is leaving the company. Neal, who joined the streamer in 2006 when it was a by-mail disc rental service, most recently held the position of chief talent officer. No reason for her departure was given and a possible replacement has not bee named.

“We are incredibly grateful to Jessica Neal for building and leading a best-in-class talent organization over these past four years,” co-founder/co-CEO Reed Hastings said in a statement. “She has been a trusted and valued partner, and we wish her the very best.”

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Neal, who left Netflix in 2013 before returning four years later, said that leading Netflix’s talent department had been “an incredible” experience.

“I want to thank Reed, Ted [Sarandos, co-CEO/CCO,] and all my stunning colleagues who have made every day memorable and gratifying,” added Neal.

 

Netflix to Stream ‘The Last Blockbuster’ Video Store Documentary

Netflix is set to stream documentary “The Last Blockbuster,” showcasing the last-standing Blockbuster Video store in the world located in Bend, Ore., the people who work there, still rent DVD movies, and industry people who supported the former 9,000-store franchise before it shuttered in 2014. The doc streams on Netflix, beginning March 15.

The license acquisition is not without irony as Netflix co-founder Reed Hastings in 1997 first launched the future SVOD titan as a ground-breaking by-mail DVD rental service after getting fed up paying Blockbuster late fees.

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Just three years later, Hastings and former CFO Barry McCarthy flew to Blockbuster’s corporate headquarters in Dallas hoping to sell the fiscally-challenged company for $50 million. They were laughed out of the company boardroom. And the rest is history.

“A lot of people know that Blockbuster had the chance to buy Netflix early on, and they passed on the opportunity,” reads the doc’s Facebook page. “In an ironic twist of fate, our movie The Last Blockbuster is coming to Netflix. We are beyond excited for people to get to see this tribute to an era of home video on the world’s largest streaming service. Just don’t forget to rewind it when you’re done watching it and bring it back by noon on Wednesday.”

The Last Blockbuster is currently available on Apple iTunes, Google Play, Amazon Prime Video, FandangoNow, and Vudu, among other digital properties.

 

Netflix Set to Raise Subscription Fees in Japan

Netflix is reportedly planning to raise the basic subscription fee in Japan by as much as 13%, following a trend that has seen the SVOD behemoth raise monthly prices in the United States, Canada and the United Kingdom. Japan’s Nikkei 225 Stock Average disclosed the news, which helped send Netflix shares up more than 2% in midday trading.

The increase, which does not affect the premium-priced plan, would see the basic plan price increase to ¥990/month ($9.39) from ¥880/month ($8.34).

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Netflix launched service in Japan — then the world’s No. 2 home entertainment market — six years ago in 2015, largely through the efforts of Greg Peters, current COO/chief product officer, who back then was GM of Netflix Japan.

Peters, on the October fiscal call, said Netflix increased spending of more than $15 billion annually on original productions justified subscription price hikes.

“We feel like there is that opportunity to occasionally go back and ask. for members where we’ve delivered that extra value in those countries to pay a little more,” Peters said.

Netflix added 1.99 million subs in the Asia Pacific region in the most-recent fiscal period (ended Dec. 31, 2020). The region totaled 25.5 million subs, including more than 3 million in Japan. The region is Netflix’s third-lowest generating revenue per subscriber at $9.32, ahead of Latin America at $7.12 per sub. The North American region leads Netflix with $13.51 in monthly revenue per sub.

“With its rich culture and celebrated creative traditions, Japan is a critical component of our plan to connect people around the world to stories they love,” co-founder/co-CEO Reed Hastings said in 2015 at the Japan launch.

Netflix Hits 200 Million Subs: Reed Hastings Orders Denny’s Takeout

With Netflix officially surpassing 200 million paid subscribers (actually 203 million) through Dec. 31, 2020, co-founder and co-CEO Reed Hastings took to Twitter to post a picture eating Denny’s takeout solo at home.

While some might wonder why a guy reportedly worth close to $6 billion would celebrate the milestone not ordering a Grand Slam breakfast (!), the venue has special meaning to Hastings. The executive has marked several subscriber accomplishments during the streamer’s 20+ years eating steak at Denny’s — alone.

Hastings did the same in 2017 when Netflix topped 100 million subs and in 2003 when it reached 1 million subs renting DVDs through the mail — underscoring the moves with the hashtag #superstitious.

Hastings eating solo after 100 million Netflix subs in 2017.

 

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A noteworthy post among responding messages on social media came from Netflix’s other co-founder Marc Randolph: “Congratulations Reed. I never imagined this crazy idea would get this far.”

Indeed, Randolph and Hastings’ crazy idea at the time had little to do with streaming video and everything to do with one question: Could you send a CD disc in the mail and not have it arrive cracked, chipped or scratched? The answer was yes and the by-mail DVD rental business was launched with initial TV ads featuring Ryan Seacrest pitching the concept to consumers.

Randolph’s post also included a financial spreadsheet marking Netflix topping 500,000 subscribers on Jan. 13, 2002. He said that milestone took three-and-a-half “brutal years” to realize at a time when Blockbuster Video dominated the market.

“I think this only merited a celebratory cupcake,” Randolph wrote.

 

 

 

 

Netflix Rolling Out ‘Linear TV’ Service Globally

Netflix is planning to expand worldwide a test feature that allows subscribers to simply click a button and let the streamer pick programming to watch. Tested in France and other markets, the “Shuffle Play” feature acts as an old-school TV channel broadcasting shows on a loop.

Greg Peters, COO and chief product officer, said that as Netflix subs come to the service seeking to be entertained in a whole variety of ways, deciding what movie or TV show to stream can be daunting.

“Sometimes … [subs are] not really sure what they want to watch,” Peters said. “And so we’ve had the opportunity to try and be innovative and try new mechanisms to sort of help our members in that particular state.”

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Greg Peters

Peters said the new feature would enable subs to “skip browsing entirely,” click one button and let Netflix’s algorithms pick a title to instantly play.

“That’s a great mechanism that’s worked quite well for members in that situation,” he said.

Joining Peters on Netflix’s Jan. 19 fiscal webcast, co-founder/co-CEO Reed Hastings asked Peters if the feature was going to be called, “I’m feeling lucky,” or if he was going to come up with something better.

“We’re going to come up with something better than that, so standby for this,” he responded. “You’ll see it when it rolls out.”