In an interview to CNBC-TV18's Shereen Bhan, Reed Hastings CEO, Netflix spoke about the companies journey so far, its plans for India and much more.
Below is the transcript of the interview.
Q: Democratising entertainment – that is what Netflix is all about. You started as a DVD shipment company, you started as a US only company and today you are across 130 countries. The international part of your business is growing at a very fast clip. India is a priority market, take me through the journey so far.
A: Yes we are continuing to invest here in India and continuing to grow. Netflix just makes TV watching so easy because it is on the internet, you get to pick, you watch shows you want to watch, you get to stop and pause them.
Q: You don’t get to stop and pause. What is binge watching and binge racing about then, you have taken control right?
A: Binge watching is a funny story because the term comes up of being able to watch a series all night long. When it first came up, we tried to supress it because binge was sort of too dark and we tried to get people to say feast viewing or something very nice sounding and nobody liked that. They liked the darkness and binge viewing became an epic term despite our best efforts.
Q: Public binging in India - I believe after Mexico, India ranks number two on the Netflix survey on public binging, right?
A: That’s right. Public binging is watching on your mobile, on the busses, in taxis, in trains. It has got its own certain protocol of what you show and what you don’t.
Q: Let me take you back to 1997, Apollo 13 – your VHS goes missing, a USD 40 rental, cancellation or late fee or whatever the case maybe, you did not want to tell your wife about that and that is how the Netflix idea came about. Did you ever imagine that you would be sitting in Mumbai today, you would be talking about having 55 million international customers?
A: Not in my wildest dreams. When we started it was all DVD by post. For the first five years it wasn’t clear that we were going to survive. We were competing with Blockbuster trying to rent DVDs.
Q: It took you four years to make money?
A: Yes at least four years – till 2003. Those were very challenging years, fun in their way but challenging. Then we started streaming in 2007 and in international in 2010 and now we are really focused on expanding original content like this great new series Sacred Games that we are producing here in India.
Q: If it is now going to be all about original content and localisation so to speak is going to be your way to grow markets like India, what more can we expect? An USD 8 billion budget to create content, that is the latest number that you are working with. So, give me a sense of what we can expect for priority markets like India?
A: Of course there are the global shows we have like Narcos – filmed in Columbia, popular all around the world. We have got a new German original Dark, we have got The Crown coming in just another month, that is Queen Elizabeth and one of the most expensive and elaborate productions ever. We have got Stranger Things, 13 Reasons Why and then we are adding more and more Bollywood films. We are also adding Sacred Games and originals that we are doing here in India.
Q: Outside of content for India, what can we expect in terms of investments because connectivity is an issue here in India, low bandwidth is a problem that you are having to deal with, not just in markets like India but I would imagine in other emerging markets that you are operating in. So, what more can we expect on being able to grapple with those challenges?
A: We launched in Mexico five years ago which had a relatively slow internet and it has just accelerated tremendously because people want to watch Netflix, YouTube, other content sources online and it is moving to the internet life.
Now we see in India, in last two years with Reliance Jio, just the biggest explosion in bandwidth that the world has ever seen. It is just incredible what is happening here in India. So, now we are trying to, as we go to other countries, saying an investment like Reliance Jio is transformative for the society, it is just so impressive.
Q: What is unique about India? You are operating across 130 different countries. We have established the fact that Indians are public binging. They are also probably watching much more on their laptops and mobile phones as opposed to television screens. What else is unique about the Indian market from a Netflix perspective?
A: About a billion people who love television. People are just wild about entertainment and television. So that is what is so exciting. We are still just a very young player. We have only been two years here, but we are going to be doing more and more new shows and new movies, not only for the Indian market but also for the whole world. So we want to take some of the best of Indian cultural content.
Q: So what is the plan as far as original content from India for India or maybe from India for the rest of the world is concerned?
A: We have got some great series that we have commissioned like Sacred Games. It will be coming out in 2018. And in fact, now we are working with Red Chillies Entertainment with Shah Rukh Khan. He is trying to expand into television and so Bard of Blood is a great new book written by a 19 year old and it has been all the rage and so, we are together working to put that in a series. So very exciting to be announcing that.
Q: You do not specifically talk about individual markets, but in terms of investing in content from India for the rest of the world, give me just a sense of what we should expect realistically, now that you have gotten it started.
A: You should expect rapid increase, dozens of series a year from now will be under way. So, making great progress on that.
Q: Do you believe that geography, clearly if you look at the Netflix example, it has become boundary-less. Content, in that sense has become boundary-less. Do you see local content from India being able to connect with viewers outside of markets like India for instance?
A: Absolutely. Content is best when it really has a local flavour, but then it is approachable by other people. So Narcos is an example of a tale that is really in Latin America, but audiences around the world have really enjoyed it. Now we have an American comedian, Hasan Minhaj, does stand-up in California and he is popular all over the world now on the Netflix platform. So you get all these interesting crossovers.
Q: Speaking of maybe it could be a concern or a challenge or even an opportunity, but with the likes of Disney now saying that we are going to come off the platform, what does that mean for somebody like you?
A: It means we are shaking things up, we are having some fun, we are doing our own content. And so the existing media companies are not quite sure what to make of us. But our content just keeps improving.
Q: So what would the strategy be to combat something like that?
A: To be producing more original movies and more original series.
Q: Outside of India, what next as far as Netflix is concerned? You have always been a believer in focusing on the niches because that is where you make money. So if sport is not the way to go as far as Netflix is concerned, what next?
A: We want to do so many great television shows and movies that everyone is just watching our shows, talking about them, that you get that big cultural conversation. We have got a long way to go.
Q: How much of your own stuff do you watch? Are you a binge bracer or a binge watcher?
A: I am a savourer. But when I find a show that I love and it is like I will watch two episodes and stop so I have something the next night.
Q: The other interesting thing that we have noticed is how you are relying on smart data to actually be able to customise your content. How is that working for you?
A: Very well. When you look at the growth that the company has enjoyed, we are now over a 110 million members globally and that is because we are producing content that people are excited about. And some of that is that whole feedback loop of seeing what content is popular for which people, using the AI to help us figure out what areas we should be doing more in.
Q: But how much of, I cannot remember whether it was Simon Sinek or somebody else talking about how House of Cards and the other show that Amazon was doing, which was pretty similar relied on data, but eventually the results of how it worked with the audience was very different. So how do you make use of the feedback that you are getting from consumer groups or whatever else it is? How much of it is still driven by intuition, by your creative instinct?
A: We call it informed intuition. So we want the creatives to have a lot of data to help them think about things. But ultimately, it is a judgement call of a human being with a creative vision and that is the intuition. The intuition is the most important part but we would like it to be informed by how other shows have done.
Q: What drives you today? You have created this global conglomerate now, if I could call it that with operations across 100 different countries. What continues to excite you about Netflix? You do not have an office. You have not had one since 2008, I believe.
A: I have a laptop. That is my office.
Q: So how does that work for you?
A: What excites me is travelling around the world and seeing people sharing ideas, shows. There is so much power to entertainment and to see some of our shows like stranger things, being so popular in Africa, in India, in Europe, also the US, it is an incredible thing to see. And so, it is about bringing the world together because we are all sharing some of the same shows and their expressions, if you look at Narcos, if you look at some of the other shows, we have a show we produced in Brazil, 3%. It is about you compete to be in the elite. So it is a fair starting place, the ultimate meritocracy and it is this great show that really caught on with all Brazilian actors. So that is an example of what we are trying to produce around the world and share to the whole world.
Q: Since we talked about competition, I remember I had this book here in my hand, your chapter clearly stuck with me, this was a couple of years ago that I read it. In 2011 that is when you have been interviewed in the book. You talked about how the competitive landscape could possibly be Amazon, Apple, Hulu, etc. How do you see the competitive landscape today? I know that you truly believe that sleep is your only competition, but outside of that, with the possibility of Apple now getting into streaming, with the possibility of Facebook doing exactly the same thing, Amazon is already there, they are here in India as well. What does the competitive landscape look like to you?
A: It varies by country. Hotstar is doing a great job here in India. They are leading in the subscription internet category. There is a lot of other companies like you say, the global internet companies, YouTube and Facebook. There is us, Amazon, Apple. So there are many competitors. The traditional media companies and all of the internet sector. And what that is doing is everybody bidding for content, to have the most valuable content. So the prices now for creators now are increasing. And there are more shows and movies getting produced than ever before.
Q: So if it is going to be about original content, it is also then going to be linked I would imagine to more flexibility when it comes to pricing plans because that is what we are seeing happen at least in markets like India. So are you going to be forced to maybe be much more competitive on the pricing side as well?
A: Netflix is only Rs 500 a month here which is consistent with our global pricing.
Q: Amazon is that much for a year, I believe.
A: Yes, but they do not have our shows. They have some content and then there is lots of stuff on YouTube for free. So think of it as, there is free content, there is cheap content and then what we try to do is have great content, have very unique shows with very special things and to make it easy to subscribe and join.
Q: As you continue to build operations, as you continue to build the culture at Netflix. I know that you have this seven and nine matrix. There are seven values and then nine skills that you rely on to continue to nurture this culture. How important is it going to be to ensure that there is consistency across all of these different markets that you operate and that the Netflix culture that you established in the US is in fact, imported or transported across these different countries. How is it going to work?
A: The great thing about the Netflix culture is it is always improving. We are trying to get better and one of the ways we are getting better is being more global. So everything from how we schedule meetings to how we write up results so people can read them at different times because now we are operating around the world. So we do not look at it as, let us take the California culture and make sure that that is the same culture around the world. We want our culture to get better, to be more reflective of the whole world and every time we open in a country, every time we great employees to join from around the world, we adjust the culture and we try to learn from them some of the great lessons.
Q: So what are the lessons that India has taught you? You are a very recent entrant into India, but do you watch any Bollywood, have you watched any Bollywood movies? What has the Indian culture taught you?
A: I have never completed a whole Bollywood movie. I have watched a number of them and I do quite get the subtlety of what I am watching. But it is really quite fascinating to see the breadth of entertainment and how that works. So, we are adding more shows all the time.
Q: What sets you apart as an entrepreneur? I speak with many global CEOs and I think the one common thread, if I could link everyone together, is they are not doing it for the money. There is a higher purpose. In your case, it is democratising entertainment. What continues to drive you?
A: It is the global aspect of what we are doing. We so long just in the US, 15 years only as a domestic business and it is just so great to now be able to travel the world and share these stories with everyone. So I would say it is really about having this global story telling.
Q: So outside of global story-telling, for a young entrepreneur who might be watching this show, what is it that you would tell them? I remember you said that you need to be an aspirin and not a vitamin because you need to address a specific need. For somebody who is actually getting started today, what would the Reed Hastings dos and don'ts be?
A: I did not really set out to be an entrepreneur. There were some ideas that I was excited about.
Q: You taught geometry and algebra as well, I believe.
A: I was a high school math teacher and so, it was some ideas that I got so excited about that I had to build a company to see the idea through. So I think if you start with the idea first and the company second that is probably a good approach.
Q: As you see the world today, there is this business of responsibility and freedom that you talk about in the context of the Netflix culture. But then there is also a lot of strife around us whether it is political, there are geopolitical tensions and risk. What concerns you? What are the challenges that you would be worried about as an entrepreneur with global operations today?
A: Around the world, it is a fractious time, but if you compare it to the last 500 years or the last 10,000 years, it has been an incredibly steady progress. So I am very optimistic even if in the short-term we may have some hiccups here or there that people are learning how to work well together around the world. In every 100 years, it is significantly better than it was 100 years ago. It is just we cannot say that every year it is better than it was last year.
Q: You can say that about your quarterly earnings though.
A: Hopefully and so far, that is true.
Q: So what is the target as far as Netflix is concerned? Where do you see the company over the next few years?
A: We would like to just make progress on entertaining everyone around the world. Everyone is going to be on the internet. We would like everyone to have access to Netflix shows and movies.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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