Netflix CEO Reed Hastings on conquering Europe

Reed Hastings, co-founder and CEO of Netflix.
Michael Newberg | CNBC
Reed Hastings, co-founder and CEO of Netflix.

For the co-founder of a company that warns new staff that "adequate performance" will result in a "severance package", Reed Hastings does not come across as a typical tough guy. Breezy and relaxed, the 56-year-old chief executive of Netflix delivers chilling statements with unnerving warmth.

"We are modelled on sport and if you want to win a championship you have to have an incredible player in every position," he explains. "It's not for everyone. If you want job security you don't go into sports — and you don't join Netflix."

Even Mr Hastings admits the culture creates "pockets of fear". But a decade after he reinvented his DVD rental business as a global online streaming network, it seems to be working.

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At the end of April, Netflix broke through the symbolic barrier of 100m members across the world. To celebrate, Mr Hastings posted a picture of himself on Facebook eating a steak alone in a branch of Denny's, the US restaurant chain (he did the same when the company signed up 1m members).

For the first three months of 2017, the company reported revenues of $2.64bn, a 34 per cent increase year on year.

Meanwhile, the entertainment group, best known for big budget hit shows such as House of Cards, Narcos and The Crown, says it will invest $6bn in content this year as it continues its drive to upend traditional TV network programming.

It has been a dizzying ride, but Mr Hastings insists it is just the beginning.

"If you think of any night this last month when you did not watch Netflix what did you do?" he says.

"Sports, gaming, watching linear TV . . . we compete with all of that. We even compete with sleep. We are just a very small player in the market for time and entertainment."

The streaming market is becoming crowded, with Amazon vowing to spend $4.5bn on acquiring and commissioning programmes this year, and other rivals such as Hulu, owned by a consortium of US broadcasters including Walt Disney and 21st Century Fox, spending on content and launching a live service in May.

"As long as you do great unique content, there's a market for you," Mr Hastings adds.

Having signed up more than 50m households in the US, he wants to grow Netflix in Europe. Appropriately, we meet at the Booking Office, a grand restaurant which looks out on to London's Eurostar terminal at the renovated St Pancras Station. Next stop: dinner in Paris before going on to a celebration with staff in the Netherlands.

Since 2012, Netflix has invested £2bn in original and acquired European content. It recently announced 400 new jobs at its Amsterdam office (Netflix has 3,000 staff globally) and has been launching original shows across the continent, including Las Chicas del Cable — the first original Spanish series — and the Dogs of Berlin, which will be written, produced and shot in Germany.

The European push is timely as the EU considers an overhaul of its rules on video content, dragging technology and streaming groups into the same framework that already exists for traditional broadcasters.

For Netflix this could mean payments to local culture funds in France, for example, and having to meet quotas of locally produced content across the EU, something Mr Hastings seems characteristically relaxed about.

"It's not going to be hard for us to meet those quotas," he says, adding that the investment in Europe is "95 per cent consumer driven". The other 5 per cent, he adds, is political. "If we are seen as an outside exploiter we will have problems."

Mr Hastings hails from Boston, Massachusetts, but has become one of the biggest names in Hollywood.

His first glimpse of the international power of TV came during his time as a maths teacher in Swaziland 30 years ago.

"While I was travelling around Africa, I saw how people loved television," he explains."You could be in the middle of nowhere but having a TV was a prized possession."

The journey from itinerant maths graduate to media mogul is unlikely but his enthusiasm for show business is clear. One of his favourite programmes at the moment is 13 Reasons Why, a controversial US high school drama that has been accused by some critics of romanticising suicide. "We say it's an honest discussion of what's going on in adolescent life," he says.

Mr Hastings' first company was a software development business called Pure which he founded in 1991 before selling it six years later. He says the Netflix corporate culture was partly shaped by the mistakes he made as a young tech entrepreneur.

Early success has its problems, he says, when I mention Travis Kalanick, the Uber chief executive who was forced out last month after a series of crises, including accusations of sexism.

"There are a lot of lessons for the young founder experiencing incredible growth," he replies, careful not to mention Mr Kalanick by name.

"You are young and a lot of things hit all at once. Those are challenges much like a movie star who gets famous at a young age. Those who make it through like Facebook and Google are fantastic."

Such praise for Facebook is unsurprising — in addition to running Netflix, Mr Hastings is also a member of the Facebook board, allowing him to see some of the broader political and regulatory challenges facing the disruptive technology groups as they expand beyond the US.

But while Netflix has been grouped together as one of the FAANGs (the big five tech groups that also includes Facebook, Apple, Amazon and Google), Mr Hastings does not see the company as part of Silicon Valley.

Asked to choose between being a tech or an entertainment company, he says: "If we have to choose, we are more entertainment. But we should aspire to be great at both."

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