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On a stream of creativity

A serial entrepreneur, Netflix co-founder and chief Reed Hastings does his best to encourage a startup culture at the streaming service provider, even when hiring talent.

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'Two big evolutions of the business in six years is amazing. I would say we're faster and more flexible than we've ever been. We learn how to do that over time. It's hard to learn how to be entrepreneurial. But we encourage people to try new ideas constantly.'

DAPPER with greying black hair and a chiselled face that brings to mind American film actor Matthew Modine, Netflix co-founder and chief Reed Hastings has the quietly powerful look of someone who has seen the world, and created a company, or two.

"It's just a joy - jumping out of bed every morning to check how many people joined Netflix yesterday," says the serial entrepreneur, who will turn 56 this October.

It is all about new subscribers for the TV show and movie Internet streaming service, and its lofty plans to rule the world. In January, Netflix went live in nearly every country in the world - with the notable exception of China. It reported nearly 75 million members in the fourth quarter of 2015.

"The main (gauge of success) is still membership, not how many Emmys we win," says Mr Hastings.

Describing his work as "a lot of travel", he tells The Business Times in an interview in late April that international growth is only possible this way. "In the last 30 days and for the next 30 days, I have and will be going all over the world two or three times for work. It's fun learning the world."

Mr Hastings adds: "I'm lucky now that I have two kids who are off to college, so it's not as difficult (for me to travel) as when they were little."

Asked if his children watch Netflix, "I'm sure," he says, laughing.

The American entrepreneur and philanthropist does not rest on his laurels, founding Netflix in the same year he left his first company after it got acquired.

PureSoftware, which Mr Hastings started in 1991, created products to troubleshoot software. Revenue reportedly doubled every year. In 1995, Morgan Stanley took the company public. In 1997, it was acquired by Rational Software for US$750 million, which gave Mr Hastings the means to start Netflix.

"I wrote the first product at PureSoftware. (My co-workers) were always finding bugs in my code," he shares.

In Netflix, it is pure business leadership. He says: "I never wrote a code. Now the only thing I correct are spreadsheets."

The engineer-turned-entrepreneur admits that he is "not particularly" entrepreneurial. "I was surprised I came to run a business, and not just one business," he says.

The idea for Netflix had come to Mr Hastings when he was made to pay US$40 in overdue fines after returning Apollo 13, a cassette he had rented from a video store, way past its due date.

Mr Hastings had not wanted to tell his wife about it, only to realise that he would be compromising the integrity of his marriage over a late fee. Later that day, on the way to the gym, he thought of a "much better business model". As a single-rental service, Netflix would charge a flat fee per DVD rental.

The company has come a long way since originating in 1997 as a DVD-by-post service in the US.

In 1999, Netflix launched monthly subscription, offering flat-fee unlimited DVD rentals. In 2007, Netflix further disrupted itself by introducing Internet streaming as DVD sales started to fall. Today, the streaming service is in over 190 countries and Netflix, a US$90.50 stock on Nasdaq.

Mr Hastings says: "Netflix has been a great product - people get so much enjoyment out of the entertainment."

Another mark of Netflix's success as a brand is the trending euphemism "Netflix and chill". People in the know would know that an invitation to "Netflix and chill" involves more than just watching movies or TV shows on the Internet and sitting back with chilled beer. It has become a global slang for engaging in sexual activity while a Netflix video plays in the background.

Asked how Netflix has not gone the way of the dinosaur, as did many Fortune 500 companies in recent years, Mr Hastings jokes: "We haven't died yet."

He explains: "You always have to be worried, as most companies do die eventually. It's important to recognise that the forces of change are very strong - you have to adapt and change."

Ironically, Netflix was offered for acquisition to home movie and video game rental giant Blockbuster in 2003. But Blockbuster declined the offer. In 2010, Blockbuster filed for bankruptcy protection. Today, it is defunct - and a textbook example of a company that had not survived the forces of disruption.

Asked what will likely disrupt Netflix, Mr Hastings says: "It's hard to tell. Right now, the growth is very strong with movies and TV shows. Maybe in 50 years, people will see movies and TV shows like how they do the novel, as a very small art form. Or they may discover new art forms in which they find more entertainment.

"But at least for the next 10 or 20 years, movies and TV shows will be very strong."

Netflix has the privilege of operating in an industry that does not yield to the economy, entertainment being something people crave in both good and bad times, Mr Hastings acknowledges. "We are recession-resistant. In 2008 and 2001, we didn't shrink. We continued to grow. In fact, people traded off expensive things to watch more Netflix."

The media industry is also one where content creators will never stop finding new angles or stories to tell, says Mr Hastings. "There is so much out there. It's human creativity; it's not limited to a pool."

A big opportunity now for Netflix is to figure out how to produce a global show "like no one has figured out before", he says.

Korean dramas, Mr Hastings notes, are extremely popular throughout Asia. "But I think we can make it popular throughout the world, and we want to do that too, for other genres, such as Japanese anime."

Receptiveness towards Internet streaming is growing, Mr Hastings adds. "YouTube is pretty well-known, right? Facebook's livestream is gaining awareness. The idea of streaming literally is pretty well-established."

Streaming provides consumers with the ability to watch content they did not have before, watch TV shows or movies any time on demand, in the middle of the night or afternoon, and to pause a video on their iPhone, turn it off and turn it on again to the page it was left off, he says. "Because everything's stored in the cloud, all of those modern things are possible."

Mr Hastings notes that the Netflix brand is quite new. While it may be familiar among people who follow "Internet things", many other people still "don't know what it is", he says.

Netflix is essentially a startup, if Mr Hastings has his way. The second-time entrepreneur, who once said PureSoftware became more bureaucratic as it grew, thought long and hard about how to avoid similar problems at Netflix.

Asked about Netflix's culture now, Mr Hastings says: "I think it's improved! We've become more entrepreneurial and smarter over the last five years than ever before."

He explains that in the last five years, Netflix has expanded to Canada, Latin America, Europe and most recently, Asia.

It also ventured into producing original content - popular TV shows such as House of Cards and Orange is the New Black.

Mr Hastings says: "Two big evolutions of the business in six years is amazing. I would say we're faster and more flexible than we've ever been."

Even though "nothing specific" has been done to preserve the scrappy startup culture at Netflix, Mr Hastings says the company tries to always be flexible and creative. "We learn how to do that over time. It's hard to learn how to be entrepreneurial. But we encourage people to try new ideas constantly."

When hiring talent for Netflix, Mr Hastings says that traits such as creativity, clear thinking and bias for action speak to him. "Those things do help an entrepreneur," he says.

"Also, if you're known for being entrepreneurial, sometimes the people who apply are pre-selected to be entrepreneurial."

Like falling in love

Mr Hastings likens being an entrepreneur to falling in love - an act he describes as inherently irrational. "You just fall in love with the product or service - the thing you want to see change the world."

He says: "It's an emotion; it's not really rational. You're not going to get there or take the plunge based on a spreadsheet."

And it's ok that it is illogical, he adds, by way of advice to budding entrepreneurs. Now is in fact a great time for anyone to start up, the Internet having democratised information, technology and opportunity, he says.

"It's great to see that the Internet levels the playing field so much, and that there are just amazing global opportunities."

Singapore, for instance, has a local market that is not very large, but this will compel startups here to think pan-Asia or global. Sweden, like Singapore, is not a big country, but Spotify, a global music platform, came out of it.

Companies in large countries such as France, Germany or the US, on the other hand, tend to think about their home markets for too long, says Mr Hastings.

Starting up is also a lot easier than before, in particular with government support such as grants, he recognises. "You know, every time it's easier, then there's more competition. It's a double-edged sword," he says.

Speaking to seasoned founders who can share how their startup journeys were "never so easy" is very useful, he says. "When I was a young entrepreneur, I remember how helpful they were. So when I'm travelling, I try to fit (sessions with budding entrepreneurs) into my schedule. It's my way of giving back."

Staying focused

When the topic turns to Netflix's competition, Mr Hastings - who mostly comes across as amiable and affable, especially when discussing his children, or Netflix - stiffens up a little, turning almost sombre.

"We're not afraid of talking about competition. More choice is always good for the consumer," he says. "It's fun to have competitors, to see who's growing. Look at HBO. They are growing even though they are our most direct competitor. And we've been growing. We don't have to beat them."

What Netflix has to do is stay focused and create great entertainment for people, he says.

Asked about his reference to "English-language speaking elites" when describing (during an earnings call in April to analysts) Netflix's target audience in countries such as Poland, Turkey and Russia, which some market observers thought was semi-racist, Mr Hastings says: "I don't think so."

He then clarifies that he meant English-speaking "people" in non-English-speaking countries.

He adds: "We want to be more accessible than that. We have about 20 languages. YouTube has over 50. We've ways to go."

Mr Hastings says that, for him, the fundamental driver in life is making an impact. Hence being a serial entrepreneur does not mean he would be unwilling to work for somebody.

He says: "I think I can work for someone just fine; it doesn't bother me at all. If I admire them, for me, that doesn't really matter."

It is about making a contribution that is exciting, and that is changing the world in some important way, he says. "When you meet people, a taxi driver who is using Netflix, for example, and hear how much they love it, it's very satisfying."

jaccheok@sph.com.sg

@JacCheokBT


REED HASTINGS

Co-founder and chief executive, Netflix

1960: Born in Boston, US

1983: Graduated from Bowdoin College (BS Mathematics)

1988" Graduated from Stanford Universiy (MS Computer Science)

1991: Founded PureSoftware

1997: Sold PureSoftware for US$750 million

1997: Founded Netflix

2002: Netflix started trading on Nasdaq

2007: Netflix introduced Internet streaming of TV shows and movies

2016: Netflix added 130 new markets