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Land of the Giants: The Netflix Effect

2020-07-03

Land of the Giants is a podcast from our friends at Recode and the Vox Media Podcast Network that examines the most powerful tech companies of our time.

 

The second season is called The Netflix Effect, and it’s hosted by Recode editors Rani Molla and Peter Kafka.

 

The Netflix Effect explores how a company that began as a small DVD-by-mail service ultimately upended Hollywood and completely changed the way we watch TV.

 

It’s a fascinating look at what really goes on behind the scenes at Netflix, one of the few companies that’s actually growing during the pandemic, and how they’re continuing to transform entertainment for you and me.  

 

New episodes are released every Tuesday morning. 

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Hello want them to know that's over the weeds on the bus media, Potass network Matthew places by yesterday as a special we ve got Peter Kafka's, one key member of the we code and then Box team is the host of a new package series. A new season rather of the land of the giants. Podcast series I'm so welcome, while competing but having backup most rear. I Anita factually right from the top. My co host is Ronnie Move. I'm a co host of this.
Cause. Yes, ok, so be surmounted gets her, perhaps as as well. She said so that this isn't. It is all about Netflix and what what what made Netflix get up the interesting subject. We're networks has been an interesting subject me for a decade, because I'm really interested in the convergence of media and taken where the conflict happen and Netflix history have been at the forefront of that sort of working with Hollywood. Working against Hollywood, eventually. Sort of overtaking Hollywood, I think it's a fascinating story and now is global, entertainment giant, and I think we ve ever seen anything like that before saw that is fascinating to, and so what we we're. Gonna have argued. You embody talking about ass sort of that, the critical pivot from from quick stare at it back to Netflix, and what one of the things you guys get into is sort of the culture.
Of a technology company, even though now it's like it's a media company and in a very real way, but the sea or comes from from attack background and that sort of meter a real difference to how he thinks about running company. You above he is he's a technologist Reed Hastings as a technologist and genuinely nerdy about it is difference in some other silicon Valley brows. Who did the peace corps is got village interests outside of technology as well, but yet Netflix was sort of famous within tech circles for it this culture, and specifically as culture, it put up online about ten years ago. It's very influential in the start up world preaches lots of things. I think that people take for granted now in startup Landor, maximum flexibility as an employer, we're gonna pay. You really well, but we expect you to excel and if you dont excel we're gonna move you out and this edict that were were. I were not a family had Netflix we're a team, meaning we don't expect you to work for us for
at some point. We can replace it with a better quarterback and many many many many people in tech take that very seriously. Our city, odium bank off has told us that he is very impressed in and motivated by that that deckhands end, and I think people know a little bit about Netflix, but it's it's a much weirder culture than that, and unless you have worked there, you don't really a sense of it and that's what we wanted. A sort of poke out a little bit. What's it actually to work at networks is shit, sounds great, do not have to fill out an expense policy, but sort of. What's on the other side of that and a lot of it almost feels a little caught like there's a whole, language that you ve got to learn. There's that serve model of constant sort of criticism that yours expected to take from your co workers about how you perform. If you, if you screw up in a very bad way, yours did you simply called sun shining and we would alternate back and forth as we were talking about this in researching and sing. This has terrible onawandah work here and then some as you go. Actually,
sounds pretty cool where you get all the information about the cambodian aid, and so all of that is in one company. So let us talk about sunshine. Is it's it's a little he thought of it we're right eminent. It reminds me of that Cultural Revolution exactly where I was going to be all right. What is that The idea is, you have screwed up in some significant way and you basically are meant to go before your peers and it can be many of your peers, hundreds of your peers and explain what happened. This is what I got wrong. This is how I approached it. This is what I have learned and ideas that sort of clears the air and everyone's posed to learn from it in its posed to encourage candour. And I never heard that many people complaining about
that, although it sounds awfully creepy to me at the time it it's just it, it sounds stressful others. There is something appealing about it. What what when I think about it, read the idea of people being being honest, so so why deficit we have used recount this quicker episode, which is that a mistake and part of this culture it is built around that and so cannot just to set the central people right. I mean I was an orgy Netflix user, and this was the company that sent you, dvds in the mail, and it was incredible for sort of movie geeks because it it displaced. The need to go to posterity displaced, the need to go out your neighborhood to the like weird obscure video store that that had all the staff- and it was it- was that it was the upside of the internet. That lot of us saw it in the beginning of the internet like this is a much better version than what we had before. Wasn't it didn't just replace bought, it was better than blockbuster right. You could.
Any movie. You want ass. Any was it. Was this incredible long tail thing you must have a really cool company and yet totally different from the company that we know now and it was getting from a to b, was tricky and they had this idea about how they would to do that, and it didn't go over well right immediately or hear sort of the sort of what they learn from that I want to step on the narrative, but I wanna things at instead beyond that. That's interesting to me is that this is actually it always what Red Hastings had been talking about. He started this dvd by male company in the late nineties, but he was always talking about becoming a movie streaming serve sit in the late nineteenth, as this is where we're gonna go and what he tried to do with quicker was just speed that up much faster than is his customers actually want. You don't think it's a bit, sorry that you know he had this vision right at, because the idea
sort of pivoting is this kind of technology, world cliche and on one level, that's absolutely folks dead. But on another level it really was a plan to sort of you is the air, was a loophole, but but the way copyright law worked around the distribution of physical media was it. Nobody could stop. You write a letter to his rights, so so you know it's like once you put a dvd for sale, anyone who buys the dvd they can resell a genuine. They want taken. Male two people have, however, they want, which is totally different from sight streaming. Licensing universe that you couldn't have done appear streaming start up, probably right. If, if I want to rent a copy of a Disney movie on DVD from Netflix, Netflix can literally go to costs, go and buy that dvd or a temper
of them and mail them to me. They still have that business by the way today. But if I want a stream that movie one person controls that rights, those rights in its usually Disney irksome, in some cases the networks and it's a whole different financial structure, and what red hastens is trying to do saying. We are good at this BT business, which everyone loves. We got twenty million subscribers, that's an old business and we are going to try to move out of that as quickly as we can and sort of sea around corners and interim ranch our audience into the future. Any you know a id eat, it can with people. I didn't sort of go go over well and yet anyone in a larger sense. He was right. I mean here Why did the temptation that people have to win their successful because that old, looks like that was seen as a successful company. People were talking about their culture, their model even back then. And I think what a lot of people do- institutions do as they get conservative right. You want to protect the business use
it was, and he really wanted to push them into this different business. Since, like I mean now, it's like its it, I think, to young people with sound, like a joke like before excited to sign up for a company that send you little discs and the man it's crazy, bia, there's a lot of their. There are a lot of company. It's cool shaded talk about disrupting yourself in the region as a whole. Is because one talks about it. No one does it, but Netflix came prick close and there's a lot of risk involved in what they did and they screwed it up at the beginning in which they will not. They will now admit to that when in that's the sort of I bet it. The upside of trying to have this. This culture of almost brutal honesty is that you can make mistakes and also plough ahead with the sort of way, because that that they take away there was that the implementation was a mistake, but that the desire to really
pushed. The stream business forward was correct way and eyes why you need that kind of comfort with the idea of mistakes? To do that? That's exactly right, and you know I think there are limits to how much you can push that push. Sadness certainly helps if you're the ceo fantastically successful up until that point you you get a warrant morally, where majority? What else would be? It would have been able to do that, but he pulled it off, and that's in that again that that is what we are going to talk about in this very opposite. This mini episode, tribute shoot. Should we play there? Anyone talk more it's up to you to show. Why didn't I mean I just wanna did deserted agenda. What one more thing which is there they do everything they pay people well right, like that's the website, and second, it sounds like a very stressful place to work. It is,
I stress the place to work. They pay very well, they pay top of market. One thing I didn't know about them going in is they have a policy where they encourage you when you get a call from ahead Hunter to go meet with that recruiter and find out how much they might want to pay you to leave networks in the theory is once you know that you can go back to Netflix and say so goober wants to pay me this march, and I might say our will have to match that Yes, we're gonna, pay very well pay the top the market, because we only want the best people if you're here at means you're one of the best people. But again that also means that which we may replaced with someone who's even better. At some point, and I talk people that I've taught people who said that this is a that terrible place to work? It's very stressful and I will never get paid as well as I do here, and any other job. I go to it's gonna fuck me! That's that's! That's the trade off! Ok, I'm! So that's great
as the really fastening episode, I think you guys egg and enjoy it suggests that, but you better give it a listener. Begging support for this episode comes from click up. We lose an average of three hours every day, switching between all our work apps, but you can get them back with clear up a flexible platform that brings all your central tools into one place. We can prioritize tasks, collaborated, docks check with your team and track goals, so companies like Oberon web flow use- copies their mission Control Centre, replacing every other after we're using before cook up even guarantees to help you save one day week and get more done. It's completely. Customizable is free forever, so try click up today at click up dot, com, slash the weeds advisers. At the outset I Netflix announced that was putting its business in the to the good That's going to come out of this is no longer well knew could be the worst public announcement. It's really gonna be quicker, which I'm saying is dead stir. This is Netflix how to get the world to embrace streaming long
more, straining was mainstream and it failed in Sweden experiences that no one wants to think about. That's for sure. You feel so badly that Netflix execs Cindy HOLLAND who runs regional programming, have tried to forget. It lets backup, Netflix darted out wait. Nineties, shipping movies and tv shows on dvds through the mail Two thousand seven Reed Hastings began letting a subscriber stream videos over the internet to free at first. This is the thing appealed just an early adopters, but by two thousand eleven millions of Netflix Summers we're doing a hasty wanna things to move even faster. He wanted everyone to stream. Anyone to start getting out of the dvd business. We were bread service with dvd and streaming together in the U S, I'm starting to do streaming alone internationally. I realized it. We would be better if we could split does to services, so we were not dependent on dvd and that we were there streaming company full stop. You can hear his voice, Hastings is it
guy and he's a very logical dude, unlike last Silicon Valley, logical dues, especially those that have had some success early on my heated Hastings, assume that if it made sense to him you'd get it too. In his mind, this was simple. Trimming was the future Netflix had to make itself into streaming company, so Hastings tried to. Worse the issue, you still be able astray movies, but if you want dvds, you're gonna have to use a whole new service, people pissed off about that. One thousand eleven Netflix announced that its basic service, which offer dvds and unlimited streaming for ten bucks a month, was now gonna beat to services. If you to watch stuff on the internet. You pay a buxom for that and if you wanted, a rent dvd issued pay. Another eight bucks a month for that to say, have to pay a lot more to get the same stuff you got before. It is a good way of putting it. It was a sixty percent price hike delivered. One Americans were still climbing out of a huge session and went along with a move to make a simple service way more complicated
imagine how they went or no one was thrown by the recent Netflix pricing increase, but the way which they delivered? The message was, what really seems to have caused them many of the backlash this one of the first mainstream internet uprisings against a big consumer company. A lot of has happened on Facebook. We're Netflix customers went to complain and sometimes they would find Red Hastings their answering some of their complaints, he was extra hands on back. Then it to remember what two dozen eleven was hike, but a lot of the internet. Mass behaviour, social interaction stuff was just starting, and so this idea that than people would be upset on Facebook and and other people would see it and amp up the total conversation. What we had not as many of those in society before Netflix customers weren't the only ones who didn't like Hastings idea of his executive also had doubts, but they were scared to tell him that or more you're, so they figured retracing the super smart and if he thought it was right, it must be right. Even if it makes no sense to them,
Remember the conversations here the difficult thing about it is breed been right about almost everything Cindy. Holland is one of those executives who didn't know how to tell Hastings that splitting the business and too might be a mistake. This is really the first big example, where I think there were some nervousness. Yet there were some doubts, but he just been right so many times this wasn't terrible logic The way renascence, the guy started a video company back when everyone in the world got their videos from blockbuster. That idea right, but he won two thousand eleven Netflix had more than twenty million subscribers and blockbuster was bankrupt, so maybe hey, is, did know what he was talking about. Everyone knows the tale of the self absorbed, arrogant, CEO, who doesn't listen and theirs? element of that, because we have been so successful at so many things before that
but the more subtle one is that I had been so successful before that most of the executives thought this isn't smart. Are, I don't think it a smart, but read has been right on so many things. I'll bet, he's right on this one and I'm just not seeing, but the customer saw and networks paid the price by the end of the year, more than seven hundred thousand people had cancelled or Netflix absorption and at one point, Netflix Stock had dropped by set eight percent. What was it like inside the company when you rule this out, and then I saw the feedback commands Ah, the start drab. But what was the worst? We were a defensive and were like. We knew what was going to be hard. We weren't stupid that it was people we're gonna like it summers. Bailed, animate investors hammered stock and Hastings double down to emphasise in the future. Netflix was streaming. He announced that Netflix DVD Company was no longer we called Netflix anymore any decided best way to announce that was a video hi. I'm reigned. Hastings, CEO in CO, founder of Netflix, we ve been work,
for the past fourteen years to build Netflix year by year into the best possible service we could build, were made this video today to apologise in person released on camera, for something We did recently is a weird video. It features Hastings sitting outside at a patio table wearing a bright teal button. Damn sure it's also will be he's not really apologizing. He's saying he's going ahead with this planet. Everyone hates He's got a name for it too. We think that the dvd service its own brand so that we can advertise it We ve named are dvd service quicker. What the hell is a quicker! Why is it being spilled? Q, Debbie, then- why is the sea of high tech company shooting low fi apology, videos outside his office, this video and that name were so wide, pan that even Saturday night live when, after it and now a message from Netflix dot com I'm real, hastening c, o and CO founder of Netflix
Jason's headache, as is red, Hastings and Fred arms, and this next them is one of his underlings, fake, reed, hasty, by the way is wearing that deal shirt. We know you love Netflix, because it was an easy to use website for all your movie needs to make it better. We split into two separate slightly more confusing sites, Netflix for streaming, video and quicker, which- handle dvd rentals. Did we spell quick stir in a normal way? No, we did you W. I k annoying but easy right and by the way we know it's off putting to sea the sea over powerful company rocking goatee, untill shirt, but trust us. We know we're done this is a great video. By the way it is definitely worth looking up and Netflix got lucky the kitten were actually ran on as an ally itself. It was only on line and the admin
yes and L video, yes, wincing Steve's ways he handled PR for Netflix during the quicker debacle. The thing is: Netflix moves fast on everything and when it's the consumer benefit, everybody loves it. But when it's a mistake, its amplified and that's when we, start to feel the hurt. That's when people really revolted thee, not apology, apology, video did not work more. Subscribers left and Netflix Stock sank even lower and read Hastings, the super logical guy who was convinced that he was right and everyone else was wrong. Finally got the message he was left with. No choice. Networks has abandoned stir its widely panned movie streaming service net. Like says it was just too quick with its plan for quits in other words, quicker is dead even too. Hastings, says he was wrong with that wrong. The big thing was: we did a sixty four and price increase to twenty million american families in the middle of a recession. So there's no
communications is gonna. Make that go down well said: recap: you raise prices you make a simple service complicated. You create a terrible named for a new product that people do not want until everyone hated that they're wrong. This was not a great run for Hastings. Any put the life of his company endanger, but Netflix. Eventually subscriber numbers started taking up again and since that's all, whilst we really cared about the stock went up again to and while the to name has gone to Heaven, Hastings ended up going forward with his plan to make dvds separate from Netflix streaming service. Today, if you wanna get Netflix to send you, videos, you can you go to a service called dvd dot com and you sign up there and you paid another eight bucks a month. The lesson Hastings was not that he screwed up or that it was too early pushing streaming or maybe should want a different color certain that video. It's that lots of people run and could have told him. He was gonna, make mistake, but they didn't They lost their own self confidence. I wasn't me suppressing it
Thou overly deferential because of the track record of their beauty. Blockbuster all these, like crazily, unlikely and hard things, and so after it will be realised is okay. We need to be much more active at farming for dissent. Hastings vowed neuron accompany were everyone everywhere could tell everyone else, what they thought of them in their ideas and specifically Netflix came up with this idea where you could take a crazy big swing at something, but you better ask other Netflix troubleshoot at first. This is what Hastings Netflix call farming for dissent, you're, trying to get your co workers, Tell you what's wrong with your idea? If you tell everyone about your plan to get their feedback and aided- and you still want to go ahead, you can and if it fails, you'll be ok in theory, but if you haven't farm for sent in advance and you also fail. You can have a problem because then they all each others, just an open global doc, so they all
how each other feel and then everybody has to vote in public in writing of do they think this would be wise, stupid, not stupid, and then it's up to me to write a summary of okay. This is what I heard, and it might be that, you're doing acts or why we might not be the popular choice. So no one, it's not advertised as a democracy. Let's vote it up like the senator something, but as ever when on record some one hundred percent sure that employees will ever be candid with Hastings or their boss, as they might be with people who can lay them off given their lives, so you're suggesting it's one thing to tell me that you dont, like myself, choice than I do your tar ceo that you'd like direction companies going exactly make sense. Hastings made one other decision after trickster. He hid that t shirt in the closet and he never word again in a few years later. He gathered his employees and held a ceremonial burning. Where did you burn it just
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Transcript generated on 2021-05-19.