Netflix CEO Reed Hastings has given an in-depth interview to Variety in which he speaks about why Netflix’s business model is best suited without ads, if the company might ever get into gaming, and the employee who was reimbursed $100,000 before leaving the company.
Regarding ads, Hastings said it’s not a hard and fast rule that Netflix wants to avoid ads, but it just makes business sense to build the platform on a paid model versus ads.
“It’s definitely not a rule. It’s a judgment call… It’s a belief we can build a better business, a more valuable business [without advertising],” he said. “You know, advertising looks easy until you get in it. Then you realize you have to rip that revenue away from other places because the total ad market isn’t growing, and in fact right now it’s shrinking. It’s hand-to-hand combat to get people to spend less on, you know, ABC and to spend more on Netflix.”
The consumer market is growing more substantially than the ad market, and Netflix’s earnings results over the past two decades demonstrate that, Hastings said. “We went public 20 years ago at about a dollar a share, and now we’re [more than] $500. So I would say our subscription-focused strategy’s worked pretty well. But it’s basically what we think is the best capitalism, as opposed to a philosophical thing.”
Also in the interview, Hastings was asked if Netflix would ever get into live programming around sports and news. Live news programming probably won’t happen, but Hastings said other categories like sports and video games might be more realistic.
“I doubt news, but sports, video gaming, user-generated content–if you think of the other big categories, someday it could make sense,” he said.
It’s not completely clear here if Hastings is speaking about producing TV shows or movies around video games, or if Netflix could get into game development, or something else entirely. Netflix recently released the well-received video game documentary, High Score.
This is not the first time that Hastings has spoken about video games. In 2019, the executive said Netflix would not follow the likes of Google, Microsoft, EA, and others in creating its own game-streaming service. Back in 2011, when Netflix’s business was more focused on rentals by mail, the company announced plans to offer Xbox 360, PS3, and Wii games for rental by mail, but the company abandoned those plans in short order.
In 2018, Netflix partnered with Telltale Games to bring a choose-your-own-adventure TV show to the platform called Minecraft: Story Mode. Netflix also produced Stranger Things 3: The Game.
Also in the interview, Hastings touched on Netflix’s unique corporate expense program where employees do not need to have their expenses approved beforehand. An employee from the Taiwan branch expensed $100,000 for personal vacations, before being let go. Hastings said the $100,000 was “not that dramatic” in the scheme of things. The unique program is meant to help employees feel trusted, and in turn the quality of their work may improve.
You can check out the full interview here at Variety. And for more on Netflix, here’s our roundup of all the new TV shows and movies on Netflix in September 2020 in the US.