00:00hi everyone welcome to the a 6 & Z
00:02podcast today's episode features a Q&A
00:05with Ted Saran dose chief content
00:06officer at Netflix which evolved from a
00:09company that sold DVDs by mail to
00:11streaming to including original
00:13programming which is now an over seven
00:15billion dollar investment for them the
00:17interview conducted by Marc Andreessen
00:19covers everything from a company culture
00:21bridging entertainment and tech and the
00:23risk/reward frameworks involved in big
00:25changes and decisions to betting on
00:27talent and the Internet of tastes given
00:29it's now in over 190 countries the
00:32conversation took place in November 2017
00:34at her annual summit event other talks
00:37in this series can be found on our
00:38website at Asics and z.com slash summit
00:41Ted is in a very relaxed mood this
00:43morning because his phone stopped
00:44working I had no phone I'm deviceless
00:46and so he's entered that sort of
00:48zen-like state where he's suspended
00:50between total anxiety and absolute peace
00:51and calmness which is good for the
00:53topics we'll be talking about so we're
00:55thrilled to have Ted here working of
00:56course with co-founder Reed Hastings who
00:58we were lucky enough to have at this
00:59event last year ted has not only built
01:01Netflix into a massive commercial and
01:03creative force by the way it was not
01:05that long ago that it was considered
01:07inconceivable that a company so like a
01:09valley could make any content that was
01:11any good like the running joke literally
01:12was like what are we gonna do we're
01:13gonna film like a Cisco were like router
01:15instruction manual it was just absurd
01:17idea and so for Netflix in the heart of
01:20Silicon Valley to do what it's done it
01:22at this scale you know it's just really
01:24an extraordinary accomplishment I also
01:25think Netflix even beyond that is
01:26catalyzing the most dramatic period of
01:28revolution and change in the television
01:30video industry you know certainly since
01:31the arrival of color TV and maybe maybe
01:33even before that so somebody tried to
01:35hit a number of number of the sort of
01:37super interesting topics this morning
01:38but I'd love to start with you have a
01:40very interesting story how did you first
01:41get connected into the entertainment
01:43industry so it was an and variant
01:46meaning I didn't go to the right school
01:48I my dad wasn't in the business which is
01:51a difficult path I grew up in Phoenix
01:53work my part-time job was in a video
01:55store while I was going to school to
01:57follow what my dreams when I was about
01:5912 years old I was gonna be a journalist
02:01and I was pretty clear that I was gonna
02:03be a journalist you should just explain
02:04for kids in the audience video store
02:05yeah video store yes that's like I tell
02:08my kids all the time that's like having
02:09been a blacksmith yes so job there's no
02:12you're hammering horses and so and it
02:17was a weird like planets aligning thing
02:20that the second video store in the state
02:22of Arizona opened about a block and a
02:23half from my house and I met this guy
02:25who started the stores name was Dale
02:27Mason superstar video was the name of
02:29that chain at the time but he his thing
02:31was he had read somewhere in a magazine
02:32in the 80 that the big businesses of the
02:3580s would be yogurt shops and video
02:37stores and he said well I hate yogurt
02:39and I love movies so he cashed out all
02:41of his savings in Chicago moved Arizona
02:44opened a little tiny store had
02:46everything that you could possibly get
02:47on video at the time which is about 900
02:49things on VHS tapes and then I say
02:52things it wasn't all movies it was like
02:54a Willie Nelson concert like we used
02:56that to get movies from whoever put him
02:57out but it was still working in the
02:59store and then about two years into my
03:01schooling I just had this epiphany that
03:03I was a really lousy writer and I'm
03:06probably not going to be a journalist
03:07I'm like wow if I didn't write this I
03:09would not read this I would stop now I
03:11was a pretty decent editor so I was the
03:13editing the junior college newspaper and
03:15I got an offer to go to Northern Arizona
03:18University too for journalism and I went
03:22to the guy was working for and said you
03:24know I'm I don't know if I'm exactly
03:26gonna pursue this or not but he said I
03:27really need some time off and I was
03:28hoping you would take things over for a
03:29little while so I took him up on it
03:32I didn't finish school and for me it was
03:34this crazy MBA Film School mashup then I
03:38got paid for that kind of got me to
03:40where I'm here today that really was my
03:42kind of entrance to the edges of the
03:43entertainment business and I went from
03:45there to home video distribution you
03:47know the companies that sold the videos
03:48to the stores and to be clear like the
03:50actual physical distribution the actual
03:52physical like warehouses warehouse
03:54shipping right semi-truck loads of
03:57Jurassic Park on VHS tapes all over the
03:58world that's what we did and so again
04:01kind of on the edges of the
04:02entertainment business and at all this
04:04time not getting to LA and I think was
04:07why I don't want to live in LA at all
04:08and I got an offer from a company West
04:11Coast video they were kind of like
04:12Hollywood video at the time like the
04:14number two to come and their offices
04:16were in the South Bay of Los Angeles and
04:18sorry they yes come down I said I want
04:20to move to LA thank you I'll come check
04:21this out this early is in LA and I came
04:24down and checked it out and
04:25jumped in and after about a year that's
04:28where DVDs were just starting and I did
04:31at that other company the first revenue
04:34share deals with any of the studios for
04:36DVD and he was got into a magazine one
04:39of the trade magazines and read read the
04:41magazine and said oh these revenue share
04:42deals that's what we need to do does
04:44anyone know this guy and I happen to
04:46know somebody who started up Netflix
04:47with read and who introduced us and the
04:50rest is history so Netflix was 2 years
04:54yeah but a year year-and-a-half yeah
04:56well you join in 99 so what was Netflix
04:57like at that like what was no company
04:59well for me it was like Mars because you
05:02know our first ecommerce transaction was
05:04buying that airline ticket to go me read
05:06and then I do mean that yeah right and
05:08when I got up there like look at all the
05:11names of the Chabad companies I never
05:12heard of drugstore.com and now they said
05:15the names that are also like now
05:16blacksmith 3 but I look at these things
05:19that I said Wow everyone here like
05:20really lives online already there people
05:22are getting razor blades online that
05:24just was to me it was such a foreign
05:25thing and everybody and Netflix it back
05:27in those days had a scale on their desk
05:29because where everyone was trying to
05:30optimize for postal wait I mean it was a
05:33very cool it was a very different
05:34culture business male domestic only
05:40dvd-by-mail and and then I had this
05:42great meeting with Reid where he
05:44basically went on to describe Netflix
05:46almost exactly like it is right now as a
05:48digital company we talked a lot about
05:50downloading instead of streaming because
05:51streaming really didn't exist at the
05:53time conceptually even right but he was
05:55very clear headed that all entertainment
05:58would come into the home on the internet
06:00very soon and he was telling me about
06:02Moore's law and all these different
06:04things that sounded insane because
06:05someone had just emailed me a clip from
06:07South Park that took seven days to open
06:08I said there's no way that this is gonna
06:11displace it's heard even described it
06:14was it would've been an absurd idea
06:16completely like anybody who tried to
06:18video on the Internet yeah there's no
06:19obviously this guy but but Reid talked
06:21about it to me that day like this like
06:23who's telling me this guy is blue right
06:24and I just said stuck with me because I
06:27nobody ever changed the world without
06:29telling someone they were gonna do it
06:30first and I bet it sounded crazy and I
06:32wanted to be on that train yeah and it
06:34took me a few months but when I came in
06:36to Netflix it wasn't hardly it was
06:38hardly like being in the entertainment
06:39I office did my house for two years we
06:42bought movies from you stayed in our way
06:44I stayed in LA I would fly up to Tillis
06:47kados two to three days a week and I did
06:49that for a couple years right and then
06:51you know just because the story has been
06:52told before us obviously Netflix
06:53dvd-by-mail is a big success and the
06:55decision to cut over to streaming at a
06:57certain point was it was a big success
06:58and then there was right the really big
07:00decision as it turns out which is a
07:01decision to go into original content
07:03right cuz the business model for DVDs
07:04right had been by other people's
07:06consciously produced content the
07:07original business model for streaming
07:08was to buy other people's content and
07:10then at some point you guys started to
07:11fund and create your own car yeah what
07:13was that decision what was that
07:14conversation like so I I find the big
07:16fundamental difference between Silicon
07:18Valley and Hollywood I think is the
07:21the whole efficiency driven thing is
07:24very Silicon Valley and the whole
07:25quality driven thing is very Hollywood
07:26and rarely do those things meet I think
07:29quite Netflix has been successful in
07:31content to your point that it's pretty
07:33rare is that we always have kept a
07:36presence in Hollywood and a presence in
07:38Silicon Valley there's about a thousand
07:40people who work in LA that on all the
07:42aspects of content they all think they
07:43work at the greatest entertainment
07:45company in the world and there's about
07:474,000 people in Silicon Valley who think
07:49they work for the best top tech company
07:51in the world and I think they're right
07:52yeah and and we never tried to jam
07:54either culture on the other no we just
07:56we really do respect the two the two
07:59cultures it's not that we're gonna just
08:01erase all the the challenges between the
08:03two cultures because there are different
08:05they are really different at their early
08:06days of entertainment and the internet
08:07the tech companies would come in to
08:09Hollywood in this fly home and nobody
08:10knew who they were and the entertainment
08:12industry's almost all about
08:13relationships and trust because there is
08:15no quant so you really have to trust
08:17your instincts on a lot of things
08:18including people there was no reason on
08:20paper to approve those revenue share
08:22deals done back in those early days but
08:24he give us these big lines of credit to
08:25ship us DVDs and all those things so it
08:27was really just that relationship thing
08:29that turns out to be very very valuable
08:31so a lot of Silicon Valley companies if
08:33you think if they heard this we just say
08:34flat out like it can't work or it
08:36certainly would not work for us another
08:38company and the reason is because like
08:40consistency culture is V it is so
08:41important and right and the reason for
08:43that right is if you it's so hard to get
08:44just do one thing well to try to do two
08:46things well in two different cultures
08:47like you difficulty end up with
08:48basically Civil War inside a company how
08:50does how does this kind of split or
08:51divided happen inside the company I mean
08:53it's all credit to read I think it's
08:55really created a culture where you're
08:57free to ask questions you're free to
08:59push back but support the outcome so
09:02everyone has got a you know a strong
09:04voice at the table but once the decision
09:05is made everyone supports the outcome
09:07right and so I think it's that that
09:09candor and Trust enables people to say I
09:12don't really know what you're doing you
09:15do and I trust that you do and you're
09:16gonna run as hard as you can I'm gonna
09:17support you even though you're not in
09:18the same city even though I don't sound
09:20very often so we still feel like we have
09:21a bond but and we do have this great
09:23kind of thing where Reid comes down
09:26south and I go up north and we go back
09:29and forth we had this thing called new
09:31so when edit but we do it four times a
09:33year so when people join they all sit
09:36through a day of you know of lectures
09:39from all the heads of all the
09:40departments who really ground everybody
09:42and the vision and ground each other in
09:43the culture and what we up to and so I
09:45wanted it really kind of intimately
09:46knows what each other does but there's
09:49no expectation that we're supposed to be
09:50able to do both things right what
09:52everyone's doing in Netflix is solving a
09:53big hairy problem and all tech companies
09:55want to do that and that's included are
09:58people in LA and the big hairy problem
09:59is making great content and finding
10:02people who want to see it and putting
10:04them together and so we we're all part
10:07of the same you know debugging of the
10:08hairy problem right so how many pitches
10:11or proposals or outside opportunities
10:14does your organization have a year for
10:16content that you could buy or make I
10:17guess there's probably seven to ten
10:21pitches a day they come in every single
10:24day so no temperatures the day times
10:25yeah it might be those days they're
10:2822,000 so we took maybe 2,000 pitches a
10:30year how many times how many do you say
10:32yes this year we'll have thirty original
10:36series eighty original films thirty-five
10:39original kids series 19 local language
10:42original series being produced all over
10:4565 documentary projects so I would say
10:49it's about one in a hundred zero yeah
10:51okay and it is it turns out there's no
10:53shortage of ideas right but there is a
10:55shortage of people's people with the
10:57ability to execute on a big vision and
10:59so you have to really buy into this
11:01story of to buy into the the creator you
11:04have to buy into their ability to bring
11:06and it's that that's the magic
11:08combination you're trying to look for in
11:09these things they actually a lot of
11:10similarities eventual capitals you're
11:11describing it right which is its actual
11:12about two thousand a year we fund we
11:14fund MIT you know to maybe twenty to
11:15thirty is sort of with the top firms
11:16tend to do so maybe even a slightly
11:18lower rate of green lights but is a we
11:22always worry about sort of two
11:23categories mistakes false negatives and
11:25yeah false positives we say yes to
11:27something that fails right false
11:28negative is we say no to something that
11:30succeeds right at least in our business
11:32I can tell you those are the ones that
11:33like tortured that out of you yeah
11:35when I get a couple the rest of your
11:36life it's not just an emotional thing
11:37but it's actually a financial thing
11:38right was to something again failed fund
11:40that then goes on to become some giant
11:41yeah I'm gonna ask you a question when
11:43that happens to you yeah is it is it
11:46basically you can you look at it and say
11:47well that's exactly the thing that they
11:50pitched and that's exactly how they
11:51executed it and that's the exact team
11:54no no so that's maybe yeah maybe that's
11:56that maybe that's the escape hatch maybe
11:58that's how I rationalized to for the bad
12:00decisions exactly I guess I would say
12:01almost all the ones that we pick to
12:03succeed change a lot as well as all the
12:04ones that we don't pick that succeed
12:06yeah they also tend to change a lot of
12:07it as part of why you're looking at back
12:08a team right is because like if if it
12:10was a foregone conclusion if all the
12:12work had already been done yeah they
12:13wouldn't need you like they're just
12:16running the duffer brothers with
12:18stranger things is probably the best
12:19example of two very young guys who've
12:21never really done it but they had a
12:23amazing vision I knew as soon as we
12:26heard the stranger things pitch so we
12:27were doing a show and I knew at every
12:29step of the way as the episodes the
12:31scripts were coming in as the episodes
12:33were coming in then it was something
12:34special not at the scale that it is I
12:36didn't foresee that it'd be as big a hit
12:38as it is but it was interesting is is
12:40that we got down to the execution
12:42question can they do it well they'd
12:43really done as a couple of episodes of a
12:45show called wayward Pines it was a good
12:46show but it wasn't their show and it was
12:48a you know basically he executed someone
12:50else's vision and they hadn't made a
12:53small movie for Warner Brothers that had
12:54never been released and they basically
12:56said well you should take a look at this
12:58movie and we tracked down Warner and ask
12:59them of the screen it for us it was a
13:01little tiny zombie movie that was really
13:04fantastic and mostly what it said was
13:06and almost no resources they pulled
13:08together this really rich satisfying
13:10movie experience and which gave us
13:12confidence that they could do it on the
13:14small screen too so when do you know
13:16maybe stranger things was a case where
13:17you knew earlier but like when do you
13:19you believe you know with like eighty
13:21percent certainty that a project is
13:22going to work like that it will be
13:24successful as a as a it's a creative and
13:26a commercial project well the commercial
13:28said sometimes you really don't know
13:29until it hits because there are some
13:31times that I'm actually really surprised
13:34that it's something doesn't take off
13:35immediately like why is it not why does
13:37everyone not in love with this and but
13:39then over time people catch on it
13:40becomes like a word-of-mouth phenomena
13:42takes off making a murder is one of
13:43those that we released it on December
13:4618th last year turned out to be like the
13:48perfect show at the perfect time because
13:50people were home and so when they
13:52started watching it and got so hooked on
13:54it and started tweeting about it and
13:55posting on Facebook about it and this
13:57collective word-of-mouth around the
13:59world just exploded we didn't we spent
14:00almost no marketing money on the show at
14:02all and it just exploded on its own
14:04nobody inside a Netflix foresaw that was
14:06gonna be you know an overnight sensation
14:08like that like it was so a lot of times
14:10it isn't though actually gets out there
14:12- are you certain certain but I think
14:14when you start getting the early cuts of
14:16the show and you realize that that great
14:18script you know shows up on screen that
14:21we're good shape as long as we put
14:22enough of the work into the script if
14:24you get something that's coming in okay
14:26and you're like you know we probably
14:27wouldn't have funded this if we know
14:29that it was only gonna come in okay and
14:30not great as you see like as you see the
14:32dailies for example and then but you
14:33gotta have the mentality at that point
14:35of like hey we're Netflix like we can
14:36jam this like through the channel we can
14:38put this in the recommendation algorithm
14:39we can like get people to watch this
14:40even though it's not that good or do you
14:41kind of say well you know this is a
14:44mistake and let's just kind of quietly
14:45put it to the side and if people want to
14:46see it that's fine but I feel is we're
14:48way better off taking the creative
14:50vision that some someone's creative
14:52vision that they have put out and
14:54putting it through the service versus us
14:56trying to go in and retool it or us
14:58trying to force them to change something
15:01we do a lot of that happens along the
15:03way just organically but at the end of
15:06the day if the creator says that's my
15:07show we put it out and we support it the
15:10best we can and there is an audience for
15:12everything the one lesson we learned
15:13back in their early dvd-by-mail days
15:15taste are so crazy diverse that we had a
15:18hundred thousand titles on DVD and every
15:20day 60,000 of them shipped so the things
15:23that I hate people love and vice versa
15:24and really whenever we see we have a
15:26failure is that relative to what it
15:28costs that enough people watch it that
15:31it was a good use of
15:33so there is an efficiency measure in
15:35that way which is an efficient use of
15:36dollars relative to any other way you a
15:39dispenser the ones that don't ultimately
15:40realize those audience' that that
15:42audience and one of those was Crouching
15:44Tiger Hidden Dragon to them our first
15:46big movie we put out we thought it was
15:48gonna be the second coming of Records
15:50there's a huge which was a huge yeah it
15:52was a kind of a commercial and an
15:54arthouse film and a won the Oscar I mean
15:56everything and this was a genre film it
15:59was so people who like martial art
16:00movies like them and people who don't
16:02didn't in which price like a movie that
16:04you know for a much broader audience
16:06so in that case relative to what it cost
16:08commercially you know didn't hit that
16:10mark people love that movie so
16:12everything is that it's not an
16:13all-or-nothing bet like that right but
16:15but we wish a lot more people have
16:17watched it always kind of thrilled when
16:19I discover a movie as a viewer that had
16:20a giant budget like four years earlier
16:22and then just totally flopped then I
16:23discover it later and I like it I'm like
16:25wow they made it just for me yeah yeah
16:27because they spend two hundred million
16:29dollars nearly I'm the only one who like
16:31said oh yeah that's great
16:32let's actually talk about one talk about
16:33you know my culture thing you mentioned
16:34for a second so there's a lot of kind of
16:36modern cultural critique in the internet
16:37and it's kind of cause people to get you
16:38know very concerned about this there's
16:40sort of a minor critique which is
16:41basically like let's just say in the
16:42past culture was highly fragmented it
16:44would lots of variability among cultures
16:45lots of different languages cultures
16:47even dialects right among languages
16:49there were lots of different niches you
16:50know in the people in different
16:52countries or different regions would
16:53have you know wild even here in the US
16:54like wildly different accents wildly
16:57different to preferences wildly
16:58different payment preferences and the
17:00the normal critique basically goes that
17:01the culture both in the US and globally
17:03is homogenizing right because of
17:05information communication technology
17:06information technology started with
17:07probably radio and television and now
17:09with the internet basically languages
17:11are vanishing dialects are vanishing
17:12everybody's seeing this you know
17:14big-budget American entertainment you
17:15know it's a city everybody seen
17:16superhero movies everybody's listening
17:17to the same pop music like it's it's
17:19there's this kind of mass and
17:20modernization kind of washing out a
17:22cultural variability and then but then
17:24you hear the Netflix story and you hear
17:26the the opposite which is this sort of
17:27increased level of sort of fragmentation
17:29specialization where is culture headed
17:31in that sense we're actually straddling
17:33because a show like stranger things is
17:36completely global proportionate to our
17:38subscriber base people watch stranger
17:40things all over the watch is a little
17:41surprising because if you're my age
17:42you're the exact like you're grabbing
17:44the Midwest 1980s like it feels like it
17:46I could easily imagine somebody another
17:49country and maybe a different age saying
17:50like what the hell are these kids doing
17:51but you know what's new is that that
17:54nothing is retro anymore really cuz like
17:56my kids are 21 and 23 they knew all
17:59those movie references there right
18:00because those movies never go away any
18:02more good netflix now they didn't know
18:03all the you know the the lifestyle
18:05things that you and i knew but you know
18:06about that time yeah
18:07but solely made sense to them but what I
18:09mean we're play were doing both sides of
18:11it is we're making local language
18:13original shows now in nineteen countries
18:14those shows the mandate of those shows
18:17it says is that they're incredibly
18:18authentically local so the sabor of the
18:21Italian show that we just did it's all
18:23shot in Rome all Italian cast all in
18:25Italian and the real art that we're
18:28trying to recreate is you know when you
18:30think about dubbing into English you
18:32think about Godzilla and karate movies
18:35and very bad lip-syncing and all those
18:37things so that really never really can
18:39could never get very mainstream so right
18:41now one of the things we're working on
18:43is these local language originals very
18:45artfully dubbing them into English for
18:47it for our US audience to enjoy too and
18:49you show a show like the three percent
18:52which is should we make in Brazil in all
18:54in Portuguese with an all Brazilian cast
18:56and the watching on Netflix in the US
18:59would be equivalent to a pretty
19:01good-sized cable hit I mean people like
19:03to watch the show they watch it
19:04subtitled they watch it dubbed partly
19:07I'm sure they're not watching it in
19:08native Portuguese and without the
19:09subtitles much because I don't think any
19:12television has ever traveled that Brazil
19:13really must maybe a novella or two so
19:16we're trying to do is tell these stories
19:18that are authentically local and then
19:19the win for us is that they actually
19:22travel more the more authentic they are
19:24because there's something inorganic
19:26about the English language European
19:28television show that forces it that
19:31causes it not to become very mainstream
19:32where beloved those shows get liked but
19:34they never get loved so we really we are
19:37trying to push these shows to be as
19:38authentically local as possible
19:39embedding that that's what will make
19:41them travel and then we'll use
19:42technology to overcome the hurdles like
19:43language you said you think you think a
19:45lot about segmentation because you're
19:46gonna think like there's there's an
19:47audience for everything so how many
19:49audiences are there like is it do you
19:50think in units of like dozens hundreds
19:52thousands thousands thousands yeah and
19:54how many like do you have a sense is
19:55that like a finite set it depends on how
19:57you define the debate the floor right
20:00that audience where you can actually
20:01afford to produce anything for them or
20:03acquire anything for them but I don't I
20:05don't think it's finite as long as we
20:06keep growing so the bigger we are the
20:08bigger that Bayside she can get my big
20:10learn from the video of my old video
20:13store days when making the transition to
20:15the internet was about trade radius and
20:18what that opens up if I had a movie in
20:21Phoenix Arizona I couldn't get that
20:23hundred hour tape to rent enough to pay
20:25for itself and it was a puzzle to me I
20:27mean some of these movies were really
20:28great and I look at that and say well
20:31it's not that there's not enough fans of
20:33that movie in the world to support it
20:34there's just not enough fans in the five
20:36miles around my store where people will
20:38come but once you open up that trade
20:39radius there's plenty of people for
20:41almost everything and if then it becomes
20:42how do I reach them so like growing up
20:45in Phoenix with a my tastes a little
20:47outside of the mainstream I liked
20:48foreign language movies I liked
20:49documentaries there was one art house
20:51theater called the Valley Art Theatre in
20:53Tempe that I get would get on a bus and
20:55go over to seize things and once in a
20:57while but other than that those ways
20:58didn't exist in my world and at once I
21:00found them every time there was a
21:02foreign language movie that I would like
21:04the distributor would have to basically
21:07take a castanet across the entire state
21:09of Arizona to find me to tell me there's
21:11another one so we have all this
21:12efficiency of being able to talk
21:14directly to an audience once we figure
21:15out hey you like foreign language
21:17television and you liked stranger things
21:19and you liked this movie in that movie
21:22you liked this cast you're gonna love
21:24this show called dark that we just
21:25produced in Germany yeah it's subtitle
21:27but you also love narcos every subtitle
21:28what's happening in that algorithm that
21:30opens up things for people that they
21:32unintuitive ly turned out to love and
21:34how many audience segments are people in
21:36like how many audience segments am I in
21:38or the typical typical Netflix you're
21:39right there's probably six hundred
21:41meaningful ones yeah but like how many
21:43is each individual in like to expect
21:45each individual each individual
21:46subscriber to be in two or three or
21:47dozens so much about choosing his mood
21:50based so you know they I know you love
21:53drama but it's the hard thing about the
21:56machine even why the machine learning
21:57really is helpful in this is you can
21:59watch twenty five comedies and I could
22:01tell you a lot about your comedy taste
22:02but I know nothing about your drama
22:03taste so the requires have a lot of
22:06inputs your morning taste is different
22:07your afternoon taste your taste when
22:09you're watching with your wife is
22:10different than your watching by yourself
22:11and all those things so there's so much
22:13work that could be done in the
22:14I'm relieved that Ted is without his
22:15phone today because otherwise I think
22:16he'd be pulling up my individual viewer
22:18profile right now yes really revealing
22:20you that would rapidly become
22:22embarrassing so we was straight out from
22:24that so let's talk about creative
22:26control my sense of the standard
22:27Hollywood model in the last 20 years has
22:29been that movies are what you might
22:31describe in the valley as like a say
22:33professionally constructed startup which
22:34is to say we have this idea we have
22:36somebody to fund it and then we're
22:37basically gonna go hire a CEO or you
22:39know we're gonna go hire a head of
22:40marketing or a higher head of
22:41engineering right and try to put it
22:42together and everybody's gonna fight and
22:43argue and at the end of the day you know
22:45the guy with the guy with the money
22:46probably gonna make a lot of the
22:47decisions but what happens to the
22:48company and then on the other hand which
22:50might describe an organic Silicon Valley
22:51startup which is a founder with a vision
22:53yeah right and then ideally right
22:55idealized model a founder who is a CEO
22:57then becomes the CEO division or a
22:59founder who goes out and finds a partner
23:01right a CEO or a president to be able to
23:02partner with to be able to develop the
23:04vision TV's more like that is my is my
23:06sense because with TV right there's this
23:08concept of the showrunner right that's
23:10emerged which basically goes to the CEO
23:12CEO undisclosed tree busy and
23:15significantly with TV right the
23:16showrunner is the writer yeah right
23:18there the writers are actually put in
23:19like those movies are not directed by
23:21the writer were many many TV shows
23:23including a lot of ones that yeah they
23:25are TV they often referred to as a
23:26writer driven medium but yeah because of
23:28that right and so so TV is closer to the
23:31Silicon Valley model so sort of founder
23:32driven right driven like the creative
23:34more collaborative - okay yeah I know
23:36there's this sort of tensions like I
23:37talked a lot of people friends mining
23:39around you know TV networks and they say
23:40it's like well it's like great it's like
23:41the good news is these writers have huge
23:42vision they're not always the most
23:44practical people in the world and I've
23:45always the most commercial people in the
23:46world like we really need to give them a
23:48lot of feedback you know and for the
23:50founders in the audience you might have
23:51experienced this from your VCS in tech
23:53you know we might have to give you a lot
23:54of things in Hollywood they call them
23:55notes yes they come so frequently but
23:57like you know feedback on what you
23:59Netflix I think you had an established
24:00early reputation at providing an unusual
24:03level of creative control to the writer
24:05it actually started out quite practical
24:08I didn't have any staff okay so we had
24:11we were trying to run fast and try to
24:12make good thing that I realized along
24:14the way that the one thing that the net
24:16the Netflix culture could bring to
24:17entertainment was that kind of freedom
24:19and responsibility that's helped us
24:21become so successful which was our job
24:23is really picking great people and
24:25giving them the resources to do the best
24:28requires getting out of their way and
24:29letting them make decisions and live and
24:31die by them house of cards was our first
24:33original show on Netflix and the deal we
24:36made with David Fincher was I'm gonna
24:38give you two seasons of the show
24:39no pilot David Fincher is like I don't
24:42know maybe I don't like the Steve Jobs
24:43or something about you he's the greatest
24:45director of our generation for sure Vee
24:46Greta's felt who did the greatest film
24:48to write like me I mean if you see movie
24:49seven and I mean 70 just Fight Club if I
24:52could join button yeah
24:53and so like this is like dealing with a
24:55super high-end professional yeah and he
24:58could give me twenty six hours of home
24:59movies but I said but you have to put
25:01your name on it so the key was is that
25:04somebody who was great incredibly gifted
25:06but and cared about his brand right and
25:08then what do you need basically he was
25:11super collaborative on the things that
25:13he wanted to collaborate on he was not
25:15one of the things that he was crystal
25:16clear on and you know he has a
25:19reputation and being quite difficult and
25:20around but it but I found his said he's
25:23no he's just really exacting which I
25:24loved I mean he knew exactly what he
25:26wanted to do and you exactly was gonna
25:28cost and he fought only for things that
25:31mattered so there was no wasted argument
25:33at all so but the critique would be
25:34right that you're just cherry picked you
25:35just cherry pick like getting a chance
25:37to work with the person who's like at
25:38the top of their field who that's
25:39amazing track record of accomplishment
25:41okay and it all lined up perfectly I
25:42don't have anyone to give notes anyway
25:43okay that was great but now do a hundred
25:46more and there aren't 100 David
25:48Fincher's out there and so over time as
25:49you did buy the worst things but many
25:51other projects you're kind of lathering
25:52down on people with experience and try
25:54and let's just see if even say
25:56operational somebody in the I mean
25:58obviously the execution experience
26:00between the different mothers and David
26:01Fincher couldn't be any further apart
26:02right but but in fact you know they
26:05turned out to be really cool I guess my
26:07question is what at what point do you
26:08jerk the leaf like at what point do you
26:10assert control and say like look like
26:12this is not like this is going like way
26:14too long this is we have our budget this
26:15is not the greatest in this cast
26:17yeah this plot point makes Grace's they
26:18know - they're not surprised when things
26:20are not going as planned
26:22okay I used to think when you read about
26:23changing a showrunner on a show that's a
26:26massive failure oh my god who what broke
26:29that this had to happen and it's
26:30actually kind of an organic process and
26:32when and it's part of the process of
26:34making great television how do they know
26:35recognizing ultimately you know that
26:37this isn't going the way that they
26:39thought or where they envisioned it's
26:40one thing for you to know in the sense
26:41if you have some level of objective
26:42remove and maybe you get to look at the
26:44data and so forth but I mean as you know
26:45when people work on a project together
26:46it's very easy to get emotionally
26:47wrapped up in it and it's very easy to
26:49kind of not get the feedback so when you
26:50say they know like how do they know how
26:51did they come to that awareness well I
26:53don't think it's any different than when
26:55you look somebody go in the office and
26:57they're quite relieved sometimes you
26:58know what it's got because they they've
27:00known it for a little bit before you but
27:01things weren't going well you have a
27:03day-to-day process and if you're not
27:05shooting X number of pages a day you
27:06know things are not you know going off
27:08you're gonna go over-budget and if the
27:10performances aren't working
27:12does everybody come to the same
27:13conclusion and roughly the same time I
27:15think shows about you know the one thing
27:17about you write a show like the crown
27:20Peter Morgan writes every word of the
27:22crown no no writers room he has some
27:25research team that helps him but every
27:28word of that show is written by him and
27:29eventually it kind of burned out writing
27:30the same people over and over and over
27:32again and so you try to avoid that by
27:34infusing some new blood sometimes - I
27:36wouldn't say every time we've changed a
27:37showrunner that it's been because it was
27:39a creative failure sometimes it's just
27:41you know the rig the time in someone's
27:43life to do something else - so you know
27:46we discussed when the idea of
27:47downloading was was maybe barely
27:49possible streaming was observed in a
27:50streaming of recorded programming became
27:51feasible like that was obviously the big
27:53the big kind of breakthrough for modern
27:55Netflix you know up until a few years
27:56ago I think you still would have said
27:58okay streaming a pre-recorded
27:59programming works with streaming of live
28:00programming is just still not fees it
28:02was just not technically feasible
28:03certainly at the quality levels that you
28:04guys are used to these days I think it's
28:06fair to say streaming of live
28:07programming actually would work just
28:08fine look at the levels of scale guys
28:10really the technology now exists is that
28:11a problem yet you guys have not yet done
28:14live no is that because you think live
28:16is just a fundamentally different and
28:17somebody else should go do that or the
28:18timings wrong or are you thinking of
28:20doing it you could argue that the
28:21remaining as you say kind of the
28:23remaining pillars of broadcast TV and a
28:24lot of cable TV are alive like yes base
28:26in right sports news and maybe a few
28:28large entertainment franchises you know
28:30that thing that makes you strong makes
28:31you weak but for us like focus is really
28:34important and for us I believe that
28:36really core to the consumer proposition
28:38of Netflix is on demand and consumer
28:41control so if everything on Netflix
28:43thousands and thousands of hours the
28:45things to watch are completely your
28:46control but this thing you have to start
28:48watching at 8 o'clock on Wednesday it
28:51kind of breaks the model in a way that I
28:53think is OK for us not to be doing
28:55and the way that networks compete with
28:58Netflix is to be did the things that we
29:00don't do and they do grease lotta they
29:02do you know live Broadway they do
29:04football games they do the voice all
29:07those things that are really great
29:08because they're live
29:09I do think by the way that people will
29:11evolve away from those things over time
29:12but they do like them they like them now
29:14but we don't do everything but if you
29:16took them I mean if you took him if you
29:17took the NFL if you took the NBA if you
29:18did news like at some point like it to
29:20the extent that there's some bad
29:21long-term battle between like the cable
29:23bundle and Netflix like at some point if
29:25you could kick the struts off run dur
29:26neetha the the competitor's business
29:27model like it that has to get tempting
29:29yeah but it's tempting but is that the
29:31best use of another of the next billion
29:33dollars to get us to you know to keep
29:35forward progress we've done enough in
29:38this space that the next best use of a
29:39couple of billion dollars is sports
29:41rights the other thing I do I don't get
29:43that tempted by the major league sports
29:45is that the power and the pricing power
29:48is all belongs to the league's
29:49right now that everyone's knocking each
29:51other out and paying increase that the
29:52cost of that Amazon NFL deal for
29:55basically games that are on two other
29:57networks at the same time so completely
29:58non exclusive programming went up ten
30:00times from Twitter to Amazon so what I
30:02look at that I think the winner will be
30:04NFL calm that they'll just go direct to
30:06consumer and there's plenty of people
30:08who'd pay an outrageous amount of money
30:09for for a subscription for NFL's or NBA
30:12or MLB and ultimately the winners will
30:15be the league anyway so do you think the
30:16networks that have the major league
30:18rights right now the big the big ones do
30:20you think that they make money on those
30:21deals no and I think not only that I
30:22think that that loss leaner model that
30:24made them great is the thing that's
30:25making that really cripples them now
30:26right and the ESPN was those sports
30:29rights and that audience I mean it was a
30:31bet that there's gonna be any eternal
30:33growth in people's willingness to pay
30:35and audience and advertising rates and
30:38all those things and obviously there's a
30:40cap so let's talk about a few projects
30:42and I want to get to if you have to get
30:43to technology I can't resist talking
30:44about the Marvel D it's my personal
30:46photos as Ted knows from old my
30:48desperate pleas for early access so one
30:52of the just blockbuster Netflix moves
30:53probably what four years ago or so now
30:56five years ago was the Marvel real deal
30:57and so this was and the blockbuster
30:59thing in the in the entertainment
31:00history was this is the simultaneous
31:01green lighting and purchasing of five
31:04interconnected shows yeah with no pot no
31:07pilots no pilot oh just four people
31:09this is skip these characters daredevil
31:12Jessica Jones Luke Cage iron fist so
31:14they all have had now separate shows and
31:16then there's a fifth show called the
31:17defenders that brings them all together
31:18and those shows were purchased all at
31:20the same time yeah and I don't think
31:22that had ever been done before we tried
31:23to look for other models like it there
31:24was nothing like it right the bet it was
31:26the bet on the the Marvel movie model
31:29which for marvel at the time it was a
31:31Hail Mary Beth I mean they took out a
31:34big I took out a huge loan to produce
31:36the Iron Man movie marble the comic book
31:39company almost went bankrupt at one
31:40point and was the subject of this huge
31:42so they bet the farm to make Iron Man to
31:44make Iron Man and the bet was if that
31:46works we do this and we do this we do
31:47this and then we bring them all together
31:48there was a perceived universe how do
31:50you do make a comic universe in the
31:52movie world and my and this one was well
31:54it's worked in comics it worked in film
31:56can it work in television my typical
31:58model is always just classic risk/reward
32:00the risk was that Marvel was gonna make
32:03a you know a lousy rendition of this
32:05content people would hate it and there's
32:07been some history of that the original
32:08daredevil movie was pretty bad have you
32:10seen the original Captain America movie
32:11yes this is not some history there yeah
32:17Jessica Jones won a Peabody Award
32:19daredevil was the first comic book show
32:22it ever be nominated for an Emmy Luke
32:24Cage won and before the stunt
32:25coordinators this year so there's a
32:27bunch of these shows have been you know
32:28what right well regarded with critics
32:31too which is really unusual but
32:32basically put some more production value
32:34beyond these things and that the
32:35audience would show up and appreciate it
32:37that was the bet that we would be able
32:39to control for that and kind of control
32:41the risk reward and their reward was Wow
32:43the television version of The Avengers
32:45only on Netflix and risk of it was wow
32:49it's a boatload of money for five shows
32:50it was the first one goes badly wrong
32:51yeah the whole thing the nice thing was
32:54is that they were connected that they
32:55were connected but they were
32:56disconnected enough that if the first
32:58one went bad you could still fix the
33:00second one and have the second series
33:01and at any point we weren't committed to
33:04do multiple seasons of any of these
33:05shows at the point it was just we're
33:07gonna do one and then get to five but
33:08we're so pleased with daredevil results
33:10that we went to a second season a
33:12daredevil before we got to defenders and
33:14there's a bunch of little subtle
33:15references throughout right where that
33:16did that do tie the show together and
33:18they actually do tie subtly into the
33:20Avengers world too because this is the
33:22the defenders world they refer to this
33:24happening all this thing that happened
33:25all the time which was basically the big
33:27battle that happened with the Avengers
33:28in New York City yeah I would really
33:30recommend watching a few episodes of
33:31Luke Cage yeah yes very special
33:33it's very special creative and also
33:35defying conventional wisdom a lot of
33:38people around the world you know say
33:39that that show wouldn't travel yeah yeah
33:41African superhero and on and on and it
33:43was hugely popular for us all over the
33:45world yeah yeah yeah it's an amazing
33:47it's an amazing creative a company you
33:49know while we're talking about the about
33:50the defenders one of the greatest
33:53that you can point to between audiences
33:56and critics which is that gap is getting
33:57bigger and bigger I think is iron fist
34:00first iron fist is literally the worst
34:02reviewed show on Netflix I mean
34:04everybody hated iron fit every critic
34:06hated it I think it's fair to say
34:07critics took a great delight in hating
34:08it yo they like Susie asta Connor they
34:11did good and it was the biggest launch
34:13of all for and and and it's done really
34:17well for us and we've gone to a second
34:18season and it's not to say that these
34:20shows are critic roof it's just like I
34:22think like we there's some sport of
34:25sport hating that the fans don't take
34:27that seriously so yeah there are entire
34:29websites you may know devoted to hate
34:31watching yeah yeah shows I reviewed
34:33entirely from the perspective I watched
34:35it because I knew I would hate it i
34:36memorize I discuss with the critic went
34:38anyways tell me how much he loves movies
34:39and I go that's like saying I love
34:41puppies so let's cut one open and see
34:43whether it was too quick round of
34:49overrated underrated relative with the
34:51prevailing view of let's say the
34:52conventional wisdom in Silicon Valley of
34:54the Commission with wisdom in the
34:55industry so overrated underrated
34:56amazon's content efforts man in the high
35:00the Lord of the Rings they're doing
35:02Manthey the perception is pretty fair a
35:04ton of money they're making a good run
35:07at it I never discount Amazon I think in
35:09terms of what they're able what they're
35:10able to do eventually has been pretty
35:13spectacular at a lot of other areas of
35:15the business and that's one thing you
35:16can always count on that they'll keep
35:17running at it and they're right behind
35:18you in terms of budgets and maybe not
35:19right behind you but there a second
35:20there yeah three or four billion and
35:21they seem like they're willing to spend
35:22the fact that it's coupled to Amazon
35:23Prime is interesting because on the one
35:25hand they have such this giant base of
35:26Emmas on-premise drivers they want to
35:28get a lot more on the other hand the
35:29reason it's hard for me to comment on it
35:30is that they're you know we're such so
35:32different and we are really focused on
35:34making great television shows
35:35because this is all we do right like we
35:37make great movies and television shows
35:38because we don't ship diapers and we
35:39can't rely on that and it's really tough
35:42to do a lot of great things great and
35:43that's such a foreign thing for me that
35:45it's hard to be medium coming on it I've
35:46been searching on Netflix for diapers
35:48yeah you say you've got everything and
35:51it just the reefs just don't show it did
35:53this there's nothing like having nowhere
35:56right then motive tomato motivate you to
35:57do something well Hulu and justice
36:02context Hulu being a joint venture among
36:04Hollywood views in large part
36:05constructed to create with Netflix
36:06Hollywood was concerned there wouldn't
36:08be another buyer in the markets they
36:09were trying to create another buyer and
36:10there's plenty of buyers in the market
36:11so and but it's it's a interesting
36:14extension of the old model so I mean
36:17overrated in that I don't think it said
36:19totally disruptive it's just a different
36:21a different way of getting the cat you
36:22know getting the country to the home but
36:24roughly the same economics the same
36:27beholden this to advertising and all
36:29those kind of things so YouTube when we
36:32saw people push play and video started
36:34working that was the way we said well
36:36Netflix is gonna work when YouTube
36:37started to work yeah yeah this we
36:39thought was is that hold download
36:40anything they never really made sense to
36:42everybody that you have to manage files
36:43and everything else so to me it's like
36:45they've been incredibly innovative in
36:46that space I don't think of them as
36:47direct competitors even in their new
36:49incarnations that they're doing now but
36:50I think it's the way that people it's
36:52how do you you can monetize killing time
36:54or you can be or you can monetize
36:56destination time and I think they're
36:57monetizing killing time incredibly
36:59effective right I guess the underrated
37:00argument would just be it's remarkable
37:02how I believe they're still gaining
37:03share of video consumption on media
37:05right even at this size no Facebook and
37:07jet and right now you know they're right
37:09there are many other companies now
37:10coming out them trying to do this you
37:11know in our case you know we're in the
37:13middle of a production of a movie with
37:14Martin Scorsese right now that you can
37:16look at it as 50 million plus an hour
37:18programming and right now I think they
37:21can monetize and maybe even the hundreds
37:22of thousands but whether or not it
37:24scales up to professional content I
37:26don't know yeah if you talk to somebody
37:27I think traditional film studio or these
37:29conversations I've had with people
37:30running the traditional film studio film
37:32studios I'll tell you that Twitter in
37:33particular they would say has really
37:34changed what it means to open a movie
37:37right to come out with a movie because
37:39the bad reviews can kill it fast
37:40the bad reviews can kill it fast and so
37:41basically the model the model was in the
37:43old days you can basically feed a big
37:44enough star and all the rest of the big
37:45American campaign you could get your
37:47Friday Saturday Sunday yeah then maybe
37:48people will start to
37:49bad word of mouth through the next week
37:50but at least you got that opening
37:51weekend yeah at least you wouldn't have
37:53a complete catastrophe
37:54whereas now if the movies bad the
37:57word-of-mouth on Twitter kills it on
37:58Friday night yeah collapses on Saturday
38:01and that might be really unique to this
38:03notion of getting in a car and driving
38:04to a theater where you people really put
38:06the stakes against that are very high so
38:08what it what it takes to get you out of
38:10your house if you're on Episode four of
38:11stranger things it's pretty high so you
38:13might be looking for reasons not to go
38:15out but I think of that that Twitter
38:17effect that television shows has not
38:19really been that impactful okay I wonder
38:20if that'll be yeah content companies
38:22merging with telcos so let's say NBC
38:24Universal and Comcast and then my
38:26recently AT&T and Time Warner so is it a
38:29warm red necessary for people to make
38:30content to also own pipes I don't think
38:32so I get the emotional desire to and I
38:34also think it's more a result of kind of
38:37winner-take-all cutthroat negotiating
38:39that you end up in a place where I have
38:40to own it cuz I can't make a deal that
38:42we could both live in well I think you
38:43should be able to make a deal that you
38:45could both live in and let everybody do
38:47what they do best binge watching had
38:50obviously you're a big fan you create a
38:51 watching but let me say what why
38:53it might be overrated do say Game of
38:54Thrones is an example which is the fact
38:56that it is on Sunday night at 8 o'clock
38:57this social effect of not by the way
39:00that the Twitter social effect people in
39:02the house together watching it or having
39:03it be a cultural experience and you know
39:05creating the watercooler moments or the
39:06next day but also now the internet
39:07social effect right of everybody on
39:09Twitter and Facebook and all these other
39:10platforms a critique of binge watching
39:12has been that we've been watching like
39:13the whole thing is just dumped when
39:14people watch it when they watch it and
39:15there's no there's no there's no social
39:18momentum there's no there's no
39:20simultaneous viewing experiences really
39:22possible other than just whatever is
39:23happening in a particular home in a
39:24particular it kills the kind of viral
39:26spread of that community aspect of it is
39:28that we have not found it to be the case
39:29we've found is that the cumulative buzz
39:31plus the roundup of the watch when you
39:34want model meaning that they're kind of
39:35oh my god I'd watch stranger things in
39:37nine hours straight that's a whole level
39:40a whole different level of a buzz that's
39:42created on top of the show from the week
39:43to week to week but the the cumulative
39:46buzz of orange is the new black the
39:47cumulative buzz of 13 reasons why cue
39:50middle buzz a sort of stranger things is
39:52actually much bigger than in Game of
39:54Thrones so I think they're the benefits
39:56are there and if you people want to do
39:58what you're talking about Game of
40:00we had to Sunday night HBO ritual to
40:01back in the soprano days
40:03but what I found is is that that whole
40:04the trade off is really positive for
40:06consumers in the net-net
40:08even though there is a little bit of the
40:09fun of everyone watching the same thing
40:11at Sunday night Adam Sandler and I asked
40:14specifically because Netflix was viewed
40:16maybe as a highbrow medium and then you
40:18get you to this giant the old Adam
40:19Sandler for movies I think he's been
40:22hugely underrated okay mostly because
40:24what we found was if we we license any
40:27one of them in any window in any country
40:29they would pop immediately into the top
40:31viewing and what we found is that he
40:33travels really well people think he's
40:35funny people who grow up on him love him
40:36people who you know younger people are
40:38still discovering him and that because
40:40of a couple of movies didn't do that
40:42well in the domestic box office he and
40:44people started thinking that this was an
40:45overrated thing that we did I think it's
40:47underrated relative to watching and some
40:49of our top watch movies have been these
40:50Sandler movies which tells you again
40:52what people's tastes are so diverse and
40:54then finally overrated underrated Reed
40:56Hastings this is perfect it's a last
40:58question because it's hard to say a guy
41:00who's sitting on top of this 80 billion
41:02dollar plus market cap company could be
41:04underrated but he's hugely underrated
41:06why is that he's created something that
41:08is unique in terms of this engine to
41:11deliver joy around the world and every
41:13step of the way everything he did was
41:15completely unintuitive down to the
41:17business culture and up to the delivery
41:18model and he's created a world and if
41:21somebody told me that he spoke here last
41:22year and he was very complimentary to me
41:24and you know the moves in content most
41:26CEOs in the world would mostly take a
41:28lot take that take that credit and to
41:30Reid's credit he never will and he
41:32inspires that in all of us which helps
41:34us build great teams and everyone just
41:37wants to work together and there's not
41:39this word about credit no one thinks
41:41about all these things that really
41:42bogged down a lot of other companies and
41:44he basically wants everyone to succeed
41:46and he does he celebrates it like crazy
41:49and it's one of the it's a unique
41:52selfless quality in a CEO that I just
41:54have not encountered in most places and
41:56and clarity of vision and clarity of
41:59thought I always say the Reid is like
42:01the Beautiful Mind without all the crazy
42:03because he can walk into a meeting
42:05that's incredibly complicated I've seen
42:08formulas on boards and I don't know idea
42:10what they're doing and he walks in he
42:11goes how that goes there and walk out
42:13and it's solved and it is that clarity
42:16confidence coupled with no hubris and no
42:19arrogance that is so rare and on top of
42:23the fact that a sig is brilliant when
42:25we've made a move into original
42:26we were so convinced as a company that
42:29we would never do original programming
42:30that read had said we'll never do
42:32original programming yet I knew that I
42:33was in a safe place to do it
42:34no that's amazing great TED surround us
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