Netflix: Reed Hastings. “We’re Not a Family.” The Provocative Idea That Helped Build a Streaming Giant

**Guy Raz** (0:00)
Hey, just a quick message. If you're building a business right now, imagine getting advice from the founder of Tarte Cosmetics, or Airbnb, or even Sir Richard Branson or Mark Cuban. Well, you can get that advice. Every Thursday, we drop an episode of the How I Built This advice line. It's where I bring back a previous founder we featured on a past episode. And together, we help real entrepreneurs, people selling skin care, dog toys, pottery, food, whatever. We help them work through the challenges they're facing right now. And the best part? This kind of advice world-class, battle-tested is completely free. All you have to do is call 1-800-433-1298. Tell us what you're building in under a minute, and you might be the next guest on the advice line. So give us a call, or send us a voice memo to hibt at id.wondery.com. And tell us how we can help you.
There's a story that I've heard. You guys tried to sell the business or to try to merge with Blockbuster, to become Blockbuster's digital art. But tell me, what is the story?

**Reed Hastings** (1:28)
Roughly the idea was, did they want to bet on us to do the online? If we could have become blockbuster.com, we'd grow a lot faster.

**Guy Raz** (1:39)
I mean, it's amazing to imagine that that could have happened. Like, you were prepared for Netflix to become Blockbuster's digital arm in 2000 Like, you would have been happy with that outcome.

**Reed Hastings** (1:50)
Yeah, no, exactly. We had not much confidence that we could grow, period, and then particularly grow against them. We were probably feeling pretty desperate.

**Guy Raz** (2:07)
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Reed Hastings built Netflix, a business that began as a DVD rental service and wound up transforming home entertainment forever.
Netflix should not have survived. In fact, it should have been crushed within the first few years, because when it launched in 1997, Blockbuster dominated the home entertainment market in the US. The basic outlines of the story are pretty well known. Netflix bet on DVDs when Blockbuster was still all in on VHS tapes. Netflix believed people would rather pick their movies at home rather than go out and fetch them. And Netflix also knew that most people hated the late fees that Blockbuster charged. But still, four years into the business, Netflix was on the ropes and in fact would have been happy for Blockbuster to just buy them out. What happened next seems almost predictable from today's vantage point, but wasn't so clear cut back then. Netflix adopted streaming video much faster than Blockbuster, and by 2010, Blockbuster filed for bankruptcy. At its height in the early 2000s, Blockbuster had 9,000 stores around the world. Today, there is just one single store left in Bend, Oregon. One of the reasons Netflix prevailed was because of the decisions its leadership made, and in particular, the culture of high performance that its founder Reed Hastings put in place. Reed saw the company almost like a championship basketball team, that everyone needed to be performing at peak level. And for those who didn't, well, they were swiftly let go, with no lengthy paperwork, no second chances, and a generous severance package to soften the blow. Now, a lot has been written about this culture over the years. Some people see it as cutthroat and ruthless, but others, most importantly Reed Hastings himself, argue that it's actually transparent and honest and, well, humane. In fact, Netflix has an incredibly high employee retention rate, despite the fact that around 9% of its employees are reportedly asked to leave each year. But no matter what you might think of the work culture, Netflix changed how we consume entertainment. And the person widely credited with making Netflix what it is today is Reed Hastings. What's interesting among many things about Reed is that he isn't a film buff at all. He's not that guy who talks about Fellini and Truffaut and Akira Kurosawa. In fact, when he started Netflix in 1997, he and his co-founder Mark Randolph had spent nearly a year brainstorming a bunch of different business ideas. Video rentals just happened to be the one they thought had the most potential. But running Netflix didn't come easy. And as he will describe in this interview, Reed learned, sometimes painfully, how to become a better leader and a better manager. Reed Hastings grew up in Boston in the 1960s and 70s. His dad was a lawyer for the federal government. And as a teenager, it took him a while to find his footing.