Netflix Takes on Europe

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Netflix recently launched in France, and Germany, Belgium, and Switzerland will soon follow suit.  The move has been expected for a while, and CEO Reed Hastings has named Spain, Korea, and Japan as possible future markets.

As the next phases of the expansion unfold, Netflix will be pressed to add significant content and make other investments before it starts to see a profit.  The large data center built by Netflix in Paris has enabled Netflix to get off to a fast start, unlike the company’s slower expansion in Latin America.

Netflix is already backing the making of an original French series, “Marseille,” a move toward content creation that took much longer in the U.S.

This expansion could also give Netflix a powerful new ally in the fight for net neutrality – the European Union, which is currently considering reforms that would solidify net neutrality in law.  “The advantage of net neutrality is that it allows new Internet services to grow without needing the permission of network operators,” said Hastings. “I think it needs to be inscribed in European law.”

Read more here: Netflix will focus on ramping up in Europe over next year


What’s New on Netflix

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We all watch Netflix’s “New Releases” category and hope for a new favorite or a wonderful blast from the past.  Throughout the month of October, Netflix will be adding new shows and movies.  Here are a few that we’re particularly excited about:

1. Gilmore Girls – Starting October 1, the complete series of Gilmore Girls will be available.  Social media has been buzzing with excitement over this funny and heart-felt show about a mother and daughter set in picturesque Connecticut town.  If you’ve never watched Gilmore Girls, don’t start until you have time to binge-watch.  Trust us, you’ll want to watch one episode right after the other, in true Netflix-fashion.

2. Tombstone – Everyone loves Tombstone.  It’s the quintessential “western for people who don’t like westerns.”  The movie is based around the true story of a gunfight at the O.K. Corral in Tombstone, Arizona.  Kurt Russell stars in the movie as Wyatt Earp, but it’s Val Kilmer’s portrayal of Doc Holliday that really steals the show.  So even if you’ve never watched a western before in your life, pop a bowl of popcorn and give Tombstone a whirl.

3. The Hunger Games: Catching Fire – The world has Hunger Games fever, and Netflix will be adding to the flame by streaming Catching Fire on October 22.  The timing is perfect, since this gives fans time to enjoy the Catching Fire on Netflix before the theater release of the third movie installment of the franchise in November.  This dystopian story line is from Suzanne Collins’ highly successful book series for young adults, featuring Katniss Everdeen as she fights for her life and the lives of her loved ones in the strange and terrifying world of Panem.

4. Rain Man – The awards for this movie are staggering – it got the Oscars for Best Picture, Best Director, and Best Screenplay Written Directly for the Screen.  On top of that, Dustin Hoffman was awarded the Oscar for Best Actor for his portrayal as Raymond Babbit.  The story follows Charlie Babbit, played by Tom Cruise, who only finds out about his autistic savant brother Raymond after the death of their father.  When Charlie’s father leaves all of his money in a trust fund for Raymond, Charlie takes him on a cross-country trip to his home in California in a desperate bid for his father’s millions.  On the way, brotherly bonding of an Oscar-worthy level occurs.

5. Galaxy Quest – If you want a good, goofy movie, you can’t get much better than Galaxy Quest.  The movie centers around the cast of a sci-fi television show that has long since stopped running.  But since the actors aren’t able to get any other acting jobs after their cult-hit, they rely on paid appearances at conventions and businesses.  Life is long and somewhat sad for most of the cast, but things change when an alien race comes to the cast for help.  After watching the show, which the Thermians believe is true, the come to the actors to help them defeat their enemy.

For  a complete list of the movies and shows being added during October, click here.


Netflix Ratings Mix with Rotten Tomatoes on A Better Queue

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Netflix’s complicated algorithm for ratings already does a pretty good job of matching users with movies and shows they would like, but Dave Jachimiak had an idea to make it easier for people to find exactly what they wanted.  Jachimiak designed a website that allows you to organize your Netflix options by year, genre, number of reviews, and the show’s Rotten Tomatoes Tomatometer rating.

The website, A Better Queue, has been around for a while but has only recently gained popularity thanks to websites such as Reddit.  Users can cruise Netflix’s list, compare their choices with ratings from Rotten Tomatoes, and try to set up “a better queue.”

Read more here.


The Human Side of Netflix’s Matching Algorithm

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TV Remote ControlI have written a lot about Netflix’s matching algorithm, dubbed “Cinematch” by the founding team. I did not know the company still uses humans to tag and rate aspects of movies and TV shows. It’s kind of amazing that they have figured out how to make human-generated ratings consistent enough to incorporate into the movie matching system. The original algorithm groups viewers into “neighborhoods” to share movies among people of similar tastes. I would definitely love to have this job!



If Hastings is the Web’s Louis B Mayer, does that make Ted Sarandos its Cecil B DeMille?

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I get asked a lot lately whether I think Netflix is going to become a major player in creating original series – the underlying question, of course, is whether CEO Reed Hastings and content chief Ted Sarandos are gunning for the Hollywood studios’ breadbaskets – their production business.

Ted Sarandos' profile is rising, along with Netflix's, in Hollywood.

Netflix Chief Content Officer Ted Sarandos’ profile rises in Hollywood, as the company takes on a new role.

This speculation seems perfectly natural, especially after an impressive and historic showing at the Emmy Awards of Netflix’s new shows. Nearly every Netflix-made series — House of Cards, Arrested Development and Hemlock Grove – was nominated and the one that wasn’t recognized by the Emmys – Orange Is the New Black – is dominating both water cooler and industry talk and Netflix streams.

Sure, Netflix could give the studios a run for their money. Hastings and Sarandos are already doing that using the same approach that gave them unrivaled hegemony over online rental and streaming – using an enormous amount of predictive data gathered from closely studying consumers for 16 years and delivering what people actually watch – not what the studio system bell jar thinks Flyover Land consumers will like.

And yes, Netflix will continue to be very successful – but making content is not their core mission, or their core competency really. Attracting and retaining subscribers is. Right now, Netflix is using content creation as a strong magnet to achieve that core mission, but it is extremely risky.

So my thought is that if Hastings and Sarandos can hive off that risk on somebody else – like the people whose job it is (ahem, studios) – and get a good profit-sharing deal for providing data and distribution (as well as their famously hands-off, artist-centric attitude toward production) — everybody wins.



To Everything (Beer, Dancing and Content Windows) There is a Season – but Content is Eternal

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I was at a honky-tonk in South Texas this weekend, dancing and socializing, as I do most weekends with my boyfriend Joe, and I had a conversation with a fellow patron that convinced me that consumers have mentally jettisoned appointment TV – like, permanently. And content owners need to know that this sentiment has reached deeply and irrevocably into “Flyover Land” and take steps to not piss off the heartland further.

Joe was talking with a couple of guys at the bar while I chatted with some friends at a table. When I went to find him, I learned that Joe had told one of the guys — a sturdy-looking dude in his 30s wearing a camouflage gimme cap with his jeans, boots and pearl-snap shirt – that I wrote a book about Netflix. The guy immediately launched into a well-considered complaint about Netflix’s library – mainly that once a title disappears from the streaming service it’s a real bitch to try to find it somewhere else.

The names of several online streaming services came up as did Redbox and a couple of pirate sites, but not once did he or I mention network or cable TV or their OnDemand services, or god forbid, DVDs.

It was just too loud in the bar – and I had beers to drink and dances to dance — to explain that distributors like Netflix, Hulu, Amazon and even Redbox are just the messengers of an outdated content “windowing” system that determines where and when every movie and TV program can appear for a decade post-release. But I agreed with him that the hop scotching across platforms that the “Twilight” movies or “Scooby Doo” reruns do as a result of these agreements is ridiculous.

So get it together, content owners – the golden age of television and movies, as you knew it, is long over. It’s time to abolish content windows and do the right thing – establish a Library of Congress-style repository for content that gives consumers what we want, when and where we want it – even if we have to pay more or a la carte for the good stuff. Because when it’s time to dance, you gotta dance, not track down that missing season of “Borgia.”


“If you tell the truth, you don’t have to remember anything.” —Mark Twain

Leave a Comment  /  Posted in Blog Post, Christina Kish, Marc Randolph, Te Smith

Memory is an interesting and crucial factor when you’re writing a book about events that moved quickly and were not well documented contemporaneously—a situation that commonly occurs at Silicon Valley startups. The conditions—long working hours, a blistering pace and less formal communication than at an established or public company—lend themselves to a bit of haziness when trying to pinpoint, more than a decade later, how a particular decision was arrived at, who made it and what the actual details were.

In documenting Netflix’s pre- and immediate post-launch era, I relied on the accounts of the eight founding team members to get a clear picture of what actually happened. I interviewed them separately—most had not spoken to each other in years—and fact checked with each the narrative I came up with based on their information. I also gave Netflix’s management access to the manuscript to fact check and comment on it.

Thankfully, the memories of my interviewees were pretty consistent about big picture issues—how they derived the business model, the thinking behind the back-end processes and consumer interface, the major events leading up to and following the launch and how the culture changed as the company grew.

Like most startups, Netflix had very little hierarchy in the early days—everyone put in their two cents about most decisions, partly because they were working together in one room and could overhear every conversation. Because there was not a lot of formal documentation in the form of emails, reports, etc, of Netflix’s first couple of years, I had—in some cases—to find common ground on details in which accounts were close but not identical and to decide who had the best recall and access to the most accurate information.

For example, the founding team members independently told me about a meeting that occurred in 1998 between Amazon founder Jeff Bezos and Netflix founders Marc Randolph and Reed Hastings at which Bezos offered to buy Netflix.

What was remarkable and wonderful about this process was seeing both the overlap and distinct impressions of each team member of similar events—it gave such richness to the story. So take a look at these transcripts from Randolph, Christina Kish and Te Smith about their recollection of the moment they could have lost their startup to Amazon.

Christina Kish Interview with Gina Keating

Oh-h-h. Okay. So basically you were sort of diverted from the rental, from refining the re-, rental model because Reed felt that you had to stave off this challenge from purchasers? Okay.

Right. Right. So then, that’s why ninety-nine basically killed me off. [LAUGH] Um, so what happened this is Eric, you know, working on recommend-, working on, on cue, working on recommendations. Mark and I, you know, working these three different models and then on top of it, Reed coming in and saying we have, you know, we have to sell. And so he went and made a deal with Amazon that we would do a click through to Amazon so if they didn’t wanna rent it, they would buy it from them.

Okay. So he thought he was gonna stave off Amazon by doing this. By becoming, because he tried this a couple other ways too. Like, okay we’re gonna go to Blockbuster and sell it to, and become the white box for Blockbuster to do their online service. And then he tried it again with Amazon, so this is the, and I see what’s going on here. Okay.



So, so he made this deal with Amazon that um, there would be two buttons. Yeah.  This is what finally did me in. Um, yeah, there’d be two buttons. And so you know, they had their choice and what we would receive income from Amazon based on how much would click through.

Marc Randolph Interview with Gina Keating

So what about Amazon?

Amazon was way earlier. Yeah, ’98 maybe early ’99. It was the same thing, we got on their radar—they were going to enter video so they were interested in whether they could leverage us to jumpstart themselves into video. Because they were going to buy us to start their video wing and we flew up and they were still in the old book depository—in some weird warehouse building—all sawhorses and doors and this little room and Jeff ran the meeting. He was there. And it was really cute—I really remember it because I was describing our first day and I go, I’m kind of embarrassed, it was only 100 orders that first day. And he said, don’t, I remember it so clearly. We used to have a bell that rang, Jeff was telling me this. He goes, every time a book got ordered a bell rang and we’d all get all excited. It was so cute and he was much sweeter and he was saying yeah we think we can buy you—it would only be $6-8 million something like that and he was interested in the people and we went back and we were going well do we fold it now—that’s not a bad return but then we said, nah! The problem with all these people, whether Amazon or Blockbuster or Wal-Mart, is that it looks so easy. The idea is extremely simple. Doing it for were it costs less than someone is willing to pay for it is extremely hard and no one realizes that. They, we were a software company, not a video rental company, not a retailer. We were a software company and everything went into how to optimize it—that’s extremely hard.

Te Smith Interview with Gina Keating

By the end of that first year you had a million dollar run rate company. So that was pretty amazing.

Yeah, we were pretty proud of that.

At that time I think probably you were in talks with Amazon.

There were talks, early, early on. I remember Mark coming and saying, because he was out all one day and we didn’t know where he went. And he came back and said, I think they’re on a private plane, and Pete’s flying commercial. And we were all, we hadn’t even launched yet. I don’t even think we had launched because, or we had barely launched. Because we were all like, but we just did it. They can’t buy it. I think Reed decided that he didn’t want to sell it yet, which was the right decision for sure. There’s a lot more potential there.

But I’ll never forget that night.


This Means War—Privations of a Price War

Leave a Comment  /  Posted in Blog Post, Christina Kish, Marc Randolph, Netflix History, Reed Hastings, Te Smith

There was one very consistent element to every interview I did for Netflixed: every member of the Blockbuster and Netflix teams expressed the sentiment that the paradigm-shattering fight between the two companies had been the highlight of their professional careers. The urgency and absorption with which they had approached the five-year-long battle had unleashed their creativity and had shown them what they were capable of as executives and as combatants.

Christina's Poster

The copy on this poster is pretty funny when you apply it to Blockbuster: “… a savage empire … lost a thousand years in time!” Photo Credit: Christina Kish.

It was clearly exhilarating and my interviewees described a sort of wartime camaraderie that developed at each company. Christina Kish, head of marketing for Netflix, was legendary for keeping insane hours at the Scotts Valley headquarters in the company’s startup days. Her husband Kirby, who worked as a consultant for Netflix, described how she would often crawl under her desk and sleep if it got too late to drive back over the hill to their home in Silicon Valley. In recognition for her mighty competitive spirit, Marc Randolph found this poster and hung it on the door of the office Kish shared with Netflix’s PR chief, Te Smith.

In addition to their all-consuming schedules, both teams endured quite a bit of privation, as this next photo of Lillian Hessel, vice president of customer marketing for Blockbuster Online, illustrates. Hessel came to Blockbuster Online from a posh corporate job at AT&T where she had enjoyed expense account lunches and first-class business travel, assistants to handle the scut work, and a large corner office. She traded it for regular lunches at this extremely greasy hamburger joint down the street from the Paramount Building, where she shared a tiny office that smelled like the sandwich shop downstairs with several co-workers. She told me it was the most exciting work she had ever done.

Lillian at Burger Joint

I snapped this shot on a day when Lillian graciously agreed to show me the environs of the Paramount Building, the funky neighborhood where Blockbuster Online lived for a couple of years before relocating to the corporate headquarters in Renaissance Tower in the posh end of downtown Dallas. Photo Credit: Gina Keating.

As Netflix and Blockbuster Online settled in for the long years of the price war, you might say their executives became a bit obsessed with each other—as this photo of Blockbuster Online’s Ben Cooper and JW Craft shows. I mean, who but the truly obsessed brings a Blockbuster Online mailer to an African safari?

Ben and JW in Africa

Photo Credit: Ben Cooper.

In a stateside version of this photo, Cooper engages in a little “business intelligence gathering” outside Netflix’s old University Drive headquarters.

Ben at Netflix

Photo Credit: Ben Cooper.

Over at Netflix, CEO Reed Hastings drew on pop culture and the classics to rally his troops for the battle against the much larger, better-funded Blockbuster. The press and market sentiment against Netflix was pretty negative as soon as Blockbuster Online launched, so keeping the company focused was a constant challenge.

In this photo, Hastings dons a bathrobe and boxing gloves in a patio outside Netflix headquarters to deliver a rousing speech that invoked Muhammad Ali and his signature line about butterflies and bees.

Reed Hastings with Boxing Gloves

Photo Credit: Chris Darner.

Among the costumes and props Hastings used to prod his team forward against a formidable foe were harpoons (with Blockbuster as Moby Dick) and this fabulous tuxedo sprinkled with cut-up Blockbuster cards. In public, he learned to be very circumspect about his rival but in the privacy of Netflix events he was a keen competitor.

Reed Hastings with Blockbuster Card Suit