Netflix CEO focuses on the futureJuly 22, 2009: 3:20 PM ET
by Patricia Sellers
Reed Hastings, the founder and chief executive of Netflix (NFLX), came by our offices on Monday. He's one of the more down-to-earth CEOs you'll ever meet.
He's a Bowdoin grad like my boss, Fortune managing editor Andy Serwer. Post-college, Hastings joined the Peace Corps and taught school in Swaziland. Then he played Silicon Valley start-up guy for a stretch and eventually struck gold with his movies-by-mail idea, aimed at easing the hassle of in-store drop-offs and pesky late fees.
He didn't name his start-up "Movies by Mail" or anything like that to limit the company's evolution -- which helps explain why Netflix continues to grow briskly, even in this brutal environment. The guy had vision when he launched Netflix in 1999. The company went public in 2002 at $7.50 a share, and today the stock, at $45, isn't far below its all-time high.
Netflix is due to announce quarterly earnings tomorrow after the closing bell, so we'll see how well it's riding the the digital revolution, as well as the bad economy. But the ride seems to be pretty smooth. Referring to subscribers, which today total more than 10 million, Hastings, 48, told us, "We were growing 25% when the economy was growing. We're growing 25% now."
Among the things that he and his team are doing right, the smartest may be choosing what they don't want to be. As Hastings told me on Monday, he learned from Jim Collins, the renowned management guru, that it's just as important to decide what not to do in business as it is to determine what to do.
Especially today, when change is happening so fast and unpredictably, it's critical to prioritize. For Hastings, this has meant not competing with Blockbuster at retail. That was smart, given that video-rental stores industry-wide are down to some 10,000, from 20,000 at the peak. "In five or 10 years, video stores will be gone," Hastings predicts.
A more recent choice he made -- "really hard," he admitted -- was deciding not to enter the ad-supported web-video fray against Hulu, YouTube (GOOG), and CBS.com (CBS). "Commercial-free subscription is where we can compete. It's our best shot," Hastings says. Netflix offers unlimited DVDs by mail and unlimited instant streaming to computers and TVs for a flat $8.95 a month.
Hastings decided not to compete with pay-per-view purveyors like HBO (TWX) and cable companies. And recently, he opted not to go head to head against Redbox. That's the fast-growing start-up that places kiosks--more than 15,000 to date -- in McDonald's (MCD), supermarkets and other heavy-traffic locales. Videos cost $1 a day.
Despite inordinate disruption and confusion around distribution -- or maybe because of it -- Hastings is clear about his game. An engineer by training and a Microsoft (MSFT) board member, he's determined to make video-watching more personal and satisfying -- via advancing technology, of course.
Hastings looks forward to the day, a decade or less from now, when an Internet browser will be built into every television, he says. We'll be calling up movies and channels and websites with a click of a button or just a spoken word: "Wizard of Oz." Or "ESPN." Or "Netflix."
Take a look at my conversation with Hastings for more about how he sees the future...