Hi Reddit, great to be back for AMA #2!. I’ve just released a podcast called “That Will Never Work” where I give entrepreneurs advice, encouragement, and tough love to help them take their ideas to the next level. Netflix was just one of seven startups I've had a hand in, so I’ve got a lot of good entrepreneurial advice if you want it. I also know a bunch of facts about wombats, and just to save time, my favorite movie is Doc Hollywood. Go ahead: let those questions rip.
EDIT: OK kids, been 3 hours and regretfully I've got shit to do. But I'll do my best to come back later this year for more fun. In the mean time, if you came here for the Netflix stories, don't forget to check out my book: That Will Never Work - the Birth of Netflix and the Amazing life of an idea. (Available wherever books are sold).
And if you're looking for entrepreneurial help - either to take an idea and make it real, turn your side hustle into a full time gig, or just take an existing business to the next level - you can catch me coaching real founders on these topics and many more on the That Will Never Work Podcast (available wherever you get your podcasts).
Thanks again Reddit! You're the best.
Who was it that suggested the "skip intro" button? I feel like they deserve recognition
I see a Nobel prize in that person's future.
Im fascinated by Netflix's company culture over the last 10 years as they've scaled to be so big. What was the culture like in the early days?
Wow. I could talk about culture for ever.
The most important thing to know though, is that Culture is not what you way, it's what you do. It doesn't matter what you write down, what you put in a culture deck, what you engrave in the cornerstone of your building . . . ultimately culture is going to spring from the behavior of the leaders.
So a lot of the cultural aspects that Netflix is famous for (Radical honesty, Freedom and Responsibilty, etc) are simply the way I have always treated people. It's the way Reed and I dealt with each other. Etc.
But most companies are like this when they start. There are way too many things to do and way to few people to do them all. So you have no choice but to give people very broad direction ("here's where we are going") and then trust them to get there. You give them the "responsibility" to get done what needs to get done, but the "freedom" to do the job the way they see fit.
That's very much how Netflix was at the beginning. It was SO much fun - since we all felt like we had autonomy, responsiblity, and such an interesting challenge.
As I said, most startups have that culture. What sets Netflix apart is not that it started that way . .. it's that it stayed that way. Because with most companies, those initial experiments get corrupted. Someone is late with their responsibility - so the well meaning leader says "we all need to do status reports". Someone overspends, so the well meaning leader says "from now on I need to pre-approve all spending above $1000". And pretty soon there is no freedom. There is no real respnonsibility. And it sucks to work there.
At Netflix we didn't every want to lost what made it so fun (and so effective) in the early days. So we tried to build a culture that preserved those things as we went from 10 to 100 to 1000 and now to 10,000 employees.
I don't work there anymore, but I know they still focus hard on preserving a culture that is free of rules, based on honesty, and where freedom and responsibility go hand in hand.
For more on where our culture came from, you should (shameless plug alert) check out my book on the early days of Netflix called "That Will Never Work".
For more on the current culture at Netflix, you should read Reed Hasting's book call "The No Rules Rules".
And to get concrete tips on how to build culture in your own company, you should (more shameless plugging ahead) listen to my podcast, also called That Will Never Work.
How difficult were the discussions to undo the
Flixster Qwikster decision?
Pulling this question out of obscurity because it's really important topic.
One of the most important skills for any entrepreneur is focus. In a startup there are always hundreds of things broken and on fire - but you only have the resources to do two or three of them well.
Early at Netflix we rented DVDs and as an afterthought, decided to sell DVDs too. What happened is that nobody wanted to rent DVDs but the sales business took off. That was a problem because we knew it was just a matter of time before Amazon entered and then we would be toast. But the real problem was that doing both rental and sales at the same time was really hard; it was confusing for customers since we couldn't clearly say what we did; designing the check out process was tricky since there were rentals AND sales; the inventory management was hard; the metrics were confusing.
Ultimately we decided that we had to pick one to focus on if we were going to have any choice of making SOMETHING work.
That decision - to walk away from sales (which was paying 98% of our salary) to focus on rental - was probably the hardest decision I had to make at the time.
Now . . .fast forward 10 years . .. and Netflix is at a similar place. They are trying to do TWO things at the same time: DVD rental and Streaming. It's confusing for customers since we couldn't clearly say what we did; designing the check out process was tricky since there was streaming and DVDs; the metrics were confusing.
Once again, Netflix decided to walk away from the past to focus everything on the future.
Now of course they messed up the tactics -- but the strategy was completely right. And here's the secret - they didn't really undo the decision. The undid the naming part of it - but they still split the company in two. They still made sure that the best talent went to the streaming part of the company.
The decision I made when i was CEO to walk away from selling DVDs was brutal - but back then it only effected tens of thousands of customers. The decision to walk away from DVDs and focus on streaming was made when the DVD business had tens of millions of customers.
Had blockbuster acquired you early on....how do you think that would have changed the streaming industry?
Quick answer: you would probably be asking your partner if they wanted to "Disney and Chill".
Longer answer: For those who don't know, during a particularly bleak period in Netflix' history, when we were on the verge of going out of business, Reed Hastings and I flew to Dallas to try to convince them to buy us. We would combine forces, we would run the online business, they would run the stores, we would find all these amazing synergies, and voila! Everyone happy. The price we proposed? $50,000,000. And they laughed at us. So luckily we dodged that bullet.
But had they bought us, I have no doubt that the Netflix story would have pretty much ended there. I dont think I, Reed, or any of the rest of the team would have stuck around long. Blockbuster would invariably have fucked it up. They would have gone bankrupt anyway. And I would probably be working as a postman somewhere.
Streaming would have come along anyway, but probably a bit later. Netflix started streaming in 2007 (we launched as a DVD by mail in 1998) but we pretty much did it on our own for a dozen years before the rest of the industry caught on that this was better for consumers.
What allowed us to survive (and thrive) for those dozen years is that we came into streaming with a huge and healthy DVD business. And lots of understanding of consumer tastes.
And by the way: the company that Blockbuster could have bought for $50mil, now has a market cap of $250 billion. I'm just sayin!
What were the driving forces behind making the change to streaming? Great decision by the way!
My book, and my new podcast, are both called "That Will Never Work". And that's because that's what almost everyone (including my wife!) told me after I pitched them this crazy idea about renting videos by mail using DVDs. Almost all of the naysayers pointed to two things they said would doom us. First: Blockbuster. At the time there were 9,000 Blockbusters. Who would ever rent by mail and wait 3 to 4 days for a movie, when there was a blockbuster two blocks away. And Second: That DVDs were a digital medium. So it was just a matter of weeks or months before content was delivered digitally over a wire or through the air straight to your TV.
What was interesting was that we knew they were right. It WAS a digital medium and movies and TV shows WOULD eventually be delivered that way. But we thought they were wrong about the timing. For a lot of reasons, we thought it would take years for that to actually happen.
So our challenge was to build a business that worked in a DVD world, that would pave the way for a business that would still work in a digital delivery world. We did that by focusing on content. Even from day one: it was all about helping customers discover great stories. We sourced every DVD. We had great discovery tools. We built the taste algorithms. We made the service delivery agnostic.
So when the time came when it was technically, legally, and logistically possible to realistically deliver content over the 'net, we were in a great place.
There was never a force toward changing to streaming... it was just biding our time, getting stronger, and waiting for the world to be ready for it. Then we pounced.
How do you feel about the diversification of streaming services? Do you think it will ultimately hurt or help the business model?
If you're Disney or Netflix (and maybe HBO Max) you've got all the ingredients: You've got the ability to create great "tent-pole" content to bring in subscribers, you've got the ability to keep delivering new content on a regular basis to keep those subscribers over the long term, and your able to charge a fee high enough to support continued content product and/or acquisition.
If you DON'T have those three things, something has to suffer. Either you have to use very aggressive promotions to bring subscribers in (I'm looking at you, Apple). Or you have to continually subsidize your streaming business with other core businesses (Amazon). Or you have to cut your prices way back to attract and keep subscribers (Peacock, Paramount Plus). Or you have to aim for the fringes. Like Discovery Plus.
But we're still in the early stages. Only in the last 18 months have we gone from almost no one in the streaming biz to almost everyone - so I think this has yet to fully play out.
What is Marc Randolph's number one entrepreneurial tip? Cliche or niche, what do you think would be the ultimate advice?
Also, thank you for this AMA Mr. Randolph, have a great day!
Far and away, the thing that separates successful entrepreneurs from everyone else is a Predisposition to Action. They think less and they do more. The average time between when they have an idea and when they've figured out some way to get it out in the real world and test it . . .is about 15 minutes.
Everyone who has ever taken a shower has had an idea, but most people leave their ideas in their head - where the idea is going to be safe, and warm, and can grow to a tremendously successful company IN THEIR IMAGINATION.
But what I've learned in my 40 years as an entrepreneur (and what I hammer home episode after episode on my podcast) is that there is not such thing as a good idea. They are all bad ideas. And the ONLY WAY you can figure out whether it's a good idea or a bad idea it to figure out some way to collide it with a real customer and find out.
The classic story is that when Reed and I heard about DVDs and realized it may open up the video-rental-by-mail idea that we had been chewing on, we didn't rush to the office to write a business plan. Nor did we work on a pitch deck. Nor did we just "think about it for a while". We immediately drove into town, bought a used music CD (we couldn't find a DVD) and mailed it to Reed's house, and found out in less than 24 hours whether we were on to something or not.
Stop thinking. Start doing.
What is the reasoning behind removing objectively good shows and/or movies? Is it purely based on user watch statistics or some other factor?
Is Netflix's direction aiming to populate their service with more Netflix Original content? I'm all for giving people the chance to experiment since most major movie studios play it safe with remakes and superhero movies these days but I worry you let enough people do it, your service is overrun with 'crap' content. Maybe the aim is to find a balance?
When Netflix started streaming back in 2007, 100% of the content they had available came from other people via licensing agreements. Netflix didn't own these shows and/or movies - they just had a temporary license to show them.
That worked fine (as a business) when there really weren't other streaming options, but as the market has expanded, the content is going to migrate from service to service as contract's expire, as the owners start their own streaming services, etc. So the simplest explanation for good shows (The Office, Friends, etc) moving from one service to another is that the license expired and was sold to someone else.
Netflix saw that trend coming years ago, and has been moving agressively to up the percentage of "owned" content.
In 2012 - the spent $2bbn on content - 100% licensed. in 2020 - they spent approxiately $18bbn on content - and 60% of it owned.
This coming year Netflix is scheduled to release 70 new movies - that's more than Disney and Warner (HBO Max) Combined.
The library is unquestionably smaller - but it's arguably much better. And how much content you have is meaningless if people don't watch.
As Reed Hastings' recently said, "The Ultimate Metric is Member Joy".
How early on did you know Netflix would become a household name?
It took a while. We struggled for years before we finally found a repeatable and scaleable business model that would allow us actually start growing subscribers. So I think for the first 3 or 4 years not many people besides hard core DVD lovers, and my family, had any idea who Netflix was.
Probably the breakthrough moment for me was a few years later, when i was sitting on my couch doing the New York Times crossword puzzle. One of the clues was: "Service with a Q". Six letters. Yept, You guessed it, Netflix was actually in the NYT crossword!
But I still get amazed when I hear Netflix mentioned in popular culture. If I'm watching TV and hear one of the characters reference Netflix, my wife and I still look at each other and go, "Netflix!".
And Netflix and chill? Wow. I never saw that coming.
How do you get motivated to do the things you do? Is it just self discipline or is there something else I'm missing? I really want to be able to accomplish things, and when I try to start something new I'm usually motivated and excited about doing it, but then a few days go by (sometimes mere hours) and I just can't seem to find that motivation anymore. I've also been thinking about creating a startup of my own someday soon, but I don't have the funds yet. And I heard from several entrepreneurs that having investors ruined any passion they had for their ideas. So what's your take on that?
Unfortunately, too many people are drawn to entrepreneurship for the wrong reasons. They are doing it because they want to be rich, or famous, or powerful. But of course, once you start, you spend your days doing things that have nothing to do with being rich, famous or powerful. So of course you quickly lose interest.
The successful entrepreneurs I know are almost universally motivated by something else: they love solving problems. And what a surprise . . .when they show up for work in the morning they get to spend every waking minute solving problems. So of course they love what they do. And of course they can stay focused on that for days, weeks, months and years at a time.
I'm super lucky since I started as an entrepreneur before there was a cult about it. I've also loved solving problems, and so getting the chance to do that for a living was a dream come true for me.
And just to address the "investors ruining things" comment, it doesn't need to be that way. But I do always advise founders (shameless plug warning) on my podcast that you have to make sure their is alignment. Investors don't care about "solving problems". If they give you money, they want it back. Times 100! So now you have to do two things: solve problems AND make money. So before you say yes to financing, you have to make sure that this is something you will enjoy doing.
Netflix' interface is really kinda bad if you want to find things in a certain genre. While cheat codes are available to help with that, why not just add those features already?
I'm not ignoring this voted up question, it's just that I genuinely don't know the answer. I don't currently work at Netflix and I haven't worked there for quite a few years. But since I know that Netflix spends unbelievable amounts of time, effort and attention on their UI and UX, I'm sure there is a good reason for exactly why it is the way it is: I just don't know what that reason is.
It's funny, because on my podcast (where I mentor early stage entreprneuers) I spend a lot of time on ideation (where ideas come from, how to validate ideas, how to quickly-cheapily-easily figure out which ideas have merit, etc). I've found that the best ideation tool is simply to look for pain, and it's obvious that "content discovery" is a huge pain point for every streaming customer.
Someone is going to figure this out eventually. Could it be you?
Netflix made access to movies and shows much easier.
What do you think of games? There's this grand potential for allowing people with minimal hardware to experience hardware-intensive content, only needing to stream audio/video output and control input. Instead, companies ask people to spend over $500 for a gaming system.
Why haven't we seen more traction on something like a "gaming tv" that can stream this? Is this really an issue of home internet speeds being too slow and unstable?
While we were in the DVD by Mail business, people were always saying we should do games. And yes, at the time Games came on discs, but the similiarities end there.
One issue was that it take 90 minutes to finish a movie - and then you send it back. You might hold on to a game you like for weeks. And since a rental business model depends on being able to keep turning inventory, it's hard to make games work.
But the bigger issue is that the games don't have a shelf life. People are still watching (and loving) movies that came out years ago. (The Matrix is now 20 years old!). Games not so much. (Madden NFL 2000 anyone?)
What is your favorite movies?
What country, in your opinion, has the best Netflix?
For years, whenever someone asked me that question (which was often) I gave them a somewhat disingenuous answer: It's Quentin Tarantino's "Pulp Fiction.
Don't get me wrong. I do love that movie and have probably watched it two dozen times. I can quote most of it by heart. It's brilliant. But it's not my true favorite.
Only more recently have I admitted what my true favorite movie is (and it's somewhat embarrassing). It's Doc Hollywood. Starring Michael J. Fox. It's a cute fish-out-of-water story about a big city plastic surgeon getting stranded in a small town in Georgia and unexpectedly falling in love with small town values. It's not artistic masterpiece, but it "speaks to me." Something deeply resonates with it's message. And ultimately I believe that the true value of a great movie is not entertaining you for 86 minutes, it's changing how you feel.
Is there a way to prevent all these fractured streaming services from turning into a new version of cable?
Interesting point. I fear that it is going that way. Paramount Plus - which is launching in a few weeks - is basically just a cable service delivered in a new way.
I don't really know the answer (don't work there now) but Netflix is pretty strict about all content and pitches coming in through an Agent.
Are you still watching?
Watching Netflix? Absolutely. We're currently watching Peaky Blinders. Tom Hardy is amazing!
But I don't just watch Netflix. I'm a pretty normal guy when TV watching is concerned. I just finished Your Honor on Hulu. Currently watching Industry on HBO. Just finished season one of Unforgotten on Amazon Prime. Loved Ted Lasso on Apple. And of course Mandalorian on Disney Plus.
Why do I have to use a VPN to watch shows from other countries?
It's a legacy from how movies and tv shows were originally distributed. Back then, when the only way to watch TV was over the air TV, and the only way to watch movies was in theaters, the studios would do country-by-country deals. They would release the movie in the United States, then a few months later in one country, and then a few months later in the next country. And in fact the legal rights to distribute a movie were given to different people for different territories.
Then, when movies started being available on Video (and then DVD) they tried to do the same thing there. Giving certain people the rights to distribute those movies in different territories. (And to prevent the person who had the "rights" to distribute a DVD in one country, from just selling it over the border into a different country, they had the discs "locked" so they wouldn't play in other countries).
So now fast forward to streaming - and as ridiculous as it sounds - the studios are still making deals with different people in different companies. That means that Netflix may have the rights to a show in the US, but NOT have it in some other country.
The good news is that as Netflix slowly and steadily increases the percentage of it's catalogue that is fully owned, that they will ensure that their shows are avilable all of the world simultaneously.
Why'd you lose the star rating system?! It clearly works for users, were the studios upset?
Because your behavior turned out to be a much more reliable mechanism for determining what you like than having you provide a rating.
Every major movie studio wants to have their own streaming service (Disney, Paramount).
What needs to happen for this trend to stop?
Well eventually we're going to run out of movie studios.
How can a young wanabe writer with no courage to launch a book but with a lot of crazy ideas can pinch a few of them to a Netflix producer? I searched about this when i was in a deep state of depresion and my mind kept creating new stories, new characters and new worlds. To sad for me that the answear was that I need an agent, someone to represent me. Not now or even then was I in a financial state to get an agent or to hope publishing a book.
Here's some tough love: if you really want to write a move - just write one. If you have a phone, or a computer, or anything really with a keyboard, you have all the tools you need.
If you want to make a movie - just make one. If you have a phone and some editing software on your PC, you have all the tools you need.
If you want other people to watch what you've made - just show them. If you have access to YouTube or Vimeo or Tiktok, you have all the tools you need.
If you want to get rich and famous from making movies . . . .we'll then you are doing it for entirely the wrong reasons.
But if you love the process of creation . . .then just create. And if you are not talented, the very act of doing it over and over again will help you develop the skills to be talented.
Once you have some talent, people will watch.
And once you have talent that people want to watch, then NEtflix, HBO, Disney and everyone else in the world will clamor to want to work with you.
The only person holding you back is you.
1) Netflix is always experimenting with new ways to consume content. For example, in France they are trying a new linear-programmed channel called Direct (which you watch like you would watch a scheduled TV channel). Will it work? Who the hell knows, but they are also looking for ways to improve the experience and/or give people new ways to watch.
2) There probably won't be true collaboration, but I kind of believe the streamers aren't really competing with each other, as much as they are all collectively competing with linear TV. Although Netflix has 200million subscribers, and Disney is approaching 100million, that's still a tiny portion of the 2.5 billion users facebook has and the 2 billion that You Tube does.
3) When Blockbuster rejected us I was crushed. It had taken us months to get that meeting, and it was so obvoiusly a great combination that i was sure they would go for it. But when they said no, not only was Blockbuster not going to be the thing that was going to save us . . . they were going to compete with us! It forced me to recognize that there was no silver bullet - no magic way out - no easy path. That sometimes (as my father used to often tell me) "the only way out is through".
When are you guys gonna buy AMC and bring theatres and streaming service together to completely dominate the landscape?
Hmm? Buy AMC? Fight 100 duck-sized horses? Fight a horse sized duck?
All bad choices.
My passion has always been entrepreneurship. I recently went back to school to finish my masters in CS at 30 (3.5 years left) simply because I was tired of being limited by needing tech people for my ventures.
What would be your advice to an aspiring tech entrepreneur?
I firmly believe that if you want to be an entrepreneur, you should just be one.
In my career as a mentor, I've heard every excuse for not starting: I need to raise money, I need a CS degree, I need a co-founder, etc etc etc. Excuses every one.
Don't get me wrong . . . having a CS degree can be incredibly helpful! But you have decided to push off your passion to be an entrepreneur by 3.5 more years for it?
I don't have time to go into detail here about it, but there are powerful ways to finding tech person to help with your projects. In fact I talk about extensively on the podcast. I'm not trying to hype the pod, but you should listen. And if you don't get what you want, come on the show and I'll mentor you directly. Call 1-888-MarcPod.
What’s your favorite book? (Besides your own ;))
I've always loved "Endurance - Shackletons Incredible Voyage" by Alfred Lansing. One of the most remarkable stories of overcoming adversity ever told, not to mention an incredible story of leadership.
Highly highly recommended.
When you all started with Netflix, was it just a project for you, or did you see the potential it got? I believe it must‘ve been overwhelming when it got more and more popular in the last 6 - 7 years?
I‘ve some ideas myself too, for a project with a potential bright future, anything you‘d recommend me?
Back when we started, it was considerably harder to start an online business than it is now. There was no AWS: you had to buy your own hardware, you had to wire it all into a closet, you had to install all the server software, etc. There was no Shopify: you had to write every line of code from scratch. There was no Stripe or PayPal: you had to build your own payment portals. Same for Security. Analytics. Financials. Etc.
Because it was so hard, I couldn't start it as a project. It took a dozen people six months just to launch the website. I was all in.
That's different now. I HIGHLY recommend starting EVERYTHING as a project. As i coach people (shameless plug alert!) on the That Will Never Work podcast, you should never actually start the business without validating your concept in advance - and that should always be done on the side. The key these days is not coming up with a good idea. The key to being a great entrepreneur is how clever you can be about figuring out quick, easy and cheap ways to validate your ideas.
When you ultimately go to start, it will be infinitely easier to raise money and convince great people to join you if you're saying "look at what I've proven" rather than saying "imagine if you will". In fact, any good investor and/or employee is looking for someone who has already demonstrated that their idea is a good one - even if it's not yet in a repeatable / scalable form
What ever happened with the algorithm based on the 5star scale? I can’t seem to find anything about the algorithm online anymore.
The algorithm is even better and more important than it was when we used the 5-start scale. But now it's based on your behaviour: What you binge, what you watch, what you drop after 5 minutes, etc.
Way higher compliance, way lower user friction, and way higher accuracy.
What startup should I start today?
First piece of advice; Don't fall in love with an idea. Fall in love with a problem.
Pick a problem that you're familiar with. Leave erradicating malaria to the Gates foundation. Find a problem you encounter in your life, in your business, in your customers lives, in your hobbies.
Learn everything you can about that problem and begin figuring out ways you can quick, easily and cheaply see whether the solution you envision actually helps.
Much more about this topic on the podcast.
Marc, as much as I would love to be able to enjoy a movie while reading captions for English I just can't do it. Why have there been so many Netflix releases lately in foreign languages?
Netflix currently has about 200 million subscribers. Take a guess at how many of them are in the US. (Go ahead . . .I'll wait)
OK, give up? Only about 40% of them are in the US. That means that the majority are non-US subscribers and surprise surprise - they don't all speak English.
Netflix has made a major push to make content that is designed for the countries in which it will be consumed. With local writers, directors, actors etc. ANd languages.
Even more interestingly (to me) is that they are working really hard to improve the quality of their Dubbing. I recently watch Lupin (which was originally in French) but which has been dubbed in English and it's really hard to tell.
Thoughts on the Netflix and Chilled flavor of Ben and Jerry's ice cream?
Way to peanut-buttery for my taste. (I only tried it once - on the set of a news show I was being interview for - so I may not remember it correctly).
But it was very cool to actually see a B&J flavor named after Netflix!