Netflix chairman Reed Hastings has given $7 million to a super PAC supporting Vice President Kamala Harris’ run for president, according to a report by The Information on Tuesday.

The publication said that this was the largest donation Hastings has ever given in support of a single candidate.

Hastings was reportedly encouraged to donate by Reid Hoffman, Democratic donor and co-founder of LinkedIn.

Also Read: Netflix Co-Founder Reed Hastings Sticks His Neck Out on Biden Debate

While the Netflix co-founder and former CEO seemed initially cautious to endorse Harris, writing on X Sunday,  “Dem delegates need to pick a swing state winner." 

But after Harris won enough delegates to secure the Democratic nomination Monday evening, Hastings quickly took to the app to congratulate her, stating that “now it is time to win.”

This comes just weeks after Hastings, among other media titans, publicly called for President Joe Biden to withdraw from the race.

Earlier this month, Hastings even wrote an email to The New York Times saying, “Biden needs to step aside to allow a vigorous Democratic leader to beat Trump and keep us safe and prosperous.”

The coordinated Harris campaign reported Wednesday morning that it had raised more than $250 million in donations for the Democratic party between Sunday afternoon, when Biden withdrew from the race, and Tuesday evening.

In many respects, it’s good not to be the king anymore.

Freed from the shackles of chief-executive life and now sitting on the board of directors, Netflix co-founder Reed Hastings seemingly feels free to weigh in on controversial political matters. 

And the frequent donor to Democratic causes and candidates is messaging President Joe Biden to abandon his fraught re-election campaign. 

“Biden needs to step aside to allow a vigorous Democratic leader to beat Trump and keep us safe and prosperous,” Hastings said in an email to The New York Times. 

Hastings’ involvement in Democratic causes does extend back to his time as CEO of Netflix. 

He and his wife, Patty Quillin, have donated more than $20 million to Democratic party constituents over the last several years, including $1.5 million directly to Biden for his successful 2020 presidential campaign. 

Hastings’ message contributes to a growing chorus of Democratic backers and operatives who are asking the 81-year-old president and candidate to step aside, following his disastrous debate performance on June 27. 

Netflix co-founder and executive chairman Reed Hastings has donated 2 million shares of Netflix stock, valued at around $1.1 billion, to an unidentified group, according to a Securities & Exchange Commission filing. 

According to numerous reports, the unnamed entity is the Silicon Valley Foundation, a popular charity for tech-biz earth movers because of the tax breaks and privacy it offers. 

Hastings still owns approximately 3 million shares, valued at $1.72 billion, through his family trust, in addition to several million stock options. According to the Bloomberg Billionaires Index, Hastings now ranks No. 491 on the list of the wealthiest individuals, with a remaining personal wealth of $5.49 billion. 

Hastings has a track record of large donations to educational entities. 

In 2020, for example, Hastings and his wife, Patty Quillin, created a $120 million scholarship pool at Black universities Spelman College and Morehouse College, as well as with the United Negro College Fund. 

Currently trading at nearly $576 per share, Netflix stock is on a trajectory to surpass the all-time high of $690.31 a share reached in October 2021.

Netflix announced a series of key title promotions for its top-level managers starting at the very top, with Reed Hastings moving on from his co-CEO position to the role of executive chairman. 

Meanwhile, 14-year company veteran Greg Peters has been upped from chief operating officer to co-CEO, alongside Ted Sarandos, who himself was moved up from chief content officer in 2020. 

The co-founder of Netflix, Hastings was the only chief executive officer the streaming company had ever had until Sarandos was bumped up to co-CEO. 

Also read: Netflix Has Huge Q4, Exceeds Guidance on Revenue and Subscribers

“Ted and I have worked together for many years — building tremendous trust and respect for each other,” Peters said in a statement released Thursday in Netflix’s quarterly letter to shareholders. “We’re also motivated by the same goal: a desire to better serve our members so that we can continue to grow our business.”

For his part, Hastings said that he, Peters and Sarandos have been discussing the transition for some time.

“We dream of the whole world finding their entertainment on Netflix,” Hastings said. “And the three of us have been working together for 15 years trying to figure out how to get through this issue, that issue, and how to grow. I couldn’t be happier to complete our succession process.”

Also, Bela Bajaria has been upped to chief content officer, and Scott Stuber has become chairman of Netflix Film. 

"Bela and Scott are outstanding creative executives with proven track records at Netflix," Sarandos added. "In 2022, we premiered many of our most popular series and films in Netflix history, including Wednesday, Glass Onion: A Knives Out Mystery, Purple Hearts, Monster: The Jeffrey Dahmer Story, The Adam Project and Harry & Meghan — a testament to their leadership and creativity. I couldn’t be more excited to work alongside them as we seek to delight audiences for years to come.” ■

With Netflix making big changes — showing commercials, cutting down on password sharing — co-CEO and chief content officer Ted Sarandos is making big changes in the way he gets paid.

According to a filing with the Securities and Exchange Commission, Netflix will pay Sarandos a $3 million salary in 2023, much less than his $20 million salary in 2022.

Sarandos is being allocated stock options worth $20 million, unchanged from this year, but in 2023 he will be looking to get a bonus, unlike last year when he wasn’t part of the bonus program. The target amount is $17 million.

Putting it all together Netflix expects Sarandos' total compensation to be $40 million, the same as in 2022.

Netflix’s chairman and co-CEO Reed Hastings is looking for the same pay as 2022 in the New Year, with a $650,000 salary and stock options worth $34 million.

In 2021, Hasting actually got total compensation of $40.8 million down 6% from 2020. Sarandos’ total compensation fell $3% to $38.2 million.

Greg Peters, COO and chief product officer at Netflix, is following Sarandos’ path for 2023, taking a smaller salary — $1.5 million, down from $16 million in 2022 — but working toward a $10.5 million bonus. Peters is also getting options worth $12 million, up from $8 million last year, for a total of $24 million like in 2022. 

CFO Spencer Neuman will again get a $7 million salary and $7 million in stock options.

Chief Legal Officer David Hyman is getting a $4 million salary and $7 million in stock options. He was scheduled to get a $6 million salary and $4 million in stock options in 2022.

Rachel Whetstone, chief communications officer, is set to get a $5.7 million salary and $800,00 in stock options. In 2022 she was supposed to get a $5.5 million salary and $1 million in options. ■

With streaming video companies looking for ways to stem the slowdown in subscriber growth, a panel of experts at the Next TV Summit said using an old cable tenet — bundling — could help attract more price-conscious consumers into the fold. 

At the “Recession Realities” panel at the gathering Tuesday, part of NYC TV Week, Weather Group senior VP and chief marketing officer Fred Bucher said the same economic forces and price sensitivity that killed the cable bundle are apparently making a comeback with streaming. Already streamers like Disney, with its Hulu, ESPN Plus and Disney Plus bundle, and others are repackaging services to make them more attractive to consumers. 

“Economic forces and price sensitivity is what killed the cable bundle, and that’s continuing,” Bucher said, adding that price sensitivity and churn are driving the creation of different tiers of pricing and services like ad-supported video-on-demand (AVOD) and free ad-supported streaming television (FAST) services.

Weather Group launched its own streaming service — Local Now — to address cord-cutters who missed local news and entertainment content.

“A lot of the answers for the future are in the past,” Bucher said, adding that what built the cable business — aggregation, better pricing and bundling — will likely be cornerstones of SVOD and AVOD models in a few years. 

Panel moderator Jon Geigengack, founder and principal of Hub Entertainment Research, said that as the bundle grows, consumers will crave a way to make finding content easier, and aggregation is one way to satisfy that need. 

DirecTV Advertising Group VP, client success, programmatic and ad operations Rose McGovern agreed, adding that aggregation is what DirecTV does best. Citing recent Nielsen research, she said about 64% of customers wish to have a bundle that includes as much or as little content as they want. 

That includes live and local programming as well, McGovern added, with about 67% of people nationally watching live content every day. 

As content streaming choices grow, Bucher said it is imperative that content companies get the word out, and that means marketing becomes more important than ever. 

“The biggest threat is underinvestment in marketing,” Bucher said. “It starts with great content, great product experience, and great marketing. If you don’t have those three things, you’re not going to win.” 

Bucher added that critical to the marketing effort is that streamers really know their consumers. 

“You have to understand who your consumers are, understand who your hard core users are too  and make them happy,” Bucher said.

And once you’ve hooked a viewer, the trick is keeping them. At AMC Networks, executive VP of performance marketing Sylvia George said engagement is a critical part of the equation. 

“What is so critical is your audience,” George said. “The relationship with the audience, super-serving the audience, making sure that you’re segmenting your audience based on data, based on what is your audience engaging with once they come in — not just the first thing they watch, what’s the second and third thing they watch. Getting people engaged within a specific time period is critical to ensuring retention. If you don’t get your subscriber engaged within a few weeks, you’re at risk of losing them. You can’t get complacent.”

The panel also was encouraged by Netflix’s plan to launch an ad-supported version of the service soon. The company has already partnered with Microsoft to provide the tech infrastructure for the AVOD service. 

“In some ways, they could help re-energize the advertising business,” Bucher said, adding that Netflix doesn’t have the “institutional inertia” of some other companies that have long been in the ad business. “It’s kind of cool to take a fresh look.”

Bucher was especially encouraged by the vast amount of data in Netflix's arsenal, adding that the ad business may never get this chance again. 

McGovern also was encouraged by the potential for more innovation that a Netflix AVOD product could bring. For example, a departure from the traditional 15-second to 30-second ad spot.

But Bucher warned that whatever comes out of the Netflix AVOD experiment will depend on outside pressures. 

“There’s a lot of stuff they could do that could be an enormous amount of fun… but what it’s going to come down to will be how much pressure they’re under to deliver a number of revenue,” Bucher said. “If there are huge revenue expectations, that’s going to diminish innovation, because they are going to default to what they know, and agencies will say, ‘Just make it easy for me.’ That, to me, will be a shame. 

“The irony is that Reed Hastings, who was so dogmatic for so long about advertising, can actually become the person to really reinvent the space,” Bucher continued. “I hope they’re given the time to do that. “ ■ 

Netflix co-CEO Reed Hastings made his boldest declaration yet regarding what he sees as the ultimate triumph of streaming over broadcast and cable TV distribution.

“It’s definitely the end of linear TV over the next five to 10 years,” Hastings told equity analysts Tuesday during Netflix's second-quarter earnings call. 

Also read: Netflix Beats Forecasts with Only 1M Lost Subs in Q2, but the Revenue Picture Doesn't Look Great

Hastings has become enamored in recent months with Nielsen data showing Netflix's share of overall U.S. TV viewing increasing as broadcast and cable platforms ebb. He noted that Nielsen's latest monthly market share tracker, known as "The Gauge," will show Netflix's overall share of U.S. viewing for July at 7.7%, up from 6.6% in July 2021. 

Also, in Netflix's quarterly shareholder letter, the streaming company included a Nielsen-based graphic showing how its total U.S. viewing time for the 2021-22 TV season (over 1.3 trillion hours) dwarfs linear competition. 

Here's that chart:

Beyond an agenda to show inevitable market-share expansion for Netflix, is Hastings -- widely seen as one of the most credible voices in the video business -- correct?

Notably, ABC/ESPN, CBS and NBC just re-upped their rights deal with their biggest driver of audience, the NFL, through 2031, which fits the timeline Hastings described. Amazon, though, just took over the "Thursday Night Football" package, in what could be a harbinger for the way the league negotiates its next round of major TV extensions.

"Reed is one of the smartest people I know, so I know that he knows that the only thing that can possibly kill linear TV is the NFL walking away from broadcast TV in 2031 when the current contract ends," blogged Shelly Palmer, a Syracuse University media professor and pundit on the evolution of the TMT business. 

Juxtaposed with all of this, the broadcast industry is -- slooowly -- rolling out its ATSC 3.0 standard, which promises to deliver 4K, HDR, 120 fps and other features for free. Netlfix users currently have to pay a premium for these technologies.  

For his part, Palmer said "don't get him started" on the prospect of the so-called NextGen TV standard rescuing the broadcast industry. 

But it could live on without the NFL, he noted. "If you want to understand what a 'no sports' linear TV landscape might look like, study the radio business. It suffered TV’s 'ultimate fate' a while back, yet – against all odds – it’s still a $10 billion annual business. Why? Because it’s free to use."

Indeed, further clouding our ability to envision a moment a decade out, in which bandwidth is cheaper, streaming adoption is far more proliferate ... and it just make sense to view video on-demand over the internet: the current inflationary environment. 

Free, over-the-air broadcast is looking pretty good these days. And even in a quarter during which Netflix's Stranger Things broke viewership records, the service still lost 1.4 million users in the U.S. and Canada. ■

Top Netflix managers have told staff that their plan is to now debut an ad-supported tier in the final three months of 2022, a marked acceleration over the "next year or two" timeline publicly described in April. 

According to the New York Times, which cites two unnamed internal Netflix sources, the streaming company also in the same memo outlined plans to begin his much discussed crackdown on password sharers in the fourth quarter, as well. 

Netflix hasn't commented. 

On April 19, Netflix stock dropped 35% in after-hours trading on the Nasdaq, following the company's revelation that it lost 200,000 customers globally in the first quarter. 

Netflix revenue growth, which had exceeded 20% during the pandemic, had slowed to under 10%. 

With a return to growth in mind, Netflix CEO Reed Hastings quickly declared a reverse-course on his company's long dogmatic refusal to embrace a lower-priced tier partially supported by advertising. 

"Those that have followed Netflix know that I’ve been against the complexity of advertising and that I'm a big fan of the simplicity of subscription,” Hastings said during his quarterly interview for shareholders. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want, makes a lot of sense.”

Netflix currently prices its most popular tier in the U.S. and Canada at $15.49 a month after a January price increase. 

Netflix stock fell again Friday (April 22), ending the day at $215.52 (down 1.2%) and capping a three-day decline that saw the company shed 38% of its share price, more than $55 billion in market capitalization and the unofficial title of Streaming Champion of the World. Now with expectations low for Q2, the company is faced with a dilemma: what to do to regain its crown. 

The last time Netflix stock fell like a stone -- remember January 21? -- there was a quick response from hedge fund managers who saw the drop off as an opportunity to take advantage of the panic, to snap up a good stock for a bargain price and rake in the money later. Now, three months later, during Netflix’s latest share cratering, those earlier white knights have left the castle, and there doesn’t seem to be any replacements at the drawbridge, at least anytime soon.

Back in January, hedge fund Pershing Square and its chief Bill Ackman said they had bought 3.1 million shares of Netflix for about $1 billion, claiming he was “all in” on the streaming space and was ready to reap the profits once Netflix turned itself around, probably in the first quarter. At the time, Netflix predicted that it would add about 2.5 million global subscribers in Q1, substantially lower than in past Q1’s -- typically one of the strongest growth periods for the company -- but strong enough. A few days later, Netflix founder and co-CEO Reed Hastings said he bought $200 million of Netflix stock personally, showing his commitment to the company and the stock. 

Also: Netflix Comeback Could Take a While 

Fast-forward to earlier this week and Ackman sold his Netflix stake for a $450 million loss on April 19, and Netflix didn’t add 2.5 million global customers, it lost 200,000 of them. Adding insult to injury, the company said it would lose another 2 million subscribers in Q2. 

In a note to shareholders on April 19, Ackman said that while he and the Pershing team believe in Netflix’s management, its “enormous operating leverage” means that any fluctuation in the company’s future subscriber growth can impact value. 

“In our original analysis, we viewed this operating leverage favorably due to our long-term growth expectations for the company,” Ackman wrote.

“While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty,” he continued, adding that given its management’s track record, Netflix can still be a successful company and a good investment. “That said, we believe the dispersion of outcomes has widened to a sufficiently large extent that it is challenging for the company to meet our requirements for a core holding.”

In other words, Ackman and Pershing, like just about every other fund that invested in Netflix, believed that the subscriber growth train would never stop. Only a few years ago, analysts were predicting Netflix would have 300 million global subscribers by 2023. Now, analysts like Needham & Co. 's Laura Martin are wondering if 222 million (its current global tally) is the peak.  

Despite the irrational exuberance that fueled a lot of Netflix’s unprecedented run in the past few years -- its stock price more than doubled from $302.60 on November 18, 2019 to $700.99 on November 17, 2021 -- investors had to think, at least in the very back of their minds, that it couldn’t last forever. Like the booms and busts of past stock market bubbles -- tech in the 2000s, real estate in the mid-2000s, everything in the late 1990s -- it eventually has to come to an end. In the past week, Netflix stock has fallen 38%. Shares are down 63% since the beginning of the year. The ride, it seems, is over.

Who or What is to Blame?

To some analysts, the pandemic is partly to blame -- Netflix added nearly 55 million subscribers globally between 2019 and 2021, the height of stay-at-home orders that forced people indoors and in front of their TV sets. Broadband experienced the same slowdown after a booming two years -- Comcast and Charter alone added a combined 7 million high-speed data customers between 2019 and 2020 and just 2.5 million in 2021. Netflix was different because it kept spending money on content -- $15 billion last year, by some estimates -- had some of its most-watched shows ever during the pandemic and even though the North America market was pretty saturated (about 60% of pay TV households have a Netflix subscription), they were going to make it up in spades internationally.

But COVID was a global problem, and even international customers had more streaming choices in the last couple of years -- Disney Plus, for example, has about 46 million subscribers in India alone, a market that Netflix is just-now taking seriously. In the U.S., Netflix was becoming a victim of its own success. Couple that with very aggressive competitors and international instability -- Netflix suspended its Russian operation in March after that country’s invasion of Ukraine -- and it's no wonder that Netflix has had a tough go finding new customers. 

“In hindsight, COVID pulled forward Netflix to maturity in its oldest markets (North and Latin America and Western Europe),” wrote Evercore ISI Group analyst Mark Mahaney in a note to clients, adding that Netflix has about 60% penetration of North American broadband households, 80% when password sharing is counted. “It’s not easy to raise penetration beyond that level.” 

Netflix says it is going to crack down on password sharing and will introduce an ad-supported tier, but there are questions about how soon either of those can be implemented and whether it will make much of a difference. Wedbush Securities analyst Michael Pachter, a long-time bear on Netflix stock, told CNBC in March, when talk began to circulate that Netflix, like other streamers, would consider an ad tier, that it likely wouldn’t be big enough or fast enough to make that much of a difference. He added that Hulu has an ad tier that brings in about $10 per month per subscriber in advertising revenue. 

“The question is do they make more money at $10 per month for advertising or do they make more money charging $15.49 [for service]?” Pachter told CNBC. “I think it’s a push. …Five bucks, six bucks per month plus $10 advertising, that’s a push. What’s the point?”

Needham & Co.’s Martin believes that the ad-tier will help Netflix, but advertising alone won’t solve its problems. In an April 20 research note, Martin wrote that in addition to a lower-priced ad-supported version, Netflix needs to add sports and news content, bundle the service with other products and/or purchase a large film or TV content library. 

“Every streaming competitor does one or more of these things, which puts Netflix at a structural competitive disadvantage, we believe,” Martin wrote. “Another alternative is for Netflix to acquire other companies that provide one or more of these attributes, as it has done for video games.”

Borrowing For Growth 

Pachter has been a harsh critic of Netflix's seemingly endless habit of continually increasing its content spend -- $17 billion last year, according to some estimates, compared to $4 billion for Disney Plus -- by borrowing. Increasing leverage was OK'd by Wall Street as long as the subscriber growth was strong. When it started to trail off, then investors began to worry.

Netflix still has a junk-bond rating on its debt, but it was expected to move into investment grade territory soon. Moody’s Investors Service raised Netflix’s debt rating two notches to Ba1 in April 2021, based on revenue and subscriber growth, and the belief that as that continued, Netflix would begin to report positive, sustained free cash flow soon. Having steady, sustainable free cash flow would allow Netflix to take its leverage ratio below 2.5 times, consistent with its current rating.    

Moody’s is still optimistic that Netflix will be able to pull itself out of the hole. 

“We still see the company continuing to build on its significant scale to penetrate the world's 800 million pay TV homes and the global addressable homes of over 1.5 billion (both excluding China), sustaining competitively low cost per viewing hour leadership, growing average revenue for member, and reinvesting in even more content as it benefits from this virtuous cycle,” Moody’s SVP Neil Begley wrote. 

But that confidence does not come without caveats. In his Friday note, Begley warned that the causes of the Q1 losses and the “potentially sharp” first half declines in subscribers are still there: price increases; competition; and customers that are taking a break from in-home binge-watching as COVID restrictions are lifted. Moody’s said it will continue to monitor those conditions. 

Not Such a Big Surprise 

Pachter had warned that this day would come for years. In a 2019 article by then-Bloomberg columnist Joe Nocera, the analyst remembered being asked to justify his $183 price target on Netflix shares when the stock was already trading at $368 each. He said to justify his price target, Netflix would have to show a $2 billion improvement in free cash flow and have around 300 million subscribers paying $20 per month. Pachter believed Netflix could get there in a competition-free environment, but that wasn’t the case.

“What will happen if competitors are charging $7?” Pachter asked.

Well, that day is here. Hulu raised the price of its ad-supported service to $6.99 monthly in October, Disney Plus raised its price to $7.99 per month earlier this year and Apple TV Plus and Peacock’s premium tier are still at $4.99 per month. Netflix upped the monthly charge for its standard service to $15.49 per month in January.

Back in 2016, Nocera wondered in an article he wrote for the New York Times what would happen if the Netflix hamster wheel of constantly escalating spending to fuel subscriber growth ever slowed down. In his mind, it would lead to a lower stock price, which would increase the cost of debt, forcing Netflix to increase prices or cut back on costs or both. In a New York Times article at the time, he wrote that it would turn the “virtuous circle” of increased spending fueling increased subscriber growth, into a “vicious circle.” 

For years, Netflix was the bratty younger brother in the media business, making fun of its slower, older and less stylish cousins, while spending the equivalent of dad’s money like it was going out of style. That behavior was tolerated, even encouraged by lenders and Wall Street as long as it kept up its blistering growth pace. Now that growth has appeared to stop, or at least slowed considerably, Netflix’s hijinks just aren’t so cute anymore. 

But probably more important is that despite the ups and downs of the streaming market, Netflix was always a pretty predictable company. Sure, subscriber growth would fluctuate, but in the end it would always be higher than before. Today, a hedge fund that three months ago thought it was a good move to take a $1 billion plunge in buying Netflix stock, now thinks it’s better to take a $450 million bath just to get out of the water. ■

Netflix Co-CEO Reed Hastings has long resisted the notion that Netflix might deviate from its subscription-only dogma and offer a lower-priced tier that is at least partly subsidized by advanced advertising. 

But coming off its first quarterly subscriber loss since its Qwikster debacle back in 2011, Netflix has suddenly reversed its course on ads. 

"Those that have followed Netflix know that I’ve been against the complexity of advertising and that I'm a big fan of the simplicity of subscription,” Hastings said during his quarterly interview for shareholders. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want, makes a lot of sense.”

Netflix is aiming to establish its ad-supported strategy over the next year or two, Hastings said. 

Also: Netflix Plan For A Tier With Commercials A Positive Sign for Ad Tech: Analyst 

Hulu has long offered a $6.99 base tier partially supported by ads. 

Rival HBO Max, which prices its full subscription service at $14.99 a month, adopted a partially ad-supported tier last year priced at $9.99 monthly.

Disney is in the process of developing an ad-supported strategy for Disney Plus. And NBCUniversal's Peacock established a free, entirely ad-supported tier at launch two years ago. In fact, that remains the most popular iteration of Peacock. 

“I don’t think we have a lot of doubt that [advertising based streaming] works,” Hastings said. “I’m sure we’ll just get in and figure it out — as opposed to test it and maybe do it or not do it.”

Netflix, which saw its stock price fall over 25% in after-hours trading Tuesday, currently prices its most popular tier in the U.S. and Canada at $15.49 a month after a January price increase. 

Top execs at Netflix got less compensation in 2021, according to a proxy statement filed Friday with the Securities and Exchange Commission.

Co-CEO Reed Hastings got total compensation of $40.8 million in 2021, down 6%  from $43.2 million in 2020.

Ted Sarandos, Netflix’s other co-CEO, saw his pay drop 3% to $38.2 million from $39.3 million a year ago.

“2020 presented unprecedented challenges for Netflix and the world, as we navigated the COVID-19 pandemic. Our Named Executive Officers continued to execute our strategies and deliver strong performance throughout 2020 amidst the continuously evolving and challenging environment,” Netflix said in the proxy.

COO and chief product officer Greg Peter’s compensation dropped to $20.4 million from $20.8 million, CFO  Spencer Neuman’s pay slipped to $12.5 million from $12.9 million, chief legal officer David Hayman’s pay dipped to $10.2 million from $10.5 million and Rachel Whetstone, the company’s chief financial officer got $5.3 million, down from $5.4 million. ■

Netflix has long fetishized its unique culture, notable for lavish pay for demanding work (even by Hollywood’s over-the-top standards) but also for its oft-stated willingness to move people out the door rather suddenly when it decides they no longer are the best fit for their job. 

Departures are cushioned by hefty severance packages (four months’ pay is typical, the company says). However, since the pandemic hit, the list of prominent ex-Netflix employees is getting notably longer. The question is whether the turnover at the top is a function of Netflix’s exacting high standards, greener pastures elsewhere, pandemic existentialism, or simmering issues with the streaming company’s direction and handling of controversies amid ever-stiffening competition.

The exit list of top talent now includes long-time programming executive Cynthia Holland, the departure to Deluxe of talent relations and awards chief Anna Lee, and the short tenure of VP of original series Channing Dungey, who became chairman of Warner Bros. TV Group after less than two years at Netflix. And earlier this month, high-profile Chief Marketing Officer Bozoma Saint John departed, less than two years after her arrival, from a gig that paid her a reported $4 million a year.

Of those departures, perhaps Saint John is the least surprising. She’s whirled through a string of high-profile gigs since 2014, when Jimmy Iovine recruited her from PepsiCo to handle marketing at Beats Music … which soon was acquired by Apple, where her bopping presentation at a developers conference created a sensation. In the five years since leaving Apple, Saint John has been CMO at Uber and then Endeavor before joining Netflix in August, 2020. 

Now Saint John is gone from Netflix, too, succeeded by VP of marketing for the U.S. and Canada Marian Lee, formerly a long-time Spotify exec.  

“I came to Netflix with a surplus of enthusiasm and creative energy and am immensely proud of the campaigns we inspired that sparked global conversations,” Saint John said in a statement. “It’s been a transformative two-year experience for which I will always be grateful.” 

The peripatetic Saint John may be a special case, and it’s worth noting that being a CMO anywhere is not a job for long-timers. Last year, while CEO tenures stretched to an average 80 months, CMOs on average lasted just half as long, the shortest run in more than a decade, according to a study by leadership advisory firm Spencer Stuart. 

CMO tenures at the 100 most-advertised companies were even shorter, just 25.5 months, which the study attributed to the pandemic pushing many veterans to retire and others to struggle with the demands of a challenging and fast-changing #WFH environment. It’s possible that’s part of the Netflix job’s challenge, too.

Co-CEO Reed Hastings has long touted Netflix’s vision to create an “amazing and unusual employee culture” focused on constantly building a “dream team,” as laid out in extensive detail with a group document in its jobs section that “hundreds” of employees contributed to. The document is remarkable, a thorough critique and rejection of the operating credos (explicit or implicit) of many other companies, especially in in Silicon Valley and Hollywood. 

“We don’t buy into the lore of senior leaders, who are so involved in the details that their product or service becomes amazing,” the “Netflix Culture” document says. “The legend of Steve Jobs was that his micromanagement made the iPhone a great product. Others take it to new extremes, proudly calling themselves nano-managers. The heads of major networks and studios sometimes make many decisions in the creative process of their content. We do not emulate these top-down models because we believe we are most effective and innovative when employees throughout the company make and own decisions.”

That approach has been tested lately, after 2020’s massive subscriber gains turned into 2021’s near-stagnation even while a string of high-profile competitors launched with deep libraries, deep pockets and commitments to spend just as much for high-profile shows. 

Employee blowback erupted last summer after Netflix released a Dave Chappelle comedy special, The Closer, where the comedian once again criticized trans people with comments that angered LGBTQ+ people and their many allies. 

In the resulting internal pushback, the company ended up suspending three staff members, including engineer and prominent trans employee Terra Field, who virtually crashed a PR strategy meeting. Multiple other protests, walkouts, and “firm demands” soon followed. Later, an employee was fired for leaking financial documents around Netflix’s hit Squid Game (documents which are typically widely available internally under Netflix’s radical openness approach). 

In the months after the Chappelle controversy, Co-CEO Ted Sarandos issued a mea culpa, telling trade publications that he “screwed up” with “a blanket statement that didn’t land as it was intended.” Chappelle, meanwhile, got another Netflix deal for four Home Team specials featuring comics of his choice.  

Given the Chappelle controversy and Hollywood’s sorry history with diversity and inclusion, it’s also worth noting all of those recently departed executives I previously mentioned are female, and three are people of color.

And there are other reasons some people leave Netflix. 

Sr. Software Engineer Michael Lin quit his $450,000-a-year Netflix job last year, then wrote about it on Medium. He listed three reasons for the departure, made against the advice of family and friends: 1) for all its attention to vertical organizational opportunities, the company wasn’t set up to enable horizontal ones, like Lin’s desired transition to product management, 2) waning motivation led to waning performance, and 3) a life reassessment amid the pandemic’s depredations.

Netflix stock, which enjoyed a brief respite from its January 20 decline after two big investors snapped up a large amount of shares, is down again this week, a combination of fear, looming price increases and analyst reports.

Netflix stock took a double-digit nosedive after it released Q4 earnings after hours on Jan. 20. The next day, shares in the SVOD pioneer dropped 25% to $397.50 each and pundits were claiming that the tide was shifting away from the company that basically invented the subscription streaming video business. 

A few days later, on January 27, Netflix shares rose 10% after it was revealed that hedge fund guru William Ackman’s Pershing Square Capital Management said his fund purchased $1 billion in Netflix stock on January 21, boosting confidence in the company once again. Later, on January 31, Netflix founder and co-CEO Reed Hastings said in an Securities and Exchange Commission filing that he bought about $20 million in Netflix stock, which drove the shares up another 11.1% to $427.14 each. The thought was that Netflix stock had weathered the storm, that investors saw the intrinsic value in the company and its business and the stock would return to normal. Netflix shares closed at $457.13 on February 1, up 7% each. 

But it didn’t last long. Netflix shares began to slide and by February 2  fell 6% to $429.48 each. By February 4, the stock was down to $410.17, amid growing fears that Netflix had run its course, that despite spending $19 billion on content, releasing some of the most talked-about programming last year -- Squid Games, anyone? --  no one wanted to watch it anymore.

Also: What $19 Billion Gets You: Netflix Previews Entire 2022 Film Slate 

Those fears were somewhat founded in reality -- subscriber growth was down despite the release of popular programming -- but what got lost in the panic was that every streaming service was experiencing a growth slowdown. Disney Plus, HBO Max and Peacock all added fewer customers in Q4 than in the past. But Netflix was singled out because it spends the most on content and had been considered to be the unstoppable force of streaming TV. 

Shares were down again Monday to $402.10 after Needham & Co. media analyst Laura Martin issued a report claiming that only half of Netflix subscribers were satisfied with the service despite having its strongest content year ever, and 41% say they are more likely to jettison the service this year. Martin surveyed 504 Netflix subscribers in the U.S. (the service has more than 75 million domestic customers) and concluded if the SVOD pioneer wants to stop the bleeding, it has to add an advertising tier, buy an old media library to improve its content ROICs and/or sell out. 

“Netflix can NOT win the ‘streaming wars’ given its current strategy, we believe,” Martin wrote.

Shares have slowly inched back up in the past two days -- they closed at $403.53 on February, 8 and were priced at $404.09 on Wednesday afternoon, but they’re still far short of the $508.22 per share benchmark of about two weeks ago. 

This could truly be another example of the roller coaster ride that comes with being a Netflix shareholder. The stock has historically had big ups and big downs, usually around subscriber news, and maybe this is no different. But something just feels a little more off this time.

For one, there is a lot more competition on the streaming side than there was just a few years ago. Secondly, everybody is experiencing some kind of subscriber slowdown. Thirdly, all indications are that people are watching more video than they ever have, but if they aren’t watching streamers and are increasingly cutting the pay TV cord, what are they watching, video games? 

Or maybe the other explanation is that they are moving toward free ad-supported services like Pluto TV, Tubi and the like. Tubi already predicted that AVOD subscribers will surpass SVOD subscribers later this year. Maybe pricing really is becoming more and more important. 

But whatever it is, providers should take notice, because investors are. Disney Plus parent The Walt Disney Co.’s  stock was down about 5% between January 20 and February 9 and HBO Max parent AT&T fell 12% in the same timeframe, partly because of the fears around streaming.

While Disney seemed to reverse the slowdown in fiscal Q1 -- adding about 11.8 million Disney Plus subscribers, well ahead of consensus and driving its stock up 5.5% early February 10 -- some analysts pointed to possible weakness ahead.  

Fiscal Q1 was helped by new content releases, including the three-part Beatles documentary Get Back, and new programming could help accelerate subscriber growth beyond Q1 levels. But Barclays media analyst Kannan Venkateshwar worried that it may not be enough to get the service back on track to its previous guidance levels. Disney reiterated its guidance of 230 million to 250 million Disney Plus subscribers by 2024. 

“Next quarter may be a trough both seasonally as well as in terms of footprint expansion and content releases,” Venkateshwar wrote. “Q3 will see launches in 40 new territories in addition to tailwind from the IPL [Indian Premier League cricket] in India, which should add to growth, but Q4 will likely bear the bulk of the growth load due to release calendar. Given this cadence, the company may not be able to fully get back to its guidance trendline this year despite strong fiscal Q1.”  

Attracting the most attention from Martin’s survey is that 41% of respondents said they were “more likely to churn” from Netflix in 2022 because of the price increases. Take that with however big a grain of salt you want -- there’s a huge difference between “I probably will cancel”  and “I just cancelled.” But it does cast some shadow on what in the past has been the gold standard for streaming. Martin’s survey also suggests that 70% of respondents say they won’t pay for additional streaming services in 2022, which doesn’t bode well for the remainder of the streamer-verse. 

In her report, Martin wrote the “clear learnings” from the survey were: (1) That consumers believe they’ve watched “everything” Netflix had to offer during the pandemic of 2020 and 2021, and there was “nothing” on rival services like Discovery  Plus and Peacock. “Better to pay for new services than old,” she wrote; and  (2) Netflix still doesn’t offer a lower priced ad-supported tier like most of its competitors, meaning that “consumers that disconnect Netflix can replace it with 2 or 3 different streaming services for an identical monthly fee.”

Martin has been a sharp critic of Netflix in the past, and has called for a lower cost, ad-supported tier ever since Disney Plus came on the scene in 2019 at a $6.99 monthly price point.

Netflix management has been adamant in its resistance to including ads in programming in the past. And maybe all it will take is another popular movie or show or series or whatever to bring people back to the fold. But the fold is a lot different than it was in the past, and most of Netflix’s competition has either raised prices, included an ad-supported tier or both as a result. (FYI, I am leaving Amazon Prime Video, which said it will raise its annual charges by about 32% this year, out of the mix  because the vast majority of subscribers pay for the free shipping, not the video.)  

HBO Max launched in 2020 at $14.99 per month and last year introduced an ad-supported version at $9.99 per month. NBCUniversal launched Peacock nationwide in July 2020; Paramount Plus launched in 2021 with limited ads for $5 per month; and Discovery Plus launched in 2021 at $4.99 per month with ads.

Netflix has raised prices about 6 times since it launched its streaming video version in 2011 -- in 2014, 2015, 2017, 2019, 2020 and 2022. Each time there was a fear of a massive subscriber exodus that never came. But this time may be different. There are a lot more choices for consumers on the streaming video front. 

Netflix co-CEO Reed Hastings has said that he believes Netflix will weather this storm as it always has -- by providing more compelling content. Netflix spends more than any other service on streaming content -- $19 billion this year -- and last week previewed its entire movie slate for 2022. But more shows may not be the answer. Netflix had its most watched show ever -- Squid Games -- in September and still managed to disappoint regarding subscriber growth. And this year it said it expects Q1 subscriber additions to be about 2.5 million, its lowest growth in years. And Q1 is usually one of the company’s biggest growth quarters. 

By their very nature surveys are worded in a way to find out what people are going to do, not what they’ve done. And when those questions are put to people while the wounds of a price increase are still fresh, or shortly after they've binge-watched a show and don’t think they’ll ever be anything else to watch, the answers are usually pretty harsh. Wait a week and cooler heads usually prevail. 

That could very well be the case here. People are ticked off about another price increase, there are a lot of other lower cost choices around and none of them require long-term contracts, so people can drop them and sign up with abandon. But it does raise questions about streaming, which is turning out to be a lot like its predecessors in the video entertainment business, just trying to figure out the most convenient, cost-efficient way to deliver content to people who want it. Only time will tell who will come up with the formula that satisfies everyone's needs best. ■

Reed Hastings has said on numerous occasions that his company's biggest competition doesn't come from HBO Max or Disney Plus or any other subscription streaming service as much as it does other consumer pastimes, notably video gaming. 

According to the latest Hub Entertainment Research report, the Netflix co-CEO is right. 

The share of leisure time spent by American consumers watching movies and TV shows declined 5% from 2020 - 2021, and was down a whopping 11% from 2019 -2021. Meanwhile, the share of time consumed playing video games was up 4% from 2020-2021.

How could that be, when other research suggests that folks are watching more TV than ever before? Well, Hub is only measuring time spent on leisure activities ... and its assumption seems to be that folks are spending the pandemic era doing more leisure activity in general -- the overall pie is expanding. 

Hub said it conducted its study among 2,179 U.S. consumers aged 13-74 back in December.

As you might expect, younger consumers are driving the phenomena. The 13-24 cohort spends only 13% of its time watching "TV," while those age 35 and older throw 45% of their leisure time at the activity.

Notable also is the time younger consumers spend watching "non-premium" online video. Consumers age 13-24 spend almost as much time watching content on TikTok and other online video platforms than they do "premium" TV.

Also, 51% of the 13-24 cohort said they're spending less time watching TV because of "other screen options" vs. only 19% for consumers 35 and older.

With Netflix stock tumbling 45% from nearly the $700-per-share price it stood at just three months ago, co-CEO Reed Hastings made a power move, paying $20 million to gobble up an additional 50,000 shares.

Also: Netflix Shocks -- Shocks! -- Investors by Forecasting Only 2.5 Million Customer Adds in Q1

The purchase was revealed in documents filed to the Securities Exchange Commission. 

Hastings' purchase was made on January 23-24, just a few days after a disclosure in Netflix's Q4 earnings report -- that subscriber growth will likely fall to around 2.5 million in the first quarter of 2022 -- sent Netflix investors running for the doors.

Also: Did Wall Street Just Give Up on the Streaming Wars?

Netflix share prices rebounded 10% on January 27, when hedge funder William Ackman purchased 3.1 million company shares, worth about $1 billion. 

Netflix share prices were trading at around $427 a share as of after-hours activity on the Nasdaq Monday. They had surpassed $690 a share back in October. ■

Netflix stock continued to claw back from the hole it dug itself in the wake of disappointing Q4 results, rising more than 10% on Monday after it was revealed over the weekend that chairman and co-CEO Reed Hastings purchased $20 million worth of company shares.

Hastings purchased more than 50,000 shares of Netflix stock at an average price of $388 each on January 27 and 28, according to a filing with the Securities and Exchange Commission, increasing his personal holdings in the company to 5.16 million shares. 

Hastings’ purchases came on the heels of hedge fund legend William Ackman’s disclosure that his Pershing Square Capital Management purchased about $1 billion in Netflix stock on January 21, which sent the stock up 7.5% on January 27. 

Hastings’ purchases are seen as a vote of confidence in the stock, especially after Netflix missed subscriber growth targets in Q4 and issued Q1 guidance that some investors interpreted as a sign that streaming video was losing favor with consumers.

Netflix shares were priced as high as $427.69 each on January 31, up 11.3% ($43.33 per share), before closing at $427.14 up 11.1%. Since January 25, when the stock closed at  $366.42 -- down 28% from its January 21 close -- the stock has regained about half of those losses.  

Also: Netflix Bulls No More

Netflix isn’t the only streaming stock that has been battered after reporting disappointing results -- Disney and ViacomCBS stocks are both down significantly since reporting sluggish growth in their direct-to-consumer products in November -- and it won’t be the last. But as some investors see the slowdown as a signal to jump ship, others see opportunity. 

In a research note, Wells Fargo Securities media analyst Steven Cahall wrote that he has seen an increase in Netflix interest after the so-called “Streaming Meltdown” from growth-at-a-reasonable-price (GARP) investors, adding that there is some debate as to whether the expected slowdown in Netflix subscriber growth will be as dramatic as the company has indicated. 

“The conspiracy theorists believe this is part of management looking to shatter the annual expectation for 25-30 million net adds, and redirect attention to overall financial growth,” Cahall wrote. “No one has much of a handle on what the new rate of sub growth will be, though there's general agreement that EPS growth will remain firmly in the mid-20%s. With Netflix [Calendar Year] 2023 P/E [ratio] of 24x, this seems like a GARPy opportunity.”  ■ 

Netflix said co-CEO and chief content officer Ted Sarandos has been allocated $20 million in stock options for 2022, on top of his $20 million salary.

The options allocation is much bigger than for 2021, when Sarandos’ stock options were pegged at $14.6 million, according to an SEC filing Tuesday.

Co-CEO Reed Hastings salary was at $650,000 with $34 million in stock options, just like a year ago.

Other named Netflix executives are also set to get bigger paydays in 2022.

CFO Spencer Neumann’s 2022 salary rises to $7 million from $6 million a year ago. His stock option allocation rises to $7 million from $5.550 million.

Greg Peter, Netflix’s chief product officer sees his salary jumping to $16 million from $12 million, with his option allocation increasing to $8 million  from $6.9 million.

David Hyman, chief legal officer and secretary, will get $6 million in salary, up from $4.725 million, and $5 million in options, up from $4.725 million.

Netflix also disclosed that Rachel Whetstone, chief communications officer, will have a salary of $5.5 million and options worth $1 million. Her pay plan was not disclosed last year.

Netflix co-CEO Reed Hastings went to bat for Jason Kilar and HBO Max Thursday night, imploring Nielsen to start including the Netflix rival in its data on the major SVOD services.

“Wild that most TV time in USA is still legacy linear. Stream team needs to up its game. @jasonkilar we need you on the board too,” Hastings tweeted, following Nielsen’s publication of a new monthly infographic titled “The Gauge,” which quantifies what mechanisms U.S. consumers are using to watch video. HBO Max was not included on that pie chart.

HBO Max has also been excluded from Nielsen’s weekly audience ratings of the top shows on the major U.S. subscription video platforms. As reported each week by Next TV, these rankings only include Netflix, Amazon Prime Video, Hulu and Disney Plus. (Although WarnerMedia CEO Kilar successfully lobbied Nielsen in January for a one-time exception to include HBO Max after Wonder Woman 1984 premiered to boffo streaming numbers.)

With Nielsen’s new “Gauge” showing that most of the audience is still consuming via linear means, Kilar responded with his own tweet Thursday evening: 

“.@WarnerMedia is already on the board strongly in that largest green pie piece Reed (TNT, TBS, CNN, HBO, CN…). Proud to serve customers in whatever way they choose  Fun to also be the crazy fast(est) growing upstart in @hbomax (2 Qs straight of 2.5M+ US sub adds).”

So is Nielsen going to capitulate to Hastings and start including HBO Max in its SVOD data? Next TV’s inquiries to Nielsen weren’t immediately responded to. 

And notably, Hastings was indeed asking Nielsen for ratings inclusion, not for a boardroom seat for Kilar, as Variety first errantly reported. 

Nielsen’s hesitancy to invite HBO Max to the party probably boils down to scale. With 74.38 million subscribers in the U.S., Netflix absolutely dominates Nielsen’s weekly rankings to the top overall SVOD programs, as well as drilled down metrics on original series, acquired series and movies.

Parent company AT&T reported in April that HBO had reached 44.2 million U.S. subscribers in the first quarter, but it’s unclear as to how many of them have adopted the IP-based HBO Max service. That number was well under 20 million at last report, although it could have surpassed that threshold by now. 

Hastings responded to his own tweet Thursday suggesting HBO Max would account for more than 1% of the total TV audience. 

Certainly, down the road, as AT&T gets ready to spin off WarnerMedia and merge it with Discovery Inc., HBO Max’s scale could dramatically increase.

The pandemic boosted Netflix’s subscriber numbers in 2020 and it also boosted compensation for the streaming company’s top executive.

Co-CEO and chairman Reed Hastings got $43.2 million in total compensation, up 12% from $38.6 million a year ago.

Also Read: Netflix Adds Just 4 Million New Subscribers in 1st Quarter

Hastings’ option awards rose to $42.4 million from $37.4 million in 2019.

Co-CEO and chief content officer Ted Sarandos’ pay climbed 13% to $39.3 million from $34.7 million. Sarandos became co-CEO last July and his salary increased to $20 million from $18 million.

Netflix’s new chief communications officer Rachel Whetstone received total compensation of $5.4 million, including a $4.8 million salary.

Netflix said that Reed Hastings and Ted Sarandos, the streaming company’s co-CEOs, will each earn $34.65 million for 2021, according to a filing with the Securities and Exchange Commission.

The amount is unchanged from the compensation they were scheduled to get in 2020.

Hastings will get an annual salary of $650,000 plus an allocation of stock options worth $34 million as his compensation package.

Also Read: Netflix Promotes Sarandos to Co-CEO with Hastings

Sarandos’ salary will be $20 million. He will also get stock options worth $14.65 million.

Hastings, who is also chairman of the board, will earn a bit less than the $38.6 million he got in 2019, according to the company’s most recent proxy statement. Sarandos, who was elevated to CEO this year and remains chief content officer, will earn the same amount as in 2019.

Netflix also said that CFO Spencer Neumann will get a salary of $6 million and stock options worth $5.55 million; Gary Peters, COO and chief product officer, will get a salary of $12 million and options worth $6.9 million. And chief legal officer David Hyman will get a salary of $4.725 million and $4.725 millions in options.

In the earlier days of Netflix, co-founder and co-CEO Reed Hastings and his DVD rental startup were often underestimated by folks like Blockbuster Video impresario Joe Antioco, who notably rebuffed an overture to purchase the then small Silicon Valley company.

But Liberty Global Chairman John Malone says he saw Netflix comin’ all the way. 

Malone described an early interaction with Hastings while interviewed last week by Liberty Global CEO Mike Fries in a virtual event produced by the Paley Center. (Hat tip to LightShed Partners principal analyst Richard Greenfield for highlighting the event in the firm’s blog. The interview is also archived here.) 

According to Malone, at some point, Fries invited Hastings to a Liberty Global board meeting, and Hastings tried to assure the room that Netflix had “no intention” of producing its own content or competing with the then-thriving video services of cable companies like Liberty. 

“I responded to him at the time, bulls***,” Malone recalled. “It was clear where he was headed, and if he didn’t understand that, he was going to figure it out.”

(Hastings hasn't corroborated or disputed this public account.)

Malone also recounted the time he tried to have DirecTV acquire Netflix when he was chairing the satellite TV company: “I knew it was going to be a home run at that point and that was when [Hastings] was struggling with getting rid of his old mail platform. What I saw was global scale.” 

Is Roku the Next Netflix?

Malone also spent some time discussing the growing clout of Roku, which has seen its market capitalization quickly grow to nearly $30 billion after an up-and-down first 18 months on the Nasdaq. 

Roku, which still hasn’t come to terms with WarnerMedia to support HBO Max, also recently touted that its connected TV device platform has 46 million active users. 

Malone said that if Roku’s platform continues to expand—reaching, say, the magic 100 million active user mark—it could establish market power similar to the Apple App Store, where content suppliers have to “pay to play.”

“That’s a function of how big and unique the platform is,” Malone said. “So if the platform provider can capture a large enough global scale of consumers who are essentially using it as a bundling agent—as an intermediary—then they’re going to have market power over the suppliers of the content, and they will emerge to use that market power to get a pricing or access differentiator, and they’ll build a business based on it. I think the reason you see so much market cap flowing to Roku right now is because they seem to have developed an independent separate public company platform that is becoming essentially a channel store of scale.”

Speaking to investment analysts during Netflix’s third-quarter earnings call, co-CEO Reed Hastings confirmed what we all know: yes, the streaming service’s program library is smaller than it used to be. 

But it matters not, he said. 

A decade ago, when Netflix was pioneering the business of premium video subscription streaming, “we were trying to figure out what we can stream, and we were licensing in bulk and volume just a lot of content just to see what worked well versus today where we're much more deliberate about the programming,” Hastings said during the Oct. 20 call. “And  we really don't focus that much on the title count.”

In an earlier iteration of the streaming industry, number of titles counted more as important marketing equity. 

“The marketing war was how many titles you had,” Hastings explained. “But it isn’t that meaningful if people don’t watch them.”

Of course, he’s comparing Netflix’s old business model, which involved licensing content rights in bulk from major studios, to the one Netflix has today, which involves the investment of billions of dollars to produce its own shows because the studios no longer want to share their content with Netflix. 

Understandably, given that it’s paying a lot more for content right now, “volume, volume, volume” might not be a useful mantra. 

Hastings, however, continued to spin the “quality over quantity” narrative as being more intentional.

“What we really done is concentrated on the titles that have a lot of impact and can aggregate big audiences and move the business forward and add a lot of value for our members,” he said. “So we really don't focus on the title count, but you are correct, it's significantly lower than it was when we first started streaming, I'd say, more 10 years ago where we used to license an entire library of 800 films from somebody and nobody watched any of them. So it's really not a chase for how many titles, but these are the titles you can't live without.”

In February, streaming aggregation platform Reelgood published a chart showcasing the quantitative evolution of the Netflix library. Here it is again:

With Netflix’s market cap approaching $240 billion, global subscribers swelling to 193 million, and the TV Academy nominating its shows for a record 160 Emmys this year, it’s probably not a bad time for Netflix co-founder and co-CEO Reed Hastings to showcase his management style in a new book.

And that’s what’s happening Tuesday, when Penguin Press, after several months of pandemic-era delay, finally debuts No Rules Rules: Netflix and the Culture of Reinvention. 

If you’ve read the widely dispersed, 300-page corporate culture manifesto that Netflix has each of its job candidates read before they interview for a job at the streaming service, you kind of already get the gist. 

Netflix is at once a brutally Darwinian snake pit in which the misfits are quickly dispatched, and a mecca of boundless freedom in which the truly talented, energized, honest and collaborative thrive, unbound by pedestrian rules. 

Employees are given the freedom to do what they do—they don’t spend their time filling out expense reports or vacation-time logs. But they are subject to a culture in which they are accountable for their results—managers are asked to routinely purge the ranks of those how are not high performers. Those not pulling their weight are sent packing with hefty severance packages. 

“We have a culture where ‘no rules rules,” Hastings writes. “If you give employees more freedom instead of developing processes to prevent them from exercising their own judgment, they will make better decisions and it's easier to hold them accountable. This also makes for a happier, more motivated workforce as well as a more nimble company.”

Managers are also told to speak to recruiters regularly, find out what their staffers are worth on the open market, then pay them that sum. 

“It costs a lot more to lose people and to recruit replacements than to overpay a little in the first place,” Hastings observes.

The 59-year-old Hastings, who co-wrote his book with Erin Meyer, a respected professor at Insead business school in France, is having his guru moment not only as Netflix has ascended to the next level of culture importance in the pandemic-era American living room, but also as his SVOD service seems to have stayed clean amid the recent taint of the other “FANG” companies. 

We haven’t heard the same grumblings lately about privacy, free speech, election fraud enablement and outright greed in regard to Netflix, as we have with Facebook, Apple and Google. 

In the book, Hastings said much of his management philosophy stems from his time as CEO of Pure Software, a company that made a popular debugging tool for Unix engineers in the 1990s. He blames the thick layer of traditional corporate employee dogma for Pure’s ultimate floundering and eventual sale to Rational Software. 

But with then fortysomething Hastings working long hours and spending much of his time on the road, it was the marriage counseling spent with his dissatisfied wife that might have had the greater impact. 

Hastings said he learned to air resentments and concerns in a constructive way, a behavioral pattern he imparted on his small staff when he co-founded a DVD-by-mail service called Netflix in 1997.

“I began encouraging everyone to say exactly what they really thought, but with positive intent.”

Hastings contrasts the “no rules rules” style with Blockbuster Video, once a $6 billion VHS rental juggernaut, at its zenith when he approached in in 2000. Hastings describes himself as “crestfallen” when Blockbuster CEO John Antioco bluntly refused his proposal to have Blockbuster acquire Netflix for $50 million and make it its DVD-by-mail rental arm. 

“Of course, Antioco wasn't interested,” Hastings writes. “Why would a powerhouse like Blockbuster, with millions of customers and massive revenues, be interested in a flailing wannabe like Netflix?

"But, little by little, the world changed and our business stayed on its feet and grew. In 2002, two years after that meeting, we took Netflix public. By 2010, Blockbuster had declared bankruptcy. By 2019, only a single Blockbuster video store remained. Blockbuster had been unable to adapt from DVD rental to streaming,” he added. 

Netflix had one thing Blockbuster did not, Hastings concluded “a culture that valued people over process, emphasized innovation over efficiency, and had very few controls. We promote flexibility, employee freedom, and innovation, instead of error prevention and rule adherence.”

Well, there are some rules. Hastings writes that employees get in trouble if they disagree on something and don’t say anything about it—a dynamic, he says, that stemmed from his aborted “Qwikster” decision in 2011 to spin off Netflix's DVD rental business from then fledgling streaming operation. Turns out a lot of the Netflix staff actually thought it was a bad idea. 

And sometimes, employees do abuse their freedom, such as the time a since-fired Taiwanese staffer ran up $100,000 in expenses on family vacations. 

“The key is embracing managing on the edge of chaos,” Hastings writes. 

Netflix’s top executives had a good year in 2019.

Total compensation for CEO Reed Hastings rose 7% to $38.6 million. His salary was constant at $700,000. Option awards rose to $37.4 million from $34.4 million in 2018.

Chief content officer Ted Sarandos’ compensation jumped 17% to $34.7 million. His salary rose to $18 million from $12 million and he received option awards with $16.6 million.

Netflix on Tuesday announced higher first quarter earnings as viewers staying at home because of the worldwide pandemic signed up for streaming services like Netflix and consumed more content.

The European Union has asked Netflix and other OTT companies to stream shows and movies in standard definition format so that internet traffic can be kept at a manageable level amid ongoing social distancing.

In a tweet posted Wednesday, EU Commissioner Thierry Breton said he had a phone conversation with Netflix CEO Reed Hastings. “Teleworking & streaming help a lot but infrastructures might be in strain,” Breton posted, hash-tagging his tweet with, “To beat #COVID19, we #StayAtHome."

"Commissioner Breton is right to highlight the importance of ensuring that the internet continues to run smoothly during this critical time," a Netflix spokesperson told CNN "We've been focused on network efficiency for many years, including providing our open connect service for free to telecommunications companies."

UPDATE: Netflix later announced that it would adjust its bitrate in Europe for the next 30 days. “We estimate that this will reduce Netflix traffic on European networks by around 25% while also ensuring a good quality service for our members,” Netflix said in a statement. 

Also read: Residential Internet Usage Surges 98% Amid COVID-19-related Social Distancing

Monday’s average downstream internet usage was 98% higher than the most recent baseline Monday, March 9, a day when the stock market endured a record plunge and seemed to accelerate concern about the spread of coronavirus in the U.S. This is according to OpenVault, which offers data, insights and consulting to broadband service providers.

Also read: Streaming Video Usage to Spike 61% Amid Social Distancing: Nielsen

Nielsen, meanwhile, has predicted a 61% spike in streaming video usage in the U.S. amid coronavirus social distancing. 

But just as in the U.S., the lobbying component of the Euro telecom sector said the increased traffic shouldn’t be a problem.

”At this stage, new traffic patterns are being effectively handled by engineers as per standard network operations," Lise Fuhr, director general of the European Telecommunications Network Operators' Association, said in a statement. "We support the European Commission's effort to ensure that national governments and national regulators have all the tools they need to keep networks strong across the continent."

As the competition in the streaming world ramps up, Netflix is giving its two top executives a 10% pay raise.

In a filing with the Securities & Exchange Commission, Netflix said its compensation committee has set the salary plus bonus for CEO Reed Hastings and chief content officer Ted Sarandos at $34.65 million each for 2020.

Hastings is set to get a salary of $650,000 and a stock option allocation of $34 million.

Sarandos’ salary will be $20 million and he’s been allocated $14.65 million in stock.

Netflix, the leader in the video streaming area, was the top performing stock during the decade. But this year, new competitors joined the market, with Apple launching Apple TV+ and The Walt Disney Co. jumping in with Disney+. Disney also took full control of Hulu.

Next year, AT&T plans to launch HBO Max and Comcast’s NBCUniversal will launch Peacock.

In its filing, Netflix said that CFO Spencer Neumann will get $6.05 million and stock options worth $5.5 million, and chief product officer Greg Peters will get a salary of $12 million and $6.9 million in stock. 

Netflix stock fell more than 7% Friday after chairman and CEO Reed Hastings told an industry audience that the emergence of new streaming competition from Disney and Apple will create a “new world” of competition.

Hastings was speaking at the Royal Television Society Conference in Cambridge, U.K., and said that beginning in November -- the expected launch dates of Disney+ and Apple TV + -- “it’s a whole new world,” according to reports.

Hastings also name-checked NBC Universal’s planned direct-to-consumer offering Peacock, adding that the competitive landscape will be “tough.”

“Direct-to-consumer [customers] will have a lot of choice,” he said, according to a Variety report. 

But according to The Hollywood Reporter, Hastings said that Netflix has been preparing for the onslaught of SVOD competitors since 2012, and was surprised it hadn’t occurred sooner.

“Sometimes you do your best work when you're challenged,” he said, according to THR.

Still, acknowledging the competition and coming off a bad Q2 -- where Netflix lost domestic subscribers for the first time -- was enough to send the stock southward. Netflix shares traded as low $266 each (down 7.2%) on Sept. 20, before closing at $270.75, down 5.5% or $15.85 per share.

Related: Bull or Bear on Netflix: It Depends on Which Side of the Street You’re On

The Friday drop-off basically erased the stock’s gains for the year.

Netflix stock took a beating in July when it announced that it had lost domestic subscribers in the second quarter. The stock continued on a downward slope after that announcement, falling below $300 per share on Aug. 14. With the exception of a brief rise on Aug. 16 (to $302.80 per share) and Aug. 19 (to $309.38), the stock continued to stumble and is down a collective 13% ever since.

Hastings said Netflix would boost its programming spending in the U.K. -- it is on track to spend more than $500 million this year in Britain, a figure that would "not quite double" in 2020, according to THR. 

“Some day The Crown will look like a bargain,” he said according to THR, of the Netflix series estimated to cost between $6.5 million and $13 million per episode. 

He expects content costs to rise higher with new players Disney + and Apple in the mix, adding that Netflix was outbid by Amazon for one show in particular that he coveted -- Fleabag, the critically acclaimed hit series by Phoebe Waller-Bridge.

Netflix stock fell more than 7% Friday after chairman and CEO Reed Hastings told an industry audience that the emergence of new streaming competition from Disney and Apple will create a “new world” of competition.

Hastings was speaking at the Royal Television Society Conference in Cambridge, U.K., and said that beginning in November -- the expected launch dates of Disney+ and Apple TV + -- “it’s a whole new world,” according to reports.

Hastings also name-checked NBC Universal’s planned direct-to-consumer offering Peacock, adding that the competitive landscape will be “tough.”

“Direct-to-consumer [customers] will have a lot of choice,” he said, according to a Variety report. 

But according to The Hollywood Reporter, Hastings said that Netflix has been preparing for the onslaught of SVOD competitors since 2012, and was surprised it hadn’t occurred sooner.

“Sometimes you do your best work when you're challenged,” he said, according to THR.

Still, acknowledging the competition and coming off a bad Q2 -- where Netflix lost domestic subscribers for the first time -- was enough to send the stock southward. Netflix shares traded as low $266 each (down 7.2%) on Sept. 20, before closing at $270.75, down 5.5% or $15.85 per share.

Related: Bull or Bear on Netflix: It Depends on Which Side of the Street You’re On

The Friday drop-off basically erased the stock’s gains for the year.

Netflix stock took a beating in July when it announced that it had lost domestic subscribers in the second quarter. The stock continued on a downward slope after that announcement, falling below $300 per share on Aug. 14. With the exception of a brief rise on Aug. 16 (to $302.80 per share) and Aug. 19 (to $309.38), the stock continued to stumble and is down a collective 13% ever since.

Hastings said Netflix would boost its programming spending in the U.K. -- it is on track to spend more than $500 million this year in Britain, a figure that would "not quite double" in 2020, according to THR. 

“Some day The Crown will look like a bargain,” he said according to THR, of the Netflix series estimated to cost between $6.5 million and $13 million per episode. 

He expects content costs to rise higher with new players Disney + and Apple in the mix, adding that Netflix was outbid by Amazon for one show in particular that he coveted -- Fleabag, the critically acclaimed hit series by Phoebe Waller-Bridge.

Addressing what was sure to be an elephant in the room during Netflix’s Q1 investor call later in the day, Netflix CEO Reed Hastings used the streaming company’s pre-call quarterly shareholder letter to explain why he thinks the global OTT market is big enough for Apple, Disney and Netflix.

“We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings,” Hastings wrote. “We believe we’ll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing (similar to how U.S. cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s).

RELATED: Netflix Subscribers Rise to 149M in Q1

Hastings tried to make the case that Netflix only satisfies a small portion of global demand at this point for “great TV and movies.” To bolster his point, he noted that Netflix only accounts for 10% of U.S. TV usage. He also pointed to Sandvine data showing that Netflix only consumes around 2.4% of global downstream mobile internet data.

Beyond the mere mobile internet, Sandvine also said that Netflix is the No. 1 internet application globally and chews up around 15% of global traffic.

Netflix stock shrunk just under 3% in after-hours trading following the late-afternoon first-quarter earnings report from Los Gatos, Calif., on Tuesday.

RELATED: Fitch Calls Netflix's Sub Growth Momentum a Concern

Notably, U.S. subscriber growth slowed to 1.7 million new users in Q1 compared to 2.3 million in the first quarter of 2018. However, Netflix instituted across-the-board price increases in the U.S. and several other markets in Q1.

Netflix chief financial officer David Wells will resign after 14 years, the subscription video on demand pioneer said Monday.

Wells, who joined Netflix in 2010 and was named CFO in 2014, said he would stay on until the company found a permanent replacement. Netflix said its search will include both internal and external candidates.

"It's been 14 wonderful years at Netflix, and I'm very proud of everything we've accomplished," Wells said in a statement. "After discussing my desire to make a change with Reed [Hastings, Netflix CEO], we agreed that with Netflix's strong financial position and exciting growth plans, this is the right time for us to help identify the next financial leader for the company. Personally, I intend my next chapter to focus more on philanthropy and I like big challenges but I'm not sure yet what that looks like."

Netflix shares dipped slightly on the news. Shares were priced at $343.26 each in early trading, down $2.61. or 0.75% per share)

"David has been a valuable partner to Netflix and to me,” Hastings said in a statement. “He skillfully managed our finances during a phase of dramatic growth that has allowed us to create and bring amazing entertainment to our members all over the world while also delivering outstanding returns to our investors. I look forward to working with him during the transition as we identify a new CFO who will help us continue to pursue our ambitious goals."

Norm Has a Show on Netflix

TWIN: Funnyman Norm MacDonald caused a bit of controversy a few weeks ago after initially letting the cat out of the bag about his upcoming Netflix show during a Reddit Q&A, but then quickly retracting the comment. Still, fans aware of MacDonald’s mischievous nature, continued to hope that the show was a go. 

I have a new show on @netflix and I'm tweeting the text exchange that started it all. pic.twitter.com/xNA48bZlVl

— Norm Macdonald (@normmacdonald) March 9, 2018

MCN Take: MacDonald’s Netflix show, appropriately titled Norm MacDonald Has a Show on Netflix, will be in the talk format and feature his long-time sidekick Adam Eget and one celebrity guest per episode.

Read the full story at B&C.

Positive Brand Association Powers Netflix Content

TWIN: Sanford Bernstein media analyst Todd Juenger took another deep dive into Netflix’s success, focusing on two recent programming wins – Will Smith sci-fi movie Bright and German-language supernatural thriller Dark. While Bright was panned by critics, Juenger noted Netflix subscribers' positive views toward the overall brand helped drive viewership to more than 13 million in the first week.

MCN Take: Juenger was even more impressed with Dark, a German-language thriller that was supposed to be an attempt to attract local market audiences in Germany. Instead, the show drew more than 90% of its viewers outside Germany.

Read the full story at Multichannel News.

Obama in Talks to Produce Shows for Netflix

TWIN: Former President Barack Obama is in discussions with Netflix to produce a series of high-profile shows. Netflix would pay the former President and his wife Michelle for exclusive content available only on the streaming service.

MCN Take: While the deal isn’t finalized and the type of shows he would produce aren’t fully fleshed out, the former President could moderate discussions that have been near his heart during his time in office -- health care, voting rights, immigration, foreign policy and climate change. One topic not on the agenda will be current POTUS Donald Trump.

Read the full story at the New York Times.

Netflix DVDs Could Stay Another Five Years

TWIN: In an interview with USA Today, Netflix CEO Reed Hastings touched on a number of topics, including the tiny red DVD envelopes that helped drive the company’s early business. Hastings said DVD rentals are still a part of the business – kept mainly for rural subs and movie buffs – and he is in no rush to get rid of it, adding they could be around for another five years.

MCN Take: Hastings also told the paper that revenue is expected to hit $15 billion in 2018, up from $11 billion in 2017, and said despite its hits, he worries about spending too much money. “We always worry about overpaying,” he told the paper. “It’s a big step for us, a big, concentrated commitment. It has good odds for success. We’re trying to make many bets. Some of our content won’t work, but we’re willing to try.”

Read the full story at USA Today.

CBS All Access to Step up Originals to Compete with Netflix

TWIN: CBS chief operating officer Joe Ianniello (pictured below) told an industry audience that its streaming service CBS All Access will add more shows to compete with Netflix and other providers. "We're doubling down there. You're going to see six to seven originals on CBS All Access in the next 12 months," Ianniello said at the Deutsche Bank Media Telecom & Business Services conference in Palm Beach, Fla.

MCN Take: CBS All access would build on its Star Trek: Discovery series, The Good Fight and an upcoming Twilight Zone reboot from Jordan Peele. Other upcoming originals include the Kevin Williamson fairy-tale anthology Tell Me a Story,Strange Angel, and the comedy No Activity. "Wherever Netflix is, I don't see why we won't be there," Ianniello said.

Read the full story at The Hollywood Reporter.

Netflix Stock Reaches New All-Time High

TWIN: Netflix shares were up nearly 4% on Friday (March 2), closing at $301.05 per share, a new all-time high for the stock, beating the old mark of $297.36 as the company continued to ride a wave of investor optimism over the SVOD space. With Friday’s close, Netflix’s market cap reached $130 billion, putting the company within spitting distance of other major media companies like Comcast-NBCUniversal ($169 billion) and The Walt Disney Co. ($155 billion).

A few years ago I read an article that asked if @netflix had "the worst board in history". Seems like the answer is no, they do not. #startups#businesstipshttps://t.co/l1RgiQl6om

— Dan Schepleng (@DanSchepleng) March 2, 2018

MCN Take: Netflix shares are up more than 50% since the beginning of the year. And the rise comes just days after Comcast lobbed an unsolicited bid at U.K. satellite giant Sky, a move some see as insurance against growing virtual MVPD and SVOD competitors.

Read the full story at Variety

Netflix Forcing Media Competitors to Think Globally

TWIN: Former DirecTV chief Mike White told CNBC that he believes U.S. media companies need to watch what Netflix is doing internationally closely. He warned that if the company gets to 200 million international customers – it’s at about 67.7 million now – it will be able to write much bigger checks to content creators.

MCN Take: Netflix already plans to spend about $8 billion on content this year and at an industry conference, CFO David Wells said it will have around 700 original TV shows, movies and specials this year. About 80 of those programs will be internationally focused.

Read the full story at CNBC

Netflix is testing a navigation bar on Android

TWIN: According to Engadget, Netflix is beta testing a new navigation bar for Android phones, replacing the slide-out menu with something more elegant and accessible.

Netflix moves to a bottom nav bar on Android (& iOS).

Why? Obvious always wins: https://t.co/coJ7Ge55Itpic.twitter.com/iEtnPEeETE

— Luke Wroblewski (@lukew) February 26, 2018

MCN Take: The new navigation bar will make it easier for users to access their offline downloads and see what content is coming soon.

Read the full story at Engadget

Hastings: Netflix’s Next 100M Subs Will Come From India

TWIN: While it has more than 117 million subscribers worldwide, Netflix founder chairman and CEO Reed Hastings told an audience at the Economic Times Global Business Summit in New Delhi that its next 100 million customers will come from India. That would be a big boost, given that Netflix has about 500,000 customers currently in the sub-continent.

MCN Take: Hastings said India has all the components for streaming video growth, a strong, affordable high-speed internet infrastructure and a consumer base that is passionate for film and other video content.

Read the full story at the Hollywood Reporter

Black Panther Coming to Netflix This Fall

TWIN: Crossing the $700 million worldwide box office milestone in just its second week in theaters, Black Panther is expected to come to Netflix in September or October, but it will be the last Marvel movie for the streaming service as part of its expired deal with Disney. Black Panther debuted in theaters on Feb. 16 and Disney’s Netflix deal – which the company declined to renew in August and will take effect in 2019 – usually calls for movies to hit the streaming service about seven or eight months after theatrical release.

MCN Take: The blockbuster won’t make its debut on Disney’s planned streaming entertainment service, which will launch in 2019. But the streaming product is expected to be chock full of Star Wars films – including the original Episode Three, which comes as part of its 21st Century Fox deal and a new Star Wars series from Game of Thrones screenwriters David Benioff and D.B. Weiss.

Read the full story at The Independent

Netflix CEO Reed Hastings has issued some conditional praise to the proposed merger of AT&T and Time Warner Inc., so long as AT&T's future data policies don’t give rivals such as TW-owned HBO a leg up on his OTT SVOD service.

“[A]s long as HBO’s bits and Netflix’s bits are treated the same, that would be the starting place,” Hastings said Monday night at The Wall Street Journal DLive conference, according to Fortune. “We really want to make sure that to the consumer, to the system, that basically it doesn’t give an unfair advantage to HBO over Netflix. If it’s open competition, we love that.”

Those concerns seem to be tied to wariness that AT&T might try to zero-rate content from the TW content stable.

RELATED: AT&T to Tweak, Raise Broadband Data Plans

Notably, Netflix was okay with the Charter-Time Warner Cable deal when Charter pledged to extend its settlement-free peering policy to the acquired systems. Per FCC's OTT-friendly order on that deal, Charter is also prohibited from imposing data caps or charging usage-based pricing for its residential broadband service.

Hastings also admired AT&T’s plans for DirecTV Now, the OTT-TV service slated to launch sometime next month.

RELATED: DirecTV Now Coming in November

“I think AT&T is going to be very aggressive about building a national competitor to all of the cable companies,” Hastings said. “If they pull that off, that would be in the consumer’s interest.”

Netflix is offering some mixed messages with respect to virtual reality.

Always game to try out new platforms, Netflix jumped into the mix last year by developing an app for the Oculus-powered Samsung Gear VR that features a digitized living room and a virtualized screen that display shows and movies from Netflix’s substantial library. Hulu just launched its VR app, and, as I see it, took the idea several steps forward.

The topic of VR came up on Monday’s Netflix’s Q1 earnings call, and CEO Reed Hastings has what appears to be a somewhat lukewarm attitude to the emerging platform.

“I think it's mostly going to be an intense gaming format for a couple years due to the price of the consoles,” Hastings said, still hopeful that pricing on VR products will come down and become more ubiquitous. “I don't think it will have a direct effect on us in the next couple years because I think the center point for VR will be other sorts of things than watching a TV show in a VR headset. I don't think that will be very popular,” Hastings said.

That was one of several nuggets to come from the call.

Hastings, who predicted that Amazon would eventually launch a stand-alone subscription service years ago, took the news that Amazon did just that this week in stride.

“[T]his is all part of the natural evolution from linear TV to Internet TV,” he said after praising some of the “great work” being done not just by Amazon, but by Hulu, HBO and Showtime.

And don’t expect Netflix to follow in the footsteps of Yahoo and Twitter and tackle live sports. “[T]here’s no interest in live sports currently,” he said.

Hastings also addressed Netflix’s controversial decision to reduce the quality of streams delivered on Verizon and AT&T cellular networks to help users keep their exposure to data caps in check (Netflix plans to introduce a “data saver” for mobile apps next month).

“[W]e've added lots of options over time to allow more customization,” he said. “If you look, we've had one on the wired side. We just hadn't implemented it yet or rolled it out on the mobile side. So it's always been planned.”

And Netflix appears to be a bit more open to the idea of allowing customers to download (rather than just stream) its content – something that Amazon allows for a portion of its library – as it continues its global expansion.

“We should keep an open mind on this,” Hastings said. “We've been so focused on click-and-watch and the beauty and simplicity of streaming. But as we expand around the world, where we see an uneven set of networks, it's something we should keep an open mind about.”

Netflix’s stunning admission that, for five years, it reduced the video speeds of customers of Verizon Wireless and AT&T Wireless — while not doing so for customers of Sprint and T-Mobile — is little short of breathtaking. It was an exercise in hypocrisy to claim that broadband providers were degrading the quality of its video when, in fact, Netflix — without notifying its customers — was doing precisely that.

Recall the history here to understand why Netflix’s actions were so brazen and deserving of governmental review. Traditionally, peering agreements among content networks and last-mile Internet-service providers (ISPs) were never regulated, but were always negotiated between private parties.

For Netflix, arm’s-length negotiations posed a problem, because as the share of total bandwidth taken by its content grew (up to 37% at peak hours, according to one survey in March of 2015), its position became ever more untenable. It wanted ISPs to build more bandwidth to consumers for Netflx’s use, but it didn’t want to help pay for that. It didn’t want its own business model constrained.

SHIFTING THE COST BURDEN

Instead, Netflix tried to shift the real costs of its service onto others — the local network operators. In fact, it wanted “free interconnection” with the ISPs shouldering all of the costs of the upgrades required to carry the ever-growing volume of Netflix traffic. Then, as the flood of Netflix content caused consumers to experience problems with video quality, Netflix was quick to put the blame on the ISPs.

Also remember that Netflix was a driving force in advocating for network neutrality. The company’s CEO, Reed Hastings, pushed first against Comcast and then against ISPs more generally, accusing them of “purposeful congestion” and pushed free interconnection for Netflix’s services. In a sharp departure from an unbroken history of peering agreements being negotiated by private parties through which the network responsible for delivering a greater proportion of traffic to the other network would bear the resulting cost, he demanded that “they (ISPs) must provide sufficient access to their network without charge.”

Hastings blamed video quality problems on a lack of interconnectivity, even as — without disclosure — Netflix itself was slowing down video. Then, while continuing to complain about video quality degradation, the company persistently and successfully urged the Federal Communications Commission to include regulatory oversight over interconnection for the first time as an aspect of the net-neutrality rulemaking. That unprecedented assertion of authority is now a central feature of the litigation presently pending on the net-neutrality order.

ISPs, whether cable, wired telco or mobile, weren’t throttling or slowing Netflix video. Netflix was. This fact matters for yet another reason. One of the central responsibilities imposed by the net-neutrality order on broadband providers is transparency in network management practices. It must be noted that while being one of the strongest advocates of the FCC using last-century common-carrier rules to impose net neutrality obligations on the ISPs, the company was simultaneously secretly violating one of the core net-neutrality principles, the necessity of being transparent in its network management practices. The practice of degrading video for customers without notice was anything but transparent.

A MATTER OF MATH

Network-management practices that deliver fast, reliable Internet content rely not on blog posts and banging drums for government action, but on sound engineering and sound mathematics. The French writer Stendahl wrote, “Mathematics allows for no hypocrisy and no vagueness.” Nor should legal proceedings. Now that Netflix’s actions are publicly known, there is a clear path forward.

The Federal Trade Commission has jurisdiction over unfair trade practices in the Internet ecosystem. Advertising one service, such as level of video quality, while delivering a lesser service falls within the ambit of an unfair trade practice. Did Netflix advertise a service it failed to deliver? Were its conduct and its disclosures to customers consistent with fair trade practice?

Congressional committees may also legitimately ask about the circumstances that led the FCC to take the unprecedented step of departing from voluntary peering arrangements and asserting regulatory authority over interconnection between networks. In both venues it’s timely to ask some serious questions regarding Netflix’s behavior. These proceedings could even become a new Netflix hit, a true-life House of Cards.

Former U.S. Rep. Rick Boucher (D-Va.) was a House member for 28 years and chaired the House Energy and Commerce Committee’s Subcommittee on Communications and the Internet.

A two-year grace period that shielded veteran Netflix subscribers from a 2014 price increase expires next month, an event some think could cause the subscription VOD pioneer to actually subtract customers during the second quarter of 2016.

The May switchover could be tricky: It’s the biggest price increase since 2011, when the company announced a rate hike for its streaming/mail-order DVD combination from $9.99 to $15.99 per month. Back them the backlash was swift — Netflix stock fell 40%, and customers called for Netflix CEO Reed Hastings to resign.

This time around, the company has been careful, buying itself time in the two-year wait for the initial outrage to wane. And analysts point out that customers intent on keeping the $7.99 price point can do so by dialing back their tier of service to the single-stream, standard- definition Basic Plan.

The pricing details: Netflix hiked the monthly fee for new customers in May 2014 to $9.99, but allowed existing customers at the time to remain at the previous $7.99 and $8.99 monthly rates for two years.

UBS media analyst Doug Mitchelson estimates about 17.8 million Netflix customers in the U.S. (37% of its total base) were at the $7.99 price point. He thinks the $2-permonth increase will be too high for between 3% and 4% of those customers, who will probably cancel service.

‘U.S. MATURITY FEARS’

Netflix is offering those grandfathered customers an opportunity to stay at the $7.99 rate, but they would have to downgrade service to one streaming device in standard definition, as opposed to two streaming devices in HD. While that could offset some of the cost-conscious churn, it isn’t expected to be much.

The churn from the grandfathered base amounts to about half of Netflix’s quarterly subscriber gains; in the fourth quarter it added about 1.5 million U.S. customers. Couple that with a maturing market — subscriber growth has softened in recent periods — and Netflix could be heading into its first negative streaming quarter ever.

“Investor concerns regarding the potential churn from such a large price increase are compounding the U.S. maturity fears already plaguing Netflix’s stock,” Mitchelson wrote. “Add in the fact that 2Q is the seasonally softest quarter, and some investors are even questioning whether Netflix will have its first quarter ever of declining U.S. streaming subscribers.”

In the past several quarters, Netflix has seen a steady softening of domestic subscriber additions, from 2.3 million adds in Q4 2013 to 1.5 million in Q4 2015. Most analysts who follow the company aren’t expecting the worst, but anticipate that the slower growth trend will continue.

Morgan Stanley media analyst Ben Swinburne revised his Q1 subscriber estimate downward to 1.8 million from 2.2 million after the SVOD pioneer missed his Q4 estimates.

“When you have as large of a subscriber base as Netflix, minor changes in churn can have a material effect on net subscriber additions,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said. “I would be surprised if it goes negative even with negative 2Q seasonality, but you cannot completely rule it out. I figure they can do at least a couple hundred thousand.”

Mitchelson said in his report that the bear case for Netflix to lose subscribers in Q2 is unlikely, and he estimated the company would end the period with an increase of about 450,000 customers in the U.S.

Of the customers paying the old $7.99 monthly rate, Mitchelson estimated that 229,000 would churn off in Q2, with another 360,000 dropping the service in Q3.

Swinburne was a little less optimistic. He estimated that total additions would be about 150,000 and paid customer additions would be flat in the second quarter.

Fueling Mitchelson’s optimism is Netflix’s programming lineup. The company, the analyst wrote, has a strong original content slate with hit shows like Orange Is the New Black, Jessica Jones and Daredevil.

This year is expected to be especially strong — Netflix is increasing its original scripted series slate to 31 in 2016 from 16 in 2015 with shows like The Crown, Marvel’s Luke Cage, Frontier and The Ranch and has 10 feature films released or in production.

“We feel comfortable the slate supports our view for low levels of churn,” Mitchelson wrote in a report.

GROWTH MARKET: THE WORLD

While domestic growth is slowing, Netflix’s real opportunity is international, Mitchelson said. UBS estimates that the U.S., which represented 60% of total gross customer additions in 2014, will shrink to 38% by the end of 2016. Taking up the slack will be areas like Latin America, Europe and Australia.

Swinburne, also in a research note, figured international subscriber additions would rise to 3 million in the second quarter (from 2.4 million last year), with full-year additions at 15 million — 28% higher than the 11.75 million added in 2015 and outpacing his estimates for 4.1 million domestic additions in 2016.

Swinburne said he thinks international streaming customers will overtake their domestic counterparts in 2017, with 54.6 million subscribers (compared with 52.6 million domestically), reaching nearly 80 million customers by 2020. Domestic subscribers could reach 60 million in 2020 by his figures.

Wlodarczak added that, while international growth is important, so is stable U.S. growth, which validates Netflix’s increasing its original programming spend.

LAS VEGAS — Weather-induced travel snafus didn’t stop tens of thousands of techno-geeks from pouring into Sin City last week for CES, where the biggest corporate bets were placed on the Internet of Things, over-the-top video services, and 4K/Ultra HD.

If the the Consumer Technology Association’s annual gadget-fest had one big, central theme, it was the IoT, a market that spans home security and automation, OTT devices, and connected wearables, and even “smart” clothing.

CES Unveiled, an event that gives show-goers a glimpse of what was to be on display during the week, was dominated by dozens of IoT startups, all looking to cut their slice of a market that will create a record-setting $287 billion in retail revenue in 2016, according to the CTA’s latest forecast.

That’s the kind of market traction that would justify former Cisco Systems CEO John Chambers’s 2014 prediction that the IoT is poised to become a $19 trillion market over the next decade, with pickup by the private and public sectors, entire cities and, perhaps, entire countries.

Aside from the ongoing debate about data and device security, the big challenge in the years ahead will be securing IoT systems and building software that enables these multitudes of connected devices and sensors to work together. Panasonic is one of many companies taking a stab at that by introducing ÔRA, an “adaptive” smart home platform designed to work with connected products from a wide range of suppliers and underlying operating systems.

VR GETS MORE REAL

The market for virtual reality — including the technology that runs it and the content that will fuel it — is a small-yet-rapidly-growing segment, and its presence was felt strongly at CES.

Consumers appear to have an appetite for VR. Interest in new VR products will cause sales to surge 500% in 2016 and reach 1.2 million units sold, the CTA predicted. The trade group also said it expects VR to generate $540 million in revenues this year, up 440% from 2015.

Some 70% of U.S. consumers have played video games, an area expected to drive VR adoption, according to a new study from Frank N. Magid Associates, and nearly one-quarter of consumers said they are “very interested” in having a virtual reality experience at home. Another 23% said they were interested.

Those numbers are part of the reason why Comcast has been splashing cash on VR startups such as Baobab, Next- VR, and AltspaceVR, and why Discovery Communications has launched a division dedicated to VR content development.

The biggest VR news last week came by way of Oculus, the VR startup acquired by Facebook in 2014 for a cool $2 billion. Timed with the event, Oculus began to take preorders on its flagship VR platform, the Oculus Rift, on Wednesday (Jan. 6).

The company also set the starting price — $599 — for a package that includes the Oculus headset, sensor, remote, required cables, an Xbox One controller and two games.

Oculus Rift-PC bundles retail starting at $1,499. Oculus will offer its wares in 20 countries out of the chute.

By comparison, the Samsung Gear VR mobile headset (also powered by Oculus’s technology) costs $99, but must be paired with a compatible Samsung smartphone, which puts the all-in price in the same neighborhood as the single-purpose Oculus Rift.

There’s much more to come, as high-end VR platforms from Sony (for the PlayStation 4) and HTC (Vive) hit the market later this year.

“There’s nothing gimmicky about VR,” said Nick Woodman, CEO of GoPro, the maker of wearable cameras that’s working with Google on a consumer-focused, 360-degree camera array called Odyssey.

OTT SPREADS EVERYWHERE

Over-the-top video is no longer an emerging niche, but a mainstream phenomenon with an increasingly global reach.

For evidence of that look no further than Netflix, which last week said it had flipped the switch on its subscription OTT video service in 130 more countries, expanding to almost 200. Vietnam, India, Poland, Brazil, Russia and Saudi Arabia are among the countries that have joined the list, while China remains notably absent.

“Today, you are witnessing the birth of a new global Internet TV network,” Netflix CEO Reed Hastings declared in his CES keynote last Wednesday (Jan. 6).

The expansion will surely give a massive boost to Netflix’s subscriber base and the reach of its originals. Netflix, which was available in 60 countries heading into CES, has about 69.17 million subscribers worldwide, including 43.18 million in the U.S. Netflix will produce more than 600 hours of original programming this year, chief content officer Ted Sarandos said.

The adoption and reach of digital video continues to have a profound effect on the overall TV market, changing the way consumers watch.

“Digital will win the decade,” Robert Kyncl, YouTube’s chief business officer, said during his keynote last Thursday (Jan. 7). He predicted that digital video will “replace” TV, in part because it’s immersive in ways that traditional TV can’t be, is “endlessly diverse” and is inherently mobile.

“I don’t think digital video will grow linearly; I think it will grow exponentially,” Kyncl added, holding fast to a prediction that digital formats will present 75% of the total viewing pie by 2020.

Kyncl likened YouTube’s trajectory to the rise of cable TV, where networks such as ESPN, CNN, AMC and MTV first emerged as niche players but eventually expanded into original content.

YouTube is at a “similar inflection point,” he said, as it ups investment in originals for its new YouTube Red subscription service, which is also rumored to be seeking TV licensing deals.

But there are also some differences. YouTube “is a democratic platform … anyone can create something everyone can watch,” he said.

YouTube has yet to announce a multichannel TV offering that replicates pay TV, but others are pursuing services and strategies aimed at the small but growing cord-cutting trend.

Add to that list Vidgo, an Atlanta-based startup that hopes to crack the pay TV code by offering low-cost bundles of broadcast TV channels and VOD via an over-the-top distribution platform.

Taking aim at a market now targeted by services such as Sling TV and PlayStation Vue, Vidgo said it will offer a set of packages with live, linear TV and video-on-demand, including premium services, local broadcast TV and sports, to a range of smart TVs, tablets and smartphones.

Looking a bit like a virtual multichannel video programming distributor, Vidgo said its service will be free of credit checks or contracts. It plans to launch in 15 U.S. markets in the first half of 2016 (including New York, Los Angeles and Atlanta), and achieve national coverage by Q4 2016.

For now, Vidgo is keeping a lid on its channel lineups and pricing, noting it will release those details within the next 45 days. But the startup has some pay TV expertise behind it. Robert Kostensky, formerly of DirecTV, is Vidgo’s president and co-founder, and Shane Cannon, president of Cannon Satellite TV (a Dish Network authorized dealer), is its chief marketing officer. Vidgo’s parent company is Gotham Media, a company that runs a content delivery network and develops streaming apps for platforms such as iOS, Android and Roku.

TUNER TONNAGE

OTT services topped the video agenda last week, but traditional pay TV continues to fight for growth and relevance.

Dish Network used this year’s CES to unleash a super- sized whole-home DVR, the Hopper 3, a device that supports 4K video and packs 16 tuners and 2 Terabytes of storage.

Dish unveiled its latest flagship as the satellite-TV provider looks to amp up its pay TV subscriber numbers. It lost 23,000 video subscribers in the third quarter of 2015, ending the period with 13.91 million.

The Hopper 3 will carry forward elements from earlier-generation Hoppers, including integrated Sling Media place-shifting technology and AutoHop ad-skipping capability, but will sport a faster processor (the Broadcom BCM7445 Ultra HD TV Home Gateway chip) that will result in quicker response times for Dish’s coming “touch” remote, which is still in beta.

The 16-tuner device will enable customers to attach up to 6 “Joey” client devices, meaning that seven different shows can be watched in the home at the same time. Dish customers will also be able to watch and record up to 16 shows at once.

That capability also allows Dish to one-up Cablevision Systems’s multiroom DVR, as well as a multidevice X1 setup Comcast is testing that enables customers to record up to 15 shows at once. Verizon FiOS TV’s Quantum TV platform lets users record up to 10 shows at once when they combine the functions of two Arris-made Verizon Media Servers.

On the Ultra HD front, the Hopper 3 supports 4K content up to 60 frames per second. Early on, Dish will offer 4K fare from Sony Pictures, The Orchard and Mance Media, as well as Netflix’s 4K library.

Dish also has other apps in mind for 4K, as the Hopper 3 will let subs with 4K TVs stitch four live HD (1080p) streams onto the TV screen at the same time. That capability — something Dish refers to as “Sports Bar Mode” — decodes four HD programs and stitches them into one stream that can be displayed on the 4K screen.

Splitting and combining those screens is another way to “show off the power of 4K,” Vivek Khemka, Dish’s recently promoted executive vice president and chief technology officer, said.

Dish also introduced the Hopper Go, a $99 USB-connected device with 64 Gigabytes of flash memory that lets subs transfer up to 100 hours of DVR-recorded content for offline viewing on a mobile device. Dish subs with the Hopper 2 or Hopper 3 will be able to link up to five mobile devices to the Hopper Go via WiFi, and Android tablet and smartphone users will have the added option of connecting via a USB cable.

4K MATURING

There were also signs everywhere that 4K video is rapidly maturing as consumer adoption of the platform grows and the underlying technology ecosystem starts to wrap itself around standards.

About 34% of U.S. homes will have a 4K TV by 2019, according to research firm IHS. On the technical end, the UHD Alliance, an industry organization that includes DirecTV and Rogers Communications among its backers, launched a consumer-facing logo and brand that identifies services, content and devices that adhere to technical specifications that deliver a “premium” Ultra HD experience.

The group will use and license an “Ultra HD Premium” logo to identify those products and services that deliver agreed-upon metrics such as High Dynamic Range, peak luminance, audio, black levels and wide color gamut, among others.

The initial specs cover TVs (other devices are currently “under consideration”), distribution and content.

Panasonic’s DX90 series TV sets are the first to be certified with the UHD Premium label, Julie Bauer, president of Panasonic consumer electronics and chief marketing officer, said at a CES press event here.

Even before it launches its HBO nightly newscast and a documentary service on the former A&E H2 channel, Vice is laying out plans for expanding its TV and online video presence globally, and anticipates a public offering or sale in the coming year, founder/CEO Shane Smith said.

During a CNBC interview in London, Smith disclosed that Vice plans to launch at least a dozen TV networks throughout Europe during the coming year, continuing to concentrate on edgy programs for millennial audiences. He acknowledged that he move into TV is essential since 75% of the company's ad revenue comes from TV. Smith said he expects to use that money for expanded ventures into mobile and over-the-top delivery.

"You can actually take money from TV and put it into mobile, which is quite frankly more difficult to monetize," Smith said.

He offered no specific details about the upcoming U.S. launches, but said he expects revenue will near $1 billion this year and will double during the next few years. 

Vice is in acquisition talks "with everybody," at a $5 billion valuation, but that is "kind of at the top end where media could buy us today," Smith said. Hence he also is pondering a public offering.

"Around the end of this year, we're going to have to make a decision about whether we start to make the book to go public, or do a sort of larger, major strategic deal," Smith told CNBC.

During the London trip last week, Smith also revealed that Vice has produced 32 TV series  since early 2014 "for our network in America" and added that the content has been offered for pan-European regional and national deals.

"We are trying to navigate the morass of how you do telco deals simultaneous with terrestrial TV deals and keep growing our online platforms," Smith said, according to published reports. He has said he expects to announce distribution partners within the next couple months and begin TV rollout during the first quarter of 2016.

Separately, Vice has hired former Bloomberg chief content officer Josh Tyrangiel to run the company's new daily newscast for HBO; the launch date for the new five-nights-per week show has not been set. Tyrangiel had been at Bloomberg for six years.

Smith described Vice's HBO show as a venture that will "take news programming in a totally new direction. ... [It] needs the leadership of an expert who’s hungry to do things differently."  

Meanwhile, Netflix, which has accelerated its original content production, said it will add the edgy kind of documentaries that have been Vice's forte. During Netflix's recent earnings call, content chief Ted Sarandos said the streaming service could compete with Vice documentaries and with news-based shows such as HBO's Last Week Tonight With John Oliver.

"We're definitely being more adventurous in terms of the genres we're going into," Sarandos said during a presentation, during which Netflix CEO Reed Hastings asked, "What's the likelihood that we compete directly with Vice in the next two years?"

Sarandos simply said, "Probably high." 

Netflix has launched its over-the-top video service in Cuba.

Starting today (Feb. 9), people in Cuba who have Internet connections and access to international payment methods will be able to subscribe to Netflix and instantly watch a curated selection of films, TV shows and original Netflix content, the company said. Subscriptions start at $7.99.

Netflix's Golden Globe and Emmy Award-winning series House of Cards and Orange Is the New Black are among the company's original series to be available to viewers in Cuba, alongside kids shows such as DreamWorks Animation's All Hail King Julien and The Adventures of Puss in Boots, and Academy Award-nominated original documentaries such as Virunga and The Square.

Netflix first offered service in Latin Amrica in 2011 and has about 5 million subscribers across the region.

"We are delighted to finally be able to offer Netflix to the people of Cuba, connecting them with stories they will love from all over the world," said Netflix co-founder and CEO Reed Hastings. "Cuba has great filmmakers and a robust arts culture, and one day we hope to be able to bring their work to our global audience."

Count Netflix CEO Reed Hastings among the fans of an FCC proposal to bump the definition of broadband from 4 Mbps downstream to 25 Mbps down. 

Speaking Tuesday during an interview to discuss Netflix’s fourth quarter results (you can watch the whole thing here), Hastings said he “absolutely” agrees with the proposal, which will face a vote at the FCC’s meeting on Thursday, Jan. 29.

While any speed bump would be welcome by any OTT video service, Hastings said the slow shift toward 4K streaming and other bandwidth-intensive services offer good reasons for the boost.

Noting that one 4K stream from Netflix requires about 15 Mbps, he said consumers will also need additional headroom for things like video conferencing and home monitoring apps.  “So, 25-megs  is kind of baseline for the next five years as opposed to the past five years,” he said.

Netflix launched a small 4K library last year that is in the process of expanding, with support for prettier High Dynamic Range streaming already in the works.  

Access to Netflix’s 4K library also drives a higher price, as it’s only offered through the company’s top-line $12 per month plan. Even though 4K has not hit the mainstream, the approach provides “incremental revenue without making any changes ourselves…by just letting the tide come to us,” Hastings said.

Ted Sarandos, Netflix’s chief content officer, reiterated that most of Netflix’s original series are being shot in Ultra HD, and that licensing for “frontline” shows such as Breaking Bad and The Blacklist include the 4K option.

Netflix execs were also asked about HBO’s coming stand-alone OTT service for the U.S. market, but said it is hard to speculate on its impact on Netflix’s business until HBO reveals pricing.

But Hastings doesn’t expect HBO to get crazy on pricing. “To the degree that they go really aggressive and match Netflix’s price for HBO, then it’s extremely disruptive to their current ecosystem since the prices are higher than that,” he said. “They’ve generally given the signal that they’re going in softly in terms of not being too disruptive using the existing partnerships that would tend to imply a little bit higher price point.”

But even if HBO does match Netflix’s pricing, he still thinks consumers will take both, noting that shows like The Affair and Homeland have given Showtime a boost without eroding HBO’s base.

Integration with major U.S. MVPDs also came up, with analysts wondering if Netflix's new deal with Dish will cause operators like Comcast to loosen up and do the same.

“I think it is likely that Dish’s competitors would want to co-op that benefit and integrate with us, but right now everyone’s going to watch and see,” David Wells, Netflix’s CFO said. “Let’s see how Dish succeeds with the Hopper hardware, which is what has Netflix.”

Hastings, meanwhile, doesn’t believe that Sling TV, Dish’s new $20 per month OTT service, will have much of an impact on Netflix’s business. Though it does pose more competition, “I don’t think it materially changed the desire to have Netflix with our unique and exclusive shows,” Hastings said.

Netflix has launched in Belgium and Luxembourg, finishing a major European expansion this week that saw the over-the-top service also launch in France, Germany, Austria and Switzerland.

The expansion is important for U.S. producers and studios because OTT providers have become a major source of revenue in international markets and the launch of Netflix services in major European territories will head up competition for those rights, which generally translates into higher prices.

Netflix reported that the expansion means it will be able to market its services to more than 63 million broadband homes in those six countries.

"We've received a very warm welcome throughout Europe," said Reed Hastings, Netflix co-founder and chief executive officer in a statement. "Consumers love choice - in series and films and in when and where they watch. We are delighted people are embracing Netflix in our newest territories and, particularly, the incredible viewer enthusiasm for our original series."

Netflix has localized the service with subtitles and dubbing on foreign language movies and TV shows and local content.