That Time Reed Hastings Promised John Malone Netflix Wouldn’t Compete with Cable...

John Malone
(Image credit: Liberty Broadband)

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.”

Daniel Frankel

Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!