Building a Digital Media Empire

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Building a Digital Media Empire

Ralph E. Morgan
Central Maine Community College

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Wilmot Reed Hastings, Jr., better known as Reed Hastings, is the co-founder and CEO of
Netflix. He was born in Boston, MA on Oct 8th, 1960 and first attended college at Bowdoin until
1983, graduating with a BA in Mathematics (Zipkin, 2006). After graduation, he joined the Peace
Corp to teach math in Swaziland, South Africa, out of a combination of service and adventure,
from 1983-1986 (Sauer, 2005). When he returned home to the States he attended Stanford
University in Palo Alto, CA graduating in 1988 with a Masters in computer science (Hamilton,
2006).
Hastings first job was at Adaptive Technology, he said it was here he was taught his first
valuable lesson from then CEO Audrey MacLean. He learned to focus, and that it was better to
do one product really well than two products mediocre (Boyle, 2007). Hasting left in 1991 to
found his first company, Pure Software, which produced products to troubleshoot software. It
was a particular challenge for Hastings as he lacked managerial experience. As the company
grew and he lost his confidence as a manager, he even tried to step down - twice, but the board
refused. Hastings said it was it this point he had to just learn to be a manager (Sauer, 2005). He
ended up navigating the company through two mergers but ultimately left in 1997 after the
company merged with Rational Software (Conlin, 2007).
In 1997, Hastings started Netflix with co-founder Marc Randolph. The idea came to
Hastings when he had a late fee for a movie which was six weeks overdue. He realized gyms had
a much better business model. You could pay a flat-rate once a month and work out as little or as
much as you wanted (Zipkin, 2006). Over the last 18 years Hastings has shown much
forethought and willingness to take risks to drive Netflix to be the leader of online digital media.

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A transformational leader looks beyond day-to-day operations, drives innovation and

looks for ways to take the company to the next level of success. If he is truly exceptional he can
guide his company to the forefront of an industry. Reed Hastings strongly exhibits these traits.
Hastings has said when Netflix first launched he had no idea if people would even use the
service (Sauer, 2005). His fledgling company had cable companies, and big chain video rental
stores to contend with. So how did he do it?
Because of Hastings experience with Pure Software, he learned rapid growth can have a
significant impact on corporate culture and he wanted to make sure his next venture did not
suffer from the same problems (Conlin, 2007). From the very beginning of Netflix, Hastings
attempted to foster a corporate culture that would drive innovation, creative thinking, and keep
the best minds at his company. On the Netflix website, Hastings posted a slideshow, a manifesto
if you will, which details the companys philosophy regarding talent hunting, employee
compensation, and leadership development (Fenzi, 2013).
Hastings espouses rewarding for performance, not effort. "Employees who produce Blevel results--even if they put forth A-level effort--should be cut loose with a generous severance
package. Employees that produce great work, conversely, should be rewarded--even if they are
producing with relatively minimal effort, He states (Fenzi, 2013).
Hastings believes in protecting employee freedom. Hastings writes, the conventional
wisdom that holds true in many businesses, that preventing error is cheaper than fixing it doesn't
apply to a creative environment (Fenzi, 2013).
Hastings also believes paying your employees a competitive market rate is crucial in
retaining top talent. A single exceptional employee gets more completed and costs less than two
B-level employees, explains Hastings. Netflix offers salaries to employees by using a threepronged evaluation, which consists of: the employees worth elsewhere, the expense to replace

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the employee, and what they would cost to keep a specific employee in his or her job (Fenzi,
2013).
Hastings correctly anticipated, as early as 2000, virtually from the moment he started
Netflix that consumers would eventually prefer to get movies instantly delivered via the Internet
at a time when less than 7% of U.S. homes had broadband. So Hastings retooled Netflix as a
streaming video company, rather than let any number of current competitors like video rental
giant Blockbuster, premium cable channels HBO, and Showtime, or potential competitors
such as Apple, and Amazon to swoop in and deliver a killing blow disrupting his own
business before it was disrupted (Copeland, 2010).
Continuing to expanding at home, and internationally, Hastings has built his company on
a hard-driving and risk-taking culture that has already upended the movie distribution business;
by streaming movies and television shows over the Internet. Now hes changing the media game
again by producing original shows available only on Netflix. Virtually every movie deal today
includes an online distribution component. Declares film producer Harvey Weinstein: "It's
because of Netflix" (Copeland, 2010).
Since its inception in 1997, Netflix has become the worlds leading Internet television
network. They have nearly 70 million members in over 50 countries that collectively watch more
than 100 million hours of TV shows and movies per day (Smith, 2015). They now produce
original series, documentaries and feature films. Their members can watch as much as they want,
anytime, anywhere, on nearly any Internet-connected screen. All of this without commitments or
commercials. Reed Hastings is definitely an innovator of how we are entertained, and I suspect
his company will lead that charge for many years to come.

References
Boyle, M. (2007, May 23). "Questions for... Reed Hastings". Retrieved from CNN
Money.
Conlin, M. (2007, Sept 24). "Netflix: Flex to the Max". Retrieved from Business Week.

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Copeland, M. V. (2010, Nov 18). "Reed Hastings: Leader of the Pack". Retrieved from
Fortune.com.
Fenzi, F. (2013, Feb 5). "3 Big Ideas to Steal from Netflix". Retrieved from Inc.com.
Hamilton, J. O. (2006, Jan/Feb). Home Movies. Retrieved from Stanford Magazine.
Sauer, P. J. (2005, Dec). How I did it: Reed Hastings, Netflix. Retrieved from Inc.com.
Smith, C. (2015, Dec 2). By the Numbers: 50+ Amazing Netflix Statistics and Facts.
Retrieved from DMR Digital Statistics/Gadgets/Fun.
Zipkin, R. H. (2006, Dec 17). "Out of Africa, Onto the Web". Retrieved from New York
Times.