
Can Netflix Survive in the New World It Created? - yarapavan
http://www.nytimes.com/2016/06/19/magazine/can-netflix-survive-in-the-new-world-it-created.html
======
ergothus
One of the best professional pieces of advice I've ever read said something
like "Think you're indispensable? Do they know that?". It made me aware that
often the people making the hiring/firing decisions aren't actually aware of
my day-to-day. Rather, they know only the summary info. Those kudos to fellow
employees and in-house "awards" that I'd been ignoring? Those are
documentation that someone is worthwhile, and I had none. If I were fired that
day, I'd have had precious little "proof" that it was a mistake. (and of
course, the point isn't to "prove" it's a mistake, it's to make sure they know
not to in the first place).

Now, when I learned that advice I was working for virginia state govt, where I
didn't have technically competent and aware management like I do now in
Seattle tech companies, but there is still an important kernel in the message:
We tend to judge our performance relative to the difficulty of the tasks in
front of us. Often, our performance will be judged my management using
different criteria. It's a good idea to be aware of how you look from the
outside.

...which is why I'd not want to work in the Netflix system. It's not whether
I'm a good performer, it's whether THEY THINK I'm a good performer. Ideally
these are related, and outside of a Netflix-like environment I might have
confidence that my manager would let me know in advance of action if there was
a discrepancy. While I'm sure Netflix would claim the same, I doubt McCord was
expecting the axe to fall...

~~~
sevensor
> Think you're indispensable? Do they know that?

Indispensable employees are a sign of organizational failure. They indicate a
weak point in the organization -- if that person gets hit by a bus, or walks
off the job, or is on vacation during a crisis, we're all in trouble. And if
an employee becomes indispensable on purpose, that person is a problem and
should be let go before the situation gets worse. Where I used to work, people
who thought they were indispensable were the first to go when we had layoffs.

All this is to say that if you ever find yourself thinking, "this place would
fall apart without me," you have a big problem.

~~~
ergothus
1) I think you're underestimating the number of shops that ARE "in trouble".
There's a lot more tech-need in the world than tech-capable people right now,
and with the places that have resources and organization gobbling up people, a
lot of smaller shops (small startups, govt shops, small non-startup
businesses) DO have indispensable people. And often those people will want to
stay there. As for becoming indispensable on purpose...I'm sure some people do
this, but most don't. This leads me to #2 below.

2) ...All of which is irrelevant since "indispensable" was mild hyperbole for
"important/beneficial/worth keeping" in this discussion. I suppose I'll take
the hit in the name of accuracy.

~~~
sevensor
Good points, both of them. My experience with indispensable people comes from
a big manufacturing organization. When I talk about people trying to become
indispensable, I mean the engineer who had her hand in everything her
department did and supported the line 24/7, and the technician who told me,
"they'll never get rid of me, this place would fall apart without me." Among
others. They really do exist, but perhaps it's less of a thing in software? I
haven't worked with enough programmers to judge.

~~~
ergothus
Software is by no means immune to what you list. Indeed, as Hubris is one of
the Three Virtues of a Programmer, you definitely find it. That said, I think
(my opinion) that you'll find more devs/admins that are PROUD to be
indispensable than you will devs/admins that SEEK to become indispensable.

Both cases are ignoring what you point out: having a indispensable person is a
bad thing for the long term health of your business. But one case (pride) is
just mistaking doing a lot of essential work as not also creating a problem,
while the other (seeking it) is less forgivable. And of course, there's a
third, much worse option ("spaghetti code is job security") that doesn't rely
on good work at all.

I've known a lot of devs that were close to indispensible and trying to fix
it, fewer devs that were indispensable and proud of it, and only one or two
that did crappy work so that they became more vital. A fair number of all of
these devs were "responsible" for becoming indispensable simply by improving
things to the point that their improvements became essential...and no one else
had the skills/knowledge to easily replace them.

But of course, my experiences are subjective.

~~~
knicholes
I think that these devs writing spaghetti code to stay indispensable should
never get their code into the codebase through code reviews. Then that person
would fail to contribute anything.

~~~
perseusprime11
You become indispensable by doing things that nobody wants to do. For example,
I remember an Engineer I used to work loves writing Perl/awk scripts to go
through tera bytes of data to create reports. The data has anamolies and you
need to custom create regular expressions to filter data that you don't need.
The last I know he is still there.

------
yarapavan
Spoiler: It's a long read!

> Does this still holds? Is there any other organization in dissimilar
> industry where this works?

McCord also convinced Hastings that he should ask himself a few times a year
whether he would hire the same person in the same job if it opened up that
day. If the answer was no, Netflix would write a larger check and let the
employee go. “If you are going to insist on high performance,” McCord says,
“then you have to get rid of the notion of retention. You’ll have to fire some
really nice, hard-working people. But you have to do it with dignity.

“I held the hands of people weeping, saying, ‘I want to be here forever,’ ”
McCord says. “I would tell them, ‘Nothing lasts forever.’ I would say to Reed,
‘I love them, too, but it is our job to be sure that we always have the right
people.’ ”

> Ironically, in 2011

Hastings decided to re-evaluate everyone in the executive ranks, using the
litmus test McCord taught him: Would he hire them again today? One of the
people this led him to push out was McCord.

~~~
distances
> You’ll have to fire some really nice, hard-working people. But you have to
> do it with dignity.

I wonder if this is part of the reason why there are not too many Netflix-like
high achieving companies in Europe -- firing people is not possible. Even
_totally_ sucking at your job isn't acceptable reason for employment contract
termination, that'd be just a reason for further training. You'll have to go
through different hoops, usually concerning the company's financial needs --
and which high achiever would want to join a company that announces dire
economical times?

This (easier to get rid of people) is also a reason behind a recent trend of
people-for-hire companies and freelancers-only requirements.

Disclaimer: probably does not apply to all of Europe.

~~~
gaius
These are not firings technically - you are being paid a bonus on the
condition that you resign, as I understand it. Has anyone ever said no or are
the payouts _that much_?

~~~
Paul-ish
It is probably the case that in the US, choosing not to leave gracefully means
you will get the boot. In countries that make it hard to fire, someone could
say "No thanks" to the resignation package and keep working for a significant
amount of time.

------
dcole2929
The thing is Sports is the key! Cable and Network television exists almost
entirely due to revenue generated from Sports Viewers. Seriously, like the
majority of your cable bill is used to pay for licensing to air live games.
Cable is the only way for people to legally watch the majority of NBA and NFL
games (in HD). We are making stride with stuff like NFL Sunday Ticket, but
honestly those services still aren't great. When current license agreements
end Netflix (and by extension Amazon, Hulu and whoever else) should back up a
dump truck full of money to league offices and offer whatever terms they want.
In the game of Internet TV you get sports and you win. It's as simple as that.

I don't believe that any of these networks competing services will ever take
off because fragmentation is bad for consumers and they know it. Bundling is
hugely important in this market. No one is going to be willing to pay $10 a
month for a streaming service for every Network that decides it needs it's
own. Sure a lot of people will be willing to pay for more than one but
certainly not enough for all or even a lot of networks to go this route. HBO
can survive that way but does NBC for instance have any show compelling enough
to spend $10 for it separate from other networks shows.

~~~
ben_jones
The problem with NFL Sunday Ticket and NBA League Pass is that they both feel
extremely nerfed as to not get in the way of TV. I have trouble believing the
NFL and even the NBA actually have problems putting out a decent streaming
service, they just _don 't want to_ because they're getting all their money
from TV. I would have absolutely no problem paying like $5 a game for the
amount of entertainment I get from it, but they don't even let me do that! I
have to pay for an entire season in which some games won't even be shown on
the service. They basically force you to watch illegal streams. It's
ridiculous.

------
jdblair
Hi, Netflix employee here, been here 7 months. In my 18 year career I've never
liked working at a large organization as much as I like it here. The people I
work with are uniformly excellent at their jobs, I'm learning from all of
them, and I enjoy the time I spend with them.

~~~
chrismealy
Enjoy it while it lasts! As soon as they find someone new and better, you're
fired!

~~~
jdblair
I don't understand why that's a problem. My work experience has been one where
its much more likely that under-performers drag down the top performers, not
that top performers are let go prematurely. If they let me go before I'm ready
to leave I will be disappointed, but there are other jobs.

------
gumby
> “If it is a flop, we will have overpaid for one series,” he told Hastings.
> “But if it succeeds, we will have changed the brand.”

Traditional big companies are structurally unable to think this way.

~~~
lukeschlather
It also said they set up an indie film distribution company which was shut
down because "We would have been better off spending the money on DVDs." Which
sounds more like a traditional bigco.

~~~
gumby
Is it? Sounds like an example of what I was praising: they tried it, and found
that the economics wouldn't work -- surprisingly they needed to control more
of the value chain (at least it's a surprise to me).

------
gentleteblor
The most interesting thing (to me) in this piece, is how many pivots Netflix
made/is still making. Many of those moves were very much unsafe/risky (which
is why the networks didn't make em themselves)...brave for what was already an
established company then.

~~~
Animats
That's a good point. They're desperately trying to outmaneuver the cable
companies. So far, they're doing OK, but not great. While Netflix is big,
Netflix is not very profitable.

Netflix is becoming more like a cable company, with a limited menu. Total
access to a huge back catalog has been cut back. Netflix, though, doesn't own
the pipe.

Owning the pipe for TV is so profitable that AT&T more or less gives away
voice and data if you get their TV service. Internet without TV costs more
than Internet with TV.

~~~
gentleteblor
True. It's going to be interesting to watch things play out. The portion of
the article about consumers not wanting to subscribe to too many streaming
services rings true to me. I think a lot of the newer (cable) network
streaming services might die off in the next few years if they don't become
one of the dominant few. If Netflix is on top of this (dominant) heap it
should give them a lot of leverage when it comes to content costs which might
lead to higher profits etc etc.

------
mortenjorck

      At another point, Netflix created a dedicated device through 
      which to access its content, only to decide that adapting its 
      service to everything from mobile phones to TV sets made more 
      sense. (The Netflix device was spun out into its own company, 
      Roku.) 
    

Pretty sure this is a factual error in the article. As far as I know, Roku
existed as a consumer electronics company independent of Netflix for years
before it produced any Netflix streaming devices - anyone remember the Roku
SoundBridge series of home audio devices?

I’m not clear on the actual relationship between Roku and Netflix (they _are_
both based in Los Gatos) but saying the Netflix hardware was “spun out” into
Roku cannot be accurate.

~~~
polpo
This is somewhat accurate. The Netflix Player was an internal Netflix project.
Close to launch, Hastings realized that other device makers would balk at
Netflix making their own hardware, so it became a Roku product. [1] Most
articles I've seen about this say Netflix spun off Roku, but like you I
remember they definitely existed as a company before that. Did they simply
just transfer that whole department to Roku? Did they have any kind of
relationship before that? It's a little murky.

[1] [https://www.fastcompany.com/3004709/inside-netflixs-
project-...](https://www.fastcompany.com/3004709/inside-netflixs-project-
griffin-forgotten-history-roku-under-reed-hastings)

------
ergothus
Stepping away from hiring/firing practices, I had a very visceral reaction to
this:

>“Five years ago,” says Richard Greenfield, a media and technology analyst at
BTIG who happens to be Netflix’s most vocal proponent on Wall Street, “we
wrote a piece saying that the networks shouldn’t license to Netflix because
they were going to unleash a monster that would undermine their business.”

This exposes to me how capitalism, for all it's very real benefits, also has
big flaws. "Don't do this thing because people will want it but you won't be
the one to profit" is a bad attitude for society in general. Sure, it means
there's a profit motive for someone else to fill that niche, but the point of
creative works is that they are unique. If Shakespeare is too expensive you go
to Marlowe...but then you never get Shakespeare. That's a survivable choice,
but not the most beneficial result.

I don't have a solution, and I'm not saying to tear down the system. I'm just
saying quotes like this make me cringe.

~~~
dexterdog
But Netflix was just a distributor then and not a creator. The biggest problem
in this is middle men. People want to pay the creators for their work, but
there are layers upon layers of middle men that end up getting a far larger
slice of the overall pie than the people who actually create the stuff. With
the technology we have and systems similar to (but more open than) Netflix, we
should be able to have a proper compensation mechanism.

~~~
ergothus
Perhaps, but I can also see the middleman as a value add.

When I paid Netflix and could see most anything, it was great, though a few
things I couldn't see. Now I pay Netflix, Hulu, Amazon, pay for devices (e.g.
Roku) to access them, have to hop accounts, and STILL can't see everything.
Heck, Netflix's library has gotten less reliable. ("Want to see Groundhog day?
let's see if it's currently in or out of catalog").

Middlemen aren't evil. Middlemen that want to gouge money WITHOUT providing
value _cough_ cough _RIAA_ cough* aren't evil either, but they're a lot less
"good".

Frankly, I'm a fan of competition, and in general when competition revolves
around trying to offer more value to consumers, it's a bunch of winning
(except for the companies that fall behind). Too often we see a competition to
AVOID that scenario (Coke/pepsi & exclusive deals, everything about Comcast,
HFT, the examples are numerous).

~~~
dexterdog
My point is middle men should make a cut in line with typical commissions
(like 15%) so that the financial transaction is largely between the creator
and the consumer. Netflix may be close to this model while virtually nobody
else in the industry is.

------
ExpendableGuy
Aren't DVDs still a major profit-winner for Netflix? Last I checked 5 million
people were still subscribed to receive DVDs, and their subscriptions were
more profitable than streaming-only ones. DVD subscriptions, however, are
declining.

Something people forget about the Qwikster debacle: video game rentals were
teased. The fact that Netflix never explored this again really bugged me.
Imagine if Netflix bundled video games into their DVD rental plans -- I think
they'd be able to start boosting DVD rental numbers again, and thus boost
profits.

------
rogerbinns
Does anyone experience the Netflix recommendation system being useful? If you
use their web browser experience then you can tell it to never show items
again. But if you use mobile apps, Chromecast, Roku etc you do not get that
option. My experience is that they keep recommending the same content over and
over again, despite me already having watched some of it, and not wanting to
watch the rest. It is also an incredibly user hostile experience: "here are
the same items we showed you last time that you didn't want to watch, so you
must look at them again".

Heck they even go so far as recommending items where they accurately predict
I'll give it low ratings, while ignoring the items where they accurately
predict I'll give it higher ratings.

I really don't understand why they do this. Is my experience unique?

------
drostie
TL;DR: Netflix changed everything when it switched from mail-order DVDs to
streaming-video. Now, people find themselves (a) not watching commercials and
(b) watching shows back-to-back. This has been lucrative for the company in
terms of raw revenue, but not in terms of profits after costs: though the
article is pretty murky on this (one part says that they made millions in
profits; another says that they have a consistent cash-flow problem involving
borrowing and more borrowing).

Netflix has several concerns up ahead which might make it difficult to survive
operating at a constant loss. One is that Hulu and Amazon are encroaching on
its markets, and competition tends to drive down profits. Another is that they
don't own the vast majority of their content, which puts them at the mercy of
the pricing of their suppliers -- and being downstream from a monopoly can
also drive down profits. Even worse, their suppliers still have a revenue
model based on this old advertising-and-cable-packages system, which Netflix
is destroying by transforming the landscape: which is a disincentive to
working with them; a channel which can broadcast a breakout-popular new TV
show might keep that in-house to try to keep the channel alive, rather than
licensing the show to Netflix for an alternative revenue stream. At the very
least this will probably keep Netflix content about a season behind whatever's
on TV.

Finally, Netflix is finding itself raising its own prices, which may lead to a
flurry of cancellations from people who maintain inactive subscriptions
precisely because they're pretty cheap. On the flip-side, it's not clear that
they can sustain continued growth in their subscriber base; maybe at this
point almost everybody who wants Netflix's service is already signed up. If
those numbers don't keep up, then problems arise that are not too different
from the problems with "borrowing from the future" in Ponzi schemes (albeit
with a solid net positive revenue, which makes it morally very different -- in
Ponzi schemes this is 0 and it is being advertised as a huge number, which is
a huge lie -- no similar problem here). A similar "collapse" could happen,
where the growth tapers, thereby skepticism spikes, thereby costs to borrow go
high, and everything rapidly turns around from apparent success to apparent
failure.

There may also be problems with the corporate culture, but while most of the
article is devoted to the corporate culture, no clear message is given; it is
apparently a somewhat ruthless place which is probably somewhat sad but is
also sold as really exciting, because the ruthlessness only keeps the people
who really care about what they're doing, which apparently creates good
morale. There's a lot of other details like that which don't really amount to
anything significant regarding what this "new world" is that Netflix has
created, or whether it will survive the above growth pains.

~~~
smhenderson
* Another is that they don't own the vast majority of their content*

That's true now and probably will be for the foreseeable future but the
content they do own is great IMO. For me it started with the obvious -
Daredevil, Jessica Jones, etc. But lately I've dived into other things they've
done and enjoyed just about all of it. Great example - River - a somewhat
disturbing detective show with good acting, exciting action and just a deep
insight into a brilliant but seemingly broken man.

Even if Netflix has to evolve again to stay alive I hope the do so in a way
that lets them continue making original content.

~~~
distances
I think Netflix will face a problem of getting their customers find too well
what they actually like, and not being happy with the content after this. Say,
I loved River that you mentioned -- it's brilliant I think -- but can't really
stand the superhero stuff now. And that's fine, but there are economic limits
on how much of specific kind of content they can provide. I will obviously
cancel the service if I run out of the programs that I find worthwhile.

~~~
smhenderson
Yeah, agreed. I think the article mentioned price hikes scaring off casual
watchers and this almost happened with me but before I decided to cancel I
took a deeper dive into the available content and found a lot I had ignored
for a while (both NF original and licensed content).

So now I'm in this pattern where I find a few things I want to try, like
enough of it to keep me happy for a month or two and then slowly run out of
things to watch. I let it sit idle for a while and then lather, rinse, repeat.

But essentially every time I start to contemplate cancelling I tend to find
something that makes me hang on for a little while longer.

~~~
distances
Offtopic, but since you liked River, I'd suggest you to try Happy Valley too
(if it's available at your location). It's also serious English crime drama,
with some seriously good acting performances.

~~~
smhenderson
Thanks, I'll give it a look.

------
unabst
What world? Streaming was not created by Netflix. Netflix could be gone
tomorrow, and we'd stream our way around them just fine, just as us cable-
cutters stream our way around cable or around HBO to get Game of Thrones, top
downloaded show all the way back in 2012 [1].

Netflix just carved the monster wave beautifully like any pro surfer would by
building the largest subscription base for it. Good for them. But beyond that,
anyone can practically stream anything now. And it's not because of Netflix.

Anecdotally, good TV has always been good TV, and has been king. So as long as
Netflix can generate good original content as they have, people will be happy
to pay them 10 dollars. You could say this world was created by HBO, but
whatever created what, it all traces back to good television, aka content,
being king. The underlying technology doesn't really matter. As we can see HBO
appears to have caught up just fine.

[1] [https://torrentfreak.com/game-of-thrones-most-pirated-tv-
sho...](https://torrentfreak.com/game-of-thrones-most-pirated-tv-show-of-the-
season-120608/)

------
kylec
Why is it that every discussion about Netflix somehow devolves into a
discussion about their hiring/firing practices?

~~~
majewsky
1\. Because they are open about them.

2\. Because people care about having a job and earning money.

3\. Because they literally make up about a third of the article.

------
okoksowhatis
Netflix did not create a New World.

------
jonathankoren
Funny how Netflix HR polices never extend to the boardroom or the C-suite.

~~~
kschrader
It literally says in the article that Hastings fired the Chief Talent Officer
that came up with the "Would you hire them again today?" litmus test that they
use because she no longer passed it.

