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Three Minutes With Swaziland RPCV Reed Hastings, CEO of Netflix
Three Minutes With Swaziland RPCV Reed Hastings, CEO of Netflix
Three Minutes With Netflix CEO Reed Hastings
Blockbuster's nemesis discusses online DVD rentals, movies via broadband, and surviving the dot-com fallout.
Tom Mainelli, PCWorld.com
Friday, June 08, 2001
Netflix offers DVD rentals through its Web site. In three years it has amassed a loyal customer base of about 300,000 people, and ships about 70,000 discs each day. With both DVD player ownership and Net access growing rapidly, Netflix is aiming for mainstream success. Chief Executive Officer Reed Hastings waxes poetic about renting movies by mail, building a successful e-business, and planning for the future of digital entertainment.
PCW: Netflix isn't new, but it's a new name to many of our readers. What do you do?
Hastings: For $20 a month you can rent as many DVD movies as you want, with no due dates and no late fees. We have a vast selection, and the only limit is that you only get three movies out at any one time. The shipping is free, and you get a free prepaid return envelope.
PCW: Netflix's early appeal stemmed largely from the lack of DVDs in local rental stores. Now that Blockbuster carries DVDs, why should I try Netflix?
Hastings: Convenience and our breadth of selection. We have over ten times more movies to choose from than the largest Blockbuster. The movies come individually packaged and you send them back individually so--with transit time--you can watch eight to ten movies a month. We get them to you in advance so they're there when you get in the mood to watch them and there's no last-minute hassles.
PCW: A common criticism of Netflix is that sometimes the most popular movies are out of stock, and require a long wait to get. How do you address that problem?
Hastings: Like many video rental stores we occasionally run out of stock and then we have to wait until we get some in to get them to you. [In addition to existing studio agreements] we've recently struck a deal with Fox, Universal, and Dreamworks where they'll give us enough copies of the DVDs so that it's nearly impossible for us to run out.
PCW: That'll make customers happy. Who is the typical Netflix customer?
Hastings: The average Netflix customer is someone who loves movies and hates Blockbuster. That's not everybody, but it is a large section of America and it crosses all kinds of demographics.
PCW: You're a dot-com. How has Netflix weathered the storm that claimed so many other promising online businesses?
Hastings: Netflix has the advantage of being a subscription business. Once we get someone to try the service, if we can keep them happy they keep paying us $20 a month, which makes for very predictable revenues. We're really more like HBO than we are like Amazon.com.
PCW: You say you plan to be profitable next year. How many subscribers will that take?
Hastings: Half a million. What you find in subscriber models is it takes a long time to get started--it's a slow trajectory. For example, it took [broadband provider] AtHome four years to get to a million subscribers, but they got their next million in six months and the next million in three months.
PCW: There's no DVD in your name--do you expect to offer movies in different formats down the road?
Hastings: We want to be the leading Internet company that brings people movies. Today we send you DVDs through the mail because that's the most efficient way, but over time we'll be downloading them to people.
PCW: How soon will I be able to download a movie through broadband from Netflix?
Hastings: Oh, quite a while, anywhere from two to five years before there's enough interest in it. It's a matter of cost to deliver the movies--you want to do it cheaper than you can do it by mail. The post office is awfully efficient; [it costs] 34 cents to deliver DVDs to the consumer. [Right now] it's more expensive than that to move the bits through the network.