‘The most remarkable change has been Reliance Jio’

Reed Hastings, 60, founder and co-CEO of the $25-billion-plus streaming giant Netflix, says the dramatic fall in data prices in India, brought about by the Mukesh Ambani-owned Reliance Jio, has played a big part in the success of streaming services like his in India. He says nowhere in the world have data costs gone from one of the highest to one of the lowest in a span of just four years as they have in India. In fact, without the transformation brought about by Reliance Jio, Netflix’s business wouldn’t have worked in India, Hastings says in hindsight. “We were fortunate that just as we started investing in content, other people were investing in transforming the Internet,” says Hastings, during an exclusive interview with Fortune India, from a ski lodge in the Utah mountains. Netflix has just completed five years in India.

Hastings, who says he has been binge-watching Netflix original Bridgerton while a storm raged outside, also talks about the Netflix ‘no rules’ management mantra, competition, and the India strategy over a Zoom call. Edited excerpts:

To what do you attribute the culture of innovation at Netflix?

I had an unusual experience in my first company [Pure Software] from 1990 to 1997. I’m an engineer by background and we optimised everything as an engineering problem. What happened over time is we were extremely efficient, because we had all these rules. But we were very inflexible because we just had a lot of rules. And then the market changed… and we were so rigid that we were unable to adapt and we ended up having to sell the company. And so, my big lesson was the danger of over-optimising for efficiency, with rules and processes. And that it strangely was better to manage on the edge of chaos; where some crazy stuff happens, but also, it’s very fertile. And an organisation is more like an ecosystem with lots of moving parts, than it is like a factory. Now I try to have a healthy ecosystem, but [try] not to over-manage it.

Does managing on the edge of chaos help creativity and innovation?

That’s allowed us to make many changes from [being a] domestic DVD company, to streaming all titles, to developing our own, to expanding around the world, to becoming a big studio, [and] many hard expansions. We’ve got people who have to think on their feet, because there are no rules. And the people who think on their feet can adapt more easily. And so, we’ve been able to be very flexible and adapt.

Again, because you attract the people who like trying things. And you know, there are no rules. So people just try things. And you do have to be careful, because you are managing on the edge of chaos, you don’t want to actually fall into chaos.

How do you assess the last five years in India? What is the plan for the future?

The most remarkable change anywhere in the world has been Reliance Jio. There’s no country that has gone from [having] some of the world’s most expensive data to the world’s most inexpensive data in four years. The transformation of the Indian Internet is phenomenal. In hindsight, our business probably could not have worked five years ago. We were fortunate that just as we started investing in content, other people were investing in transforming the Internet. In no other country in the world have the data costs gone like this [from high to low], and the usage quite like this [from low to high]. We’ve been growing every year, we’ve been just building our team, developing content, figuring out what works, whether that’s Sacred Games, or AK vs AK, just lots of different types of content. We’re still in the learning phase. It’s just the beginning of where we want to be in India.

What is your core management philosophy?

I got to live in Italy about 20 years ago. And what’s amazing about Rome is there are no international restaurants. And I’ve come to realise that [it’s just] a few things like pasta and tomatoes, just done so, so well… that it has become my life philosophy to keep it simple. Do a few things like what we do, and do them extremely well.

What do you think of competition? Will there be consolidation in the OTT space?

If you look at many markets on the Internet, it’s pretty fragmented with lots of different players. Think how difficult it is to create a television station in any country. It’s much easier to create a video website. So, I think there’ll be a lot of choices. We hope to be the best in premium television, and that we win a lot of hours of viewing and please people, but there will always be a lot of competition. Disney on one side, Amazon on another, YouTube on a third. And then of course, linear TV is still there.

In India, is there a studio in the offing?

It’s in place. We’re still renting sound stages. But other than that, we have all the IP ownership and the lawyers, creatives, you know, we’re a full studio, even though we still rent space.

How do you see the economy shaping up?

Covid-19 is a setback for everybody. It’ll be generating a lot of government debt and funding the economy. But partially because of that, people are still spending and, of course, in Covid-19, people want to spend on entertainment, because they’ve got so many hours at home. So, in general, I think the economy is promising.

As Netflix grows in numbers in India, and reaches different segments of the market, how does one strike a balance between quantity and quality?

What happens is, they work together. The more things that you try, the more you learn. And your rate of quality improvement depends on how many swings you can take, how many attempts. So, we’re doing more quantity, and that’s helping with the quality. Again, because we get the experience curve.

You’re a computer engineer. When taking decisions, what dominates—the tech entrepreneur, the storyteller, or the businessperson?

Well, the miracle of Netflix is that Ted Sarandos joined us over 20 years ago. And he’s just a creative genius. I’ve been focussed on the business, and the technology, and him on pleasing our members, and then building a team that really works on pleasing our members. But the stability, you know, of Ted and I working together, now as co-CEOs, for the last 20 years. That’s part of what makes it work.

What is Netflix’s strategy vis-a-vis originals and acquired titles?

The big focus for us is pleasing our members. So particularly in Covid-19, if we had a chance to buy movies that, you know, might have gone to the theatre, that makes sense. Basically, we want to spend on behalf of our members, to provide them content that they love. And if we do that we grow. What we’re most excited about is developing our own content. And that’s been a big success for us.

What is going to be your next big bet?

You know, we think what happened... is the sharing of content around the world. So, AK vs AK has been a success for us outside of India. We’ve had a recent Japanese show—Alice in Borderland is popular all over the world; we've got a French show, Lupin, that’s No. 1 in the U.S. The interest over the next 20 years around sharing great content is very high. And it allows Indian filmmakers and television producers to build a global audience for their work and to share Indian stories and values as it does for Japanese stories and values and French.

Most people might say, I want half of the content to be [from] my community. And I want to have my community reflected, and stories that I really relate to. And then I want another half that’s challenging, and it’s sort of fresh, again, [like] watching a Japanese or a Korean show.

What do you see as some of the top trends, going forward?

I would say the first one is people using the Internet at home, both [for] video conferencing and entertainment. All of that commute time is eliminated. And they’re not supposed to go out for social time. I would say people have gotten more curious about the world, because they see this, where did this pandemic come from? I have to think about the outside world. So there’ve been more interest in things happening around the world.

(The full story on Netflix’s India plans appears in the February 2021 issue of Fortune India, now on stands and on Amazon.in)