The Secrets to Success According to Netflix CEO

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netflix-logoWhile the rest of the world watches revenue shrink and tech layoffs close in on a quarter million jobs axed since August 2008, Netflix this week reported profits were up 45%. Revenue was also up 19%, beating Wall Street’s estimates, and the company expects to have over 10.1 million subscribers by the end of this quarter. So much for the slowing demand in its movie rentals that Netflix predicted after profits rose 30% last quarter and the company had 8.7 million subscribers.

(Note: Netflix is planning some customer service staff cuts, but not in the interest of cost cutting — rather they claim that their new Silverlight-based streaming media player is easier to use, and thus requires less support than previous versions.)

With Netflix bucking the trend and doing so well, advice from founder and CEO Reed Hastings is certainly welcome. Hastings told Fortune magazine about how he came up with the idea for the company and gives some tips on how to ensure business success.

  • Target a specific niche. – When visualizing your startup, identify a pain point, says Hastings, and then solve it. You want to be solving a specific problem that people have, not trying to sell them on something that would only be “nice to have.”
  • Stay flexible. – Hastings tells Fortune that the original business model for Netflix was not subscription based. When it didn’t work, the company has to evolve and try something else or face going under. He also says that they named the company “Netflix,” rather than “DVDs By Mail,” which has allowed them to move into other areas — such as streaming media. For many web applications, the ability to stay agile means being able to adapt to what your users are doing with your application — even when that means supporting an unanticipated use case. Flickr, for example, famously started life as an online game in which photo sharing was an afterthought.
  • Never underestimate the competition. – Blockbuster didn’t have a competing product in 2003, when Netflix became profitable, so Hastings and company wrongly figured that the old DVD rental stalwart would never launch one. A year later, Blockbuster created Total Access, and to date they’ve put half a billion dollars into it.
  • There are no shortcuts. – This is possibly the best advice that Hastings gives: being an entrepreneur isn’t easy. We hear so many rags to riches success stories, about people who created something in their dorm room or garage or after hours and went on to great success almost overnight, that it begins to sound like anyone can do it. And maybe anyone can, but it takes a lot of hard work, and the overnight successes are rare.

Be sure to also check out our post from November about the keys to long term success according to Amazon founder Jeff Bezos.

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  • php_penguin

    You missed “don’t treat your customers like criminals”

  • zuneone

    I avoided Netflix until they offered HD streaming to Xbox 360. Now I am a happy customer.

  • http://www.sscottradcliff.com ScottRadcliff

    This is a great post! I am a Netflix user and am very pleased with the service. Netflix gets user experience right. Anything I want is within 2 clicks. The emails I get from them are not trying to sell me anything, they are trying to get feedback on my experience with their service. And when I decide to supply that feedback, it is again within 2 clicks of the mouse and I am done.

    They have a great business model. They follow the rule of doing one thing and doing it well. It’s no wonder they are about the only successful company left here in the U.S.

  • Tony

    I love Netflix and watching their movies instantly on my Roku player makes it even better. Anyone who has Netflix and doesn’t have a Roku player is missing out on getting the best value out of their Netflix membership. Go Netflix!

  • http://www.scottradcliff.com ScottRadcliff

    I wasn’t aware of the Roku player. After a quick search, looks nice. Does it play any Netflix movie, or just the watch instantly ones like the XBOX?