Netflix is probably hoping a new book about its early history never gets made into a movie.
The book, Netflixed: The Epic Battle for America’s Eyeballs, tries to debunk a widely told tale about the company’s origins and paints a polarizing portrait of its star, CEO Reed Hastings.
Set to go on sale Thursday, the book arrives at a pivotal time for Netflix. The video subscription service is still recovering from a customer backlash triggered by Hastings’ hasty decision to raise U.S. prices by as much as 60 per cent last year. Investors remain leery of Netflix as its expenses for Internet video rights steadily climb. That’s the main reason Netflix’s stock remains about 75 per cent below its peak of nearly $305 reached right around the time Hastings announced the price increases 15 months ago.
The book, written by veteran journalist Gina Keating, draws its insights from interviews with Netflix’s lesser known co-founder, Marc Randolph, and other former employees. It also depends on information from former executives at Blockbuster Entertainment, the once-dominant video rental store chain driven into bankruptcy by the rise of Netflix and Redbox’s DVD-rental kiosks.
Hastings declined to be interviewed for the book.
Keating nevertheless illuminates the competitive gauntlet that Netflix had to navigate to get where it is today. The book also dishes up juicy morsels about various negotiations that could have reshaped Netflix.
According to the book, Hastings and Randolph flew to Seattle sometime in 1998 to meet with Amazon.com CEO Jeff Bezos. The topic of discussion: a possible partnership. At one point, Hastings proposed that Amazon buy Netflix, only to be disappointed when Bezos offered a mere $12 million.
Netflix spokesman Jonathan Friedland called the Amazon anecdote “totally untrue.”
The book asserts that the Amazon talks weren’t the only time that Hastings flirted with a possible sale before the company went public a decade ago.
In the spring of 2000, Hastings and other Netflix executives flew to Blockbuster’s Dallas headquarters where they tried to sell Netflix for $50 million, only to be told the price was way too high, according to the book. That was one of many miscalculations Blockbuster made in its rivalry with Netflix. Despite its recent downfall on Wall Street, Netflix still boasts a market value of $4 billion.
Blockbuster eventually built its own online DVD-rental service and began to hurt Netflix so badly that Hastings made an informal bid to buy his rival’s roughly 3 million Internet subscribers for about $600 million, according to the book.
“People interpret history in all kinds of different ways, and a lot of the anecdotes in the book don’t square with the way we remember them,” Friedland said. “The gist of the story, that Marc and Reed created Netflix together, is correct.”
Although the book sometimes casts Hastings in an unflattering light, Keating remains convinced he is the main reason that Netflix was able to transform home entertainment.
“I hope that people recognize he is a genius,” Keating said. “There is no question in my mind that there is nobody like this guy. Wall Street and naysayers are wrong to bet against this company, especially as long as he is in charge.”
The book captures Hastings’ vision, focus, charisma and chutzpah _ traits that helped him transform Netflix from a quirky service with fewer than 100,000 customers in the late 1990s into a cultural phenomenon with 30 million subscribers in the U.S., Canada, the United Kingdom and dozens of Latin American countries.
But readers also will be introduced to a cold-hearted side of Hastings that never surfaces in his public appearances, or the many interviews that he has done with reporters during his 14-year tenure as Netflix’s CEO.
Viewed through Keating’s lens, Hastings “seemed to lack an empathy gene.” He is depicted as a brilliant mathematician who looks at almost everything as an equation to be solved. Once he’s convinced he has figured out all the variables, Hastings never let compassion trump his logic, based on anecdotes in the book. In one scene, Hastings fires Netflix’s first human resources manager in front of her coworkers’ because he wanted to bring in a former colleague from his previous company, software maker Pure Atria.
Keating thinks Hastings’ data-driven approach also makes it difficult for him to anticipate how Netflix subscribers will react to things like last year’s price increases and the botched attempt to spin off the company’s DVD-by-mail rental service into a separate company called Qwikster.
“He has one blind spot and that he just doesn’t understand the consumer-facing aspects of the business,” Keating said. “It’s illogical the way consumers act, and I think it’s frustrating for him because he is trying to do the best thing for customers. But he just doesn’t understand that you can’t dictate to them. They have to be ready to go at their own pace.”
