Netflix’s Reed Hastings on Amazon, Net Neutrality, and Theaters

May 31, 2017, 9:46 PM UTC
Netflix's CEO Hastings gestures as he delivers his keynote speech during Mobile World Congress in Barcelona
Netflix's Chief Executive Officer Reed Hastings gestures as he delivers his keynote speech during Mobile World Congress in Barcelona, Spain, February 27, 2017. REUTERS/Paul Hanna - RTS10NUT
Paul Hanna — Reuters

Netflix CEO Reed Hastings thinks of Amazon as an “awfully scary” rival and he no longer views the net neutrality debate as a “primary battle” for his popular streaming company.

Hastings spoke on a variety of topics—from streaming video rivals to the recent kerfuffle over Netflix movies screening at the Cannes Film Festival—in a pair of interviews on Wednesday afternoon. The Netflix CEO first appeared on CNBC’s Squawk Box for an interview before joining tech journalist Peter Kafka on-stage at Recode’s Code Conference. Here are some takeaways from Hastings’ conversations:

On Amazon

Hastings referred to Amazon as “awfully scary” on CNBC that because of Amazon’s big spending on original content that is intended to make it more competitive with Netflix. Much like Netflix, Amazon has been acquiring rights to original TV shows and movies in recent years, though it’s still expected to spend about $1.5 billion less on original content than Netflix’s expected $6 billion this year. Both streaming services have certainly given traditional Hollywood studios runs for their money, including on the awards circuit, with Netflix and Amazon each winning their first Academy Awards earlier this year.

In both interviews, Hastings described Amazon’s streaming model as increasingly broad. “They’re trying to be Walmart. We’re trying to be Starbucks,” Hastings told Recode’s Kafka, arguing that Amazon is trying to deliver more types of content to a wider range of audiences. “We can’t try to be them. We’re never going to be as good as them at what they’re trying to be,” Hastings said. “What we can be is the emotional connection brand, like HBO.”

Hastings pointed specifically to Amazon’s move into live sports, with the company signing a deal to stream Thursday night NFL games in the upcoming season. He said that Netflix has no plans to stream sporting events, even as rivals like Amazon, Twitter, and Facebook sign streaming deals with major sports leagues like the NFL, NBA, and MLB. “The Internet doesn’t yet add much value to the sports experience,” he said.

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Net Neutrality

It wasn’t long ago that Netflix and Hastings were leading the charge among online content companies pushing for net neutrality rules to ensure that Internet providers can’t throttle certain websites by creating so-called “fast lanes” online. Netflix and its ilk won a major battle last year when an appeals court upheld new FCC rules that would try to keep the Internet unfettered. But under President Donald Trump and new FCC Chairman Ajit Pai, the FCC now seems intent on rolling back those rules. Meanwhile, Netflix’s Hastings has suddenly become relatively quiet on the matter.

Speaking with Recode on Wednesday, Hastings admitted that net neutrality is “not our primary battle at this point,” as the Netflix CEO seemed to concede that the Trump administration will find a way “to unwind the rules no matter what anybody says.”

For Netflix specifically, though, the issue is not as much of a threat as it would have been a decade ago, thanks to the company’s big base of subscribers. “It’s not narrowly important to us because we’re big enough to get the deals we want,” Hastings admitted. He added that net neutrality is a much more important issue for “the Netflix of 10 years ago” and for innovators and entrepreneurs that have not reached Netflix’s massive scale.

Peak Content

Much has been made about the increase in the amount of TV and film that’s available to consumers, as streaming services churn out original programming to compete with traditional networks and studios. Hastings told Recode that he does not believe that the industry is anywhere near “saturation” in terms of the amount of available programming. Instead, he noted that various tech giants like Amazon, Twitter, and Facebook all have room to try different things as they determine what role they will play in the evolving entertainment landscape—hence those companies’ decisions to snatch up live sports content, among other programming.

“Everybody realizes in the next 20 years, [linear TV content] is all going to move to the Internet,” Hastings said. “It’s all going to be on-demand. So, you’ve got this massive ecosystem that’s going to change and everybody’s trying to figure out what piece of that [they] might own and investing in various ways.”

Meanwhile, Netflix’s ever-growing budget for original content is still growing after increasing from roughly $5 billion last year to a planned $6 billion in 2017. Hastings told CNBC that Netflix’s content budget is going to keep increasing “a lot” as the company’s membership keeps growing, with Netflix nearing 100 million global subscribers.

Movie Theaters

Hastings told Recode that the recent controversy over Netflix’s first-time movie screenings at the prestigious Cannes Film Festival earlier this month was “fantastic” because it resulted in more exposure for the two films his company had competing at the event, Okja and The Meyerowitz Stories. Netflix has often butted heads with traditional movie studios and movie theater operators who are not fond of the streaming company’s aversion to screening its original films in theaters before releasing them online. But, Hastings said the debate will not last forever, as he predicts the eventual demise of traditional theatrical “windows,” the periods between a film’s theatrical release and its availability for home-viewing online or in the form of a Blu-Ray/DVD.

“We’re in a transition period where the movie theater chains around the world are not willing to allow consumers to choose, but eventually they will,” Hastings said at the conference.

Later, an audience member asked Hastings if Netflix would ever consider launching its own chain of movie theaters. Hastings replied that there are “no plans” for Netflix theaters, joking that televisions are so technologically advanced that it wouldn’t make sense.