I met Ted Sarandos more than two decades ago when I was a journalist covering Hollywood’s home entertainment business and he was a video store executive on the west coast.
In that same era, I met Reed Hastings, a former math teacher and Peace Corps volunteer who had what he felt was a bright idea that others in the industry looked upon with considerable skepticism, if not mockery.
Today, Reed is the billionaire CEO of Netflix, which he founded in 1997, and Ted is one of Hollywood’s elite power brokers as chief content officer of Netflix, a pretty cool gig that comes with a seven-figure salary.
Their dual rise to fame and fortune encapsulates the technology revolution that continues to profoundly transform not merely our mundane daily lives but human evolution itself.
Searching the internet with our voices, in lieu of having to type words, is becoming more commonplace on smartphones. Artificial intelligence (or A.I., the title of a 2001 Spielberg sci-fi movie) is moving faster toward science fact. It’s no longer inconceivable—and in fact is being tested, at MIT for one—that brain waves can control certain computer functions.
Netflix is a prominent and popular example of how not only technology, but clever marketing innovation, can modify our behavior. Video retailers, like the one Mr. Sarandos worked at early in his career, and Hollywood studios at first scoffed at the Netflix business model.
After all, went the understandable logic at the time, who wants to wait for a movie in the mail when you can pick up a DVD immediately at the local “rentailer”? What Netflix competitors and detractors didn’t fully count on, however, was how enthusiastically movie lovers would embrace the customer-friendly, double perk that 1) Netflix didn’t care how long you kept the movie, and 2) Didn’t bill you for late charges. Ka-ching! The prix-fixe, all-you-can-eat approach was the game-changer.
But wait… there’s more! Using what Mr. Hastings once told me was his secret sauce of “regression analysis,” Netflix also automatically recommended movies to its subscribers, based on what they already had watched. That wasn’t exactly a fluke on his part; it didn’t hurt that the founder studied computer science at Stanford University, where only the crème de la crème of brainiacs are accepted.
What may be most impressive about Reed Hastings’ uncanny foresight is the name he chose for his bright idea. Despite the presence of “net” in Netflix, it remained strictly a mail-order service for a full decade before adding internet streaming in 2007. Now, it’s an acknowledged TV network that wins Emmy awards and produces major motion pictures for theatrical exhibition, affording Ted Sarandos the cachet to hobnob with celebrities and other Hollywood honchos on the Promenade de la Croisette at the Cannes Film Festival.
Glamour aside, it’s the Netflix numbers that most dramatically reflect how the evolution of entertainment in our time also is a revolution. It has amassed almost 100 million streaming subscribers. Netflix’s share of home entertainment revenue in the U.S. is 30 percent, which is to say that nearly one out of every three dollars we spend to watch a movie (anywhere) goes to Netflix. That data is from a newly-issued report on internet trends by venture capital firm Kleiner Perkins. Reed sure figured out how to read the market for movies.
The impact of Netflix in other corners of commerce has been codified by its name becoming synonymous with a certain kind of modern business model. An online periodical service called Texture has been described as “The Netflix of the magazine world.”
You could say the same about music streaming juggernaut Spotify, which Kleiner Perkins says accounts for 20 percent of the revenue generated worldwide by the music industry, or one out of five dollars we spend to listen to music.
It’s a long way from CDs and DVDs, and who knows what’s next?
Now and then, in future columns, I’ll look at other revelations from the Kleiner Perkins report for a further glimpse into how the digital revolution is changing human evolution.
Bruce Apar is chief content officer of Pinpoint Marketing & Design, a Google Partner Agency. Its Adventix division helps performing arts venues increase ticket sales. He also is an actor, a community volunteer, and a contributor to several periodicals. Follow him as Bruce the Blog on social media. Reach him at email@example.com or 914-275-6887.