Netflix reported earnings after the close yesterday, and the stock immediately dropped 8% in after-hours trading. So why do I argue that CEO Reed Hastings is leading this company brilliantly? Because he sees a future that some others find difficult to grasp; he has pushed resolutely toward it even through potholes and sudden twists in the road; and the further he goes, the more knowledge he amasses about how to do it better. Those are all things that excellent leaders do.
Hastings’ most important strategic move now is spending billions to create original TV programming that he can sell to online subscribers worldwide, about 600 hours of such programming this year, the same quantity that HBO plans to produce. This strategy may seem breathtakingly audacious—or, as some would say, insane—considering that Netflix was barely in the original programming business just four years ago. But it had been in the business of renting DVDs and streaming existing movies and TV shows for many years, accumulating and analyzing growing mountains of data on what its customers like. To attract high-profile Hollywood talent for its entry into original programming, Hastings had to commit to a two-year deal instead of commissioning a pilot show, as most established networks do. But that was okay. Unlike established networks, Netflix had all that data on its customers. Hastings knew they love political drama, actor Kevin Spacey, and director David Fincher. So he risked significant money by signing them to two full seasons of House of Cards, confident it would be a hit. And it was.
Hastings is ferociously expanding original programming on that same principle, and while not all his bets will be right, they will all expand his mountain of customer knowledge, which every day becomes more difficult for competitors to match. Investors weren’t delighted with yesterday’s earnings report—the company lowered its forecast of subscriber growth in light of a price increase—but the stock’s performance in the bigger picture remains impressive. Since House of Cards debuted in February 2013, the S&P is up 38%. Netflix is up 304%. Investors think Hastings knows what he’s doing, and I suspect they’re correct.
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Leaders in business, government, and every other realm should pay attention to Connectography: Mapping the Future of Global Civilization, published today by Parag Khanna, a senior research fellow at Singapore’s Lee Kuan Yew School of Public Policy. Khanna argues powerfully and persuasively that we misunderstand nations, economic growth, war, and peace if we analyze them only according to existing political boundaries. Within nations—such as the U.S., as he explains here—or among nations, he says, “We don’t fight over the borders that divide us but rather pull and yank the supply chains that connect us. While very few societies are at war, all societies are caught in this global tug-of-war, competing over the flows of money, goods, resources, technology, knowledge and talent transpiring between them.” You will see the world in new ways as Khanna shows how connections across borders are in many ways more significant than the borders themselves.
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What We're Reading Today
Theranos under federal investigation
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United Continental nears deal for proxy board
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Immigration battle hits the Supreme Court
Supreme Court justices seem split on President Barack Obama's executive action to grant deferred deportation of illegal immigrants who are parents of U.S. Citizens. Left-leaning judges, particularly Justice Stephen Breyer, have questioned whether Texas and 25 other states had the right to bring the case to court. While conservative-leaning justices, including Chief Justice John Roberts, questioned the scope of President Obama's action. ABC News
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Building a Better Leader
Target is raising its minimum wage to $10 an hour
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Before former Apple CEO John Sculley met Steve Jobs and Bill Gates...
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Backup Plans
Verizon's shadow workforce
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IBM suffers its 16th straight quarter of declining revenue...
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AB InBev accepts deal for Peroni, Grolsch
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Up or Out
Bill Campbell, mentor to a number of Silicon Valley icons, including Jeff Bezos, Larry Page and Steve Jobs, died on Monday at 75. Coins2Day
Chobani named Mick Beekhuizen CFO. WSJ
Coins2Day Reads and Videos
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U.S. Merck sues German Merck...
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On This Day...
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