Today, I’m talking with Greg Peters, the co-CEO of Netflix. I caught up with Greg while he was at the Cannes Lions festival in France, which is fundamentally the world’s biggest gathering of advertisers and marketers. It’s an increasingly crucial place for Greg to be, as Netflix’s fresh ad tier has nearly doubled in six months to more than 40 million subscribers and feels increasingly pivotal to the future of the company.
On top of that, Netflix is updating its celebrated culture memo. So I wanted to chat with Greg about the changes he’s making to that paper and how he’s reasoning about maintaining Netflix’s culture as it grows into industries like advertising and gaming.
Greg has only been co-CEO of Netflix for about 18 months, after co-founder and erstwhile co-CEO Reed Hastings retired last year and Greg was promoted from chief operating officer. He now runs Netflix alongside content chief Ted Sarandos, who’s been moving the ship with Hastings since 2020. It’s a complicated setup, and historically, co-CEOs don’t tend to work out all that well. Just look at BlackBerry, SAP, or more recently, Salesforce.
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But Netflix seems to be the exception, and that’s pure bait for Decoder — how does that structure work, and how do decisions actually get made with 2 CEOs? quite a few Netflix’s success is in the matrimony of content and technology, and having those divided up seems like a recipe for conflict or, at the very least, confusion.
Greg and I talked about this a lot — so much of the solution at Netflix is the company’s unique culture, which gives employees an tremendous amount of freedom. That culture was first laid out in a famous 2009 slide deck, which erstwhile Meta COO Sheryl Sandberg erstwhile called the most crucial paper to always come out of Silicon Valley. That deck was refined into a memo in 2017; the fresh version Greg’s here to talk about is simply a shorter, even more streamlined version of that memo.
I have always loved the first culture deck. It’s written in a beautiful brash and direct kind — it made clear that just saying the company had values wasn’t adequate and that the real indicators of a company’s culture were the behaviors and skills that it values and rewards. Most importantly, it said that Netflix wasn’t trying to be a household — its approach to hiring and firing would be more like a sports team, where low performers would be given generous severance packages and replaced with better players on a consistent basis.
This newest version of the memo is not rather so in your face as the original. In fact, it’s a lot nicer and more corporate. I asked Greg why that was, and his answer was fascinating: as the company grows, the memo needs to resonate with a very broad audience, and the speech matters. You’ll hear him talk about this in detail.
Another large change Greg and I talked about is that Netflix removed an oft-quoted section of the first deck labeled “freedom and responsibility.” You’ll hear him talk about needing to more clearly say that freedom requires even more responsibility.
This conversation truly hit on so many of the large themes that come up so frequently on Decoder, and I besides found a way to ask Greg what he thinks of the Samsung Frame TV. You know I had to.
Okay, Netflix co-CEO Greg Peters. Here we go.
Disclosure: I executive produced a Netflix show called The Future Of back in 2022.
This transcript has been lightly edited for dimension and clarity.
Greg Peters is here, the co-CEO of Netflix, welcome to Decoder.
Thanks for having me. It’s large to be here.
I am truly excited to talk to you. You have been the co-CEO for about 18 months now. You were the chief product officer and the chief operating officer before that.
There’s besides a lot going on in streaming generally. We seem to be in a time of bundling and consolidation. And then, on top of it, there’s a new culture memo at Netflix, which is simply a large deal. Netflix’s culture memos tend to set the speech for the full industry. Our show is about work charts and decisions and corporate culture, so I have quite a few questions about that, but I want to start at the start, which is you utilized to work at TiVo, and I utilized to cover TiVo all minute of all day. Are you ready for a full hr of TiVo questions?
We can do that if you want. Just to be clear: I did a startup that was acquired by Macrovision, which yet became Rovi, which yet became TiVo. So there’s a long past of those names there.
All of that is why I utilized to cover all minute of the twists and turns of that company. But let’s set that aside. Let’s start with Netflix. I feel like there are quite a few similarities between what happened on that side with cable and what is going on with streaming now. I want to start with a large question: How do you think of Netflix right now? Is it a streaming company? Is it a tv company? Is it amusement due to the fact that you besides have games now? What’s the big-picture definition of Netflix?
We definitely think of ourselves as an amusement company. We search to be an amusement company that does what’s very hard for another companies to do, which is bring a real capability and competency to the creative aspect of it. You see those competencies in many conventional media companies. Disney and movie studios and broadcasters around the planet do a large occupation of these things. But we besides effort to bring a real tech and product capability and sensibility as well.
I think you see that in another companies: Google is amazing at that; Apple’s amazing at that. But it’s very uncommon to be able to bring these 2 centers together and be strong at both. That’s what we’re trying to do and be a global amusement company as well. partially what we’re trying to do is aid entertain the over half a billion people around the planet that presently come to us for that entertainment, and hopefully grow that number over time.
Reed Hastings, the erstwhile CEO of Netflix, erstwhile famously said the company’s biggest competitor was sleep. This is simply a message of intent about the attention economy. You’re only awake so many hours a day; your eyes are only looking at so many things. This is simply a zero-sum game. The thing that people will choose over everything is sleep if they can. Is that inactive the framework that you’re using?
Generally, yes. I think that the import of that is inactive relevant. I don’t think of it as strictly zero sum due to the fact that there are any magnifying effects across different things, and I think that what we see is that your enthusiasm, your fandom for a certain title, can show up on social media, for example, in a way that’s additive.
But in the general sense, the amusement scenery is highly competitive right now. Humans on the planet have more opportunities to entertain themselves than always before. In that sense, we gotta make certain that the amusement we’re providing is highly compelling, it’s highly attractive, and it can win more of those hours. We call them moments of fact — that’s our way of reasoning about if we are doing a good occupation of entertaining our members.
One thing in the framework of “there are only so many hours a day and we’re competing for attention” that I think is challenging, and I’ve never heard anyone truly pull apart well, is that Netflix famously pays for content, Hollywood famously pays for content, and your streaming competitors pay quite a few money for content. That’s a immense part of your economics. The user-generated content platforms do not, or they pay extraordinarily low rates if they do.
I look at something like TikTok, and it’s full of pirated content. It’s a playground of copyright infringement. It’s very clever. As a erstwhile copyright attorney, I find myself very entertained by the innovation that occurs on TikTok on that scale. You look at something like Suits, which is simply a phenomenon that started with a full bunch of copyright infringement on a full bunch of social media platforms. What’s that pipeline like for you? Is that, “Okay, that’s fine, that’s just our marketing,” or are you actually competing with the social media platforms directly?
Well, we’re clearly competing at the margin, back to your attention economy model. But I would say that we’re doing 2 different amusement jobs, so I don’t think of the competition as strictly substitutable or head-to-head in that regard. In any sense, those social media channels can operate as a way of magnifying fandom and be a large mechanics for people to talk about the shows they’re watching.
You mentioned Suits, for example. I think erstwhile we saw a immense amount of engagement with Suits, we saw part of that magnified and reflected in what people were talking about on social media. You mentioned copyright. I’d say, at the extreme, we, in the manufacture and mostly governments around the world, are supportive of protecting the rights of the people that hold those copyrights. But people talking about the shows that they love, that’s a good thing.
Just on the basic economics, it’s inactive challenging to me. Those platforms get to take quite a few content for free or very, very low rates and address a large audience, and then their model is to sale targeted advertising. Netflix’s model, until recently, was you paid a full bunch of money for content at very advanced rates, and then your model is subscription fees are shot higher. But now your model is targeted advertising. Are you getting the higher rates from the ads to support how much money is going into making the content, or are you uncovering the force of the social media platforms that are just getting it for free to be a real driver of your decisions?
I don’t think the competitive dynamic that you’re describing there is as sharp as you’re relaying. Evidence of that is that YouTube, for example, has mostly been unsuccessful at delivering the kind of content that we deliver. There are a bunch of examples like this. Cobra Kai is my favorite. It started on YouTube but didn’t do peculiarly well there. Then we picked it up from them, and it’s become a gigantic show. I think they’re serving 1 request — 1 amusement request state, if you will — and we’re serving a different one.
Then you talked about ads. My rule orientation toward what we are doing in ads is that it allows us to offer consumers around the planet a lower price point, and that’s a powerful thing to do due to the fact that now we can say to folks, “Hey, you can have access to all the amazing stories, the films, the series, the games that we are doing at a lower price,” and that’s super crucial for them. Then we can besides work with advertisers to make up the difference between that and what we would otherwise charge on subscription via the advertising gross that we get there.
Do you think that the introduction of ads is changing how you think about moving the company? You’re at the Cannes Lions festival right now, which is the big advertising festival in France. erstwhile you ran a subscription business, I’m guessing you didn’t gotta spend as much time talking to advertisers in France. It’s tough work, I feel very badly for you, but I’m guessing that’s a fresh part of the puzzle. Did you gotta build up that capability?
Yeah, for sure. It’s a fresh capability from a technology perspective, so we’re building technology that supports what we hope is at any point in time — and we’re inactive very much in the process of building this — the best-in-class streaming solution for consumers, our members, and advertisers. We’re besides building capabilities that we haven’t had in the company before. We never had ad sales, for example. That’s a full fresh muscle for us to go build, so it’s definitely about increasing that.
.Maybe the question behind your question — and a question that I’ve gotten internally — is, “Are we programming differently as a consequence of now adding advertising to our model?” And the answer to that question is no because, at the end of the day, whether it’s subscription or advertising, both are anchored in something that consumers want to watch, that our members are dying to watch.
That engagement is at the center of both models. It’s mutually supportive in that regard. We very much think our programming occupation is to think about what our members request and how we can give them that, and that drives and then fuels both models in a affirmative way.
I want to come back to that due to the fact that I think that perceived shift is truly important, especially as you add advertising, due to the fact that the marketplace for advertising is dominated by another large tech companies. Like you said, YouTube is not out there selling premium programming the way that you are, but it’s inactive all just advertising.
I want to unpack that, but I besides want to make certain I get to the Decoder questions due to the fact that I think they will aid me realize how that works in your brain. Famously, there are two CEOs at Netflix. There’s you and Ted Sarandos. Historically, having 2 CEOs has gone sideways. BlackBerry didn’t work out. It had 2 CEOs. How is that structured between you and Ted, and how is that working after 18 months?
Having 2 CEOs is an incredibly powerful model, and it allows us to fundamentally embody what I mentioned at the beginning, which is we search to be a company that brings 2 very strong centers of excellence and capability on the creative side and on the product and tech side together. If you look around the planet at our competitors in the space, they typically are run by 1 CEO, and it’s a CEO who’s either truly anchored in 1 or the another of those worlds. I think that reflects the strengths and weaknesses that those companies have. Ours is simply a very powerful model. It’s hard to pull off. I think the reason we’ve seen it not be done so frequently historically is due to the fact that you request a culture and a set of folks that are bought into this model.
That’s where I go back to our culture and think about it as an enabling function for why the co-CEO model works at Netflix. You think a lot about what we do in culture, the willingness to be transparent with each other, to have honest conversations, to be selfless, to put the company first. These are all things that make the co-CEO model work. Whereas, in another places without those cultural elements, it’s very hard or it’s harder to pull off.
We did do a small bit of a historical look, and I would say that the performance of co-CEO-led companies is bimodal. It either importantly underperforms peers or it importantly overperforms peers. The real discriminating origin there is, do you have that culture and do you have a set of CEOs who are bought into the model and see it as a affirmative alternatively than something that’s a compromise or obstacle they gotta work around?
Maybe I over-index on the historical underperformers. I think the way people think about it reductively is that you are the tech CEO and Ted is the content CEO. Is it that simple? What’s the overlap?
There’s definitely fact to that. We both feel that we’re liable for the company at the end of the day. The next level of leaders both study into us. The major decisions that we make as the company, we feel like we gotta make together. We always say speaking to 1 of us is speaking to both of us, so we feel like we owe each another clarity and transparency in those conversations. But it is besides actual that 1 of the reasons this model functions for us is that we get the benefit of that collaboration, but also, erstwhile you think about velocity of decision-making, we have lanes that we are primary in and we know that we can focus on.
If there’s a large content strategy question, depending on how large it is, we’ll both weigh in. But possibly for something that sits below that, Ted is going to have a much better-informed position than I will and he’s going to make a call more quickly. rather frankly, even more so, our chief content officer, Bella [Bajaria], will be doing that. That allows a velocity of decision-making that is part of why this works.
So how is Netflix structured? You said that line below reports to both of you. How does that work?
That next set of leaders reports to both of us. Now, we have a primary responsibility, so you think about content, marketing, legal, comms, and publicity — those are on Ted’s side. On my side, for example, we’ve got product tech, ads, games, finance. That’s an example of how we are taking primary work for the activities that sit at that level.
On your side of the house, you’ve got the core engineering functions, the core product functions. There’s a real dynamic between the product, how it works, and what people experience, which is simply a bunch of content tiles and content recommendations. Where’s the balance there?
I think quite a few companies think video streaming is just like a white-label product, and you can just buy it and put in your content and you’re off to the races. Netflix is famously not that. How do you think about that mix? due to the fact that everyone’s kind of standardized on your approach. Everything kind of looks like Netflix now. Is there inactive area to innovate?
There’s definitely area to innovate. In fact, we just launched a fresh version of our tv UI, which is where the majority of engagement takes place on Netflix. I besides think it’s crucial to separate what is copyable and what’s not. You’re absolutely right that we do an update to our UI, and I can click a stopwatch and fundamentally number the time until our competitors align on the pixel component of that version. And it ranges. The better competitors can do it in 18 to 24 months, and then any of the folks that take a small bit longer to get going, it can be years before they get there, but they all get there eventually.
An crucial component of what makes the user experience is all the things that then populate those pixels. How do we think about title recommendations? How do we present titles and usage assets in different ways that make it more compelling for different users around the world? due to the fact that you and I might both be curious in period 3 of Bridgerton and be super excited about watching it, but we might be curious in it for different reasons, and our ability to communicate those differences effectively is super crucial to unlocking the value of that incredible storytelling. That’s harder to copy. I’d say no one’s done as good a occupation as we’ve done with it. any folks are not even personalizing, which is remarkable to me at this point in time.
Who’s not personalizing?
Well, I’ll let you do your research.
I’ve heard any rumors. I’m wondering if you want to say it out loud.
No, it’s what you’d expect, which is the more conventional media folks are slower to that process. That’s a strength that we can bring that they don’t necessarily have the same fluency of accessing. But then, on the flip side, you’ve got incredible tech companies that live, eat, breathe personalization, but then the quality of their content offering is not the same and their ability to produce amazing shows at scale around the planet is something that they just don’t have. We see both sides, and really, the magic for us is bringing those 2 things together in a way that magnifies them.
That’s the user experience that’s the most forward-facing part of the product stack. Netflix is celebrated for spending quite a few time and money on core engineering problems. Moving video on the net was not a solved problem in the early days of Netflix. How much of your time is spent on video and coding and caching network distribution deals and peering arrangements?
Well, it’s inactive an crucial part of how we think we can improve the user experience. It’s remarkable to me that you mentioned encoding. And encoding efficiency… I would’ve thought five, seven, 8 years ago that we had grounded out on the ability to compression more efficiency, which is delivering higher-quality video under little and little good network conditions. Yet something we participate in in the manufacture writ large is uncovering even more advances in that space, which is shocking to me, but it’s incredibly impressive.
We think that there are more opportunities out there to do that level of work and deliver better experiences to our members. I’ll give you another examples. As you mentioned, content delivery, moving video around the internet, part of this is what we’re working on in games as well. Ultimately, what we want to do is be able to deliver game experiences to the TV, and we’re going to do that by rendering the actual game in the cloud and streaming it fundamentally as a video. That’s an chance to leverage the infrastructure work that we do by being profoundly embedded as a client on tv silicon and working with tv manufacturers to make certain we can bring those high-quality experiences to those devices.
Game streaming is 1 of those things that I hear about constantly on the show. For a while, you would look at Microsoft and be like, “Game streaming is going to happen.” It has not happened. Why do you think it hasn’t taken off in the way that everyone wanted it to?
Well, I’d say I’m convinced it’s going to happen as well.
Wait. Is it going to happen like self-driving cars are going to happen, or is it going to happen like video on the net is going to happen?
That’s where I was going to go with this, which is, “What is it that’s going to happen?” We should be a small more clear about what that means. If you think about the pinnacle of what that could be, which is, let’s call it, console-like experiences at console-like latency, that is simply a very advanced bar, technically. The cost dynamics of that where we think about the infrastructural requirements around that are super hard.
Quite frankly, that part of the marketplace is incredibly well served right now. You’re talking about the apex of an ecosystem that’s evolved to support that. If you think about the software improvement model, the software improvement costs, what the consumer model is, it’s a solved problem for so many people around the world. I would say, back to streaming, where’s the opportunity? The chance is actually not to come in from that level but to come up from the bottom and say, “Hey, there’s a scope of game experiences that we can deliver to folks that are very capable technically today, where the cost dynamics around it are manageable.” If you think about household game night, couch co-op, there’s a full set of rather awesome interactive experiences that I think we can do.
One of the challenging parts of games is people play them all over the place. I play them on airplanes, where I don’t have the connectivity. With video, you have an out. You can just put the bits on my telephone and you’re not streaming them to me anymore. But my telephone can most likely just play them back. With a game, there are all kinds of things that might happen. You can’t just put the full game on my telephone necessarily, or my telephone might not be as powerful as your server that’s making the game to stream it to me as a video file. How are you solving that problem?
We’re delivering games in multiple different ways. Cloud is 1 way to do it. And I’d say cloud is applicable due to the fact that it unlocks TVs, which haven’t truly been a origin of gameplay but as the screen in which connected devices like consoles manifest themselves.
The tv manufacturers think they will be able to do that. This is what I mean by self-driving cars as a comparison. Everyone thinks they’re going to be able to do this.
We think we will be able to do it in the way that I described it. That envelope of what we can deliver will change all year. We’ve seen it grow, and I don’t know erstwhile it will get to that eventual level, but it’s going to be a while away, and we’ve seen that again and again from the folks that have tried it. Back to your question, back to the telephone — the telephone is simply a way more capable general gaming device than a tv is. It has way more compute power in that regard, so we will deliver downloaded games to your telephone in a way that is totally different from what we would do with a TV.
Do you want to get to that AAA set of games at the end of the day, or are you going to compete for the more casual games that people are playing right now?
If you step back and look at what we do, we’re in the business of working with creators, the most amazing storytellers on the planet, and having them build compelling universes that we can then deliver to people around the planet in a variety of different ways. So that could be non-interactive modes like movie and TV, and it could be interactive modes like games. Ultimately, to give fans the most compelling immersive experiences, eventually, we’ll get to something that looks like a AAA model. I would definitely not regulation that out.
We’ve walked the same way in another places in the company. If you think about erstwhile we add fresh genres and things like that, sometimes we start smaller and then make more capability and more aspiration to do it at the highest level. I think that’s a beautiful common trajectory for us to follow, and I anticipate that’s where we’ll go with games as well.
Games seem like a fresh interesting engineering problem. You said you were amazed the manufacture can keep figuring video and coding out. Are there core engineering problems that would give you an advantage if you solved them present that you’re putting resources against?
Sure, there always are. Back to games, for example, the ability to virtualize multiple game instances on a single GPU. If we can do that more efficiently, that yields a better, more effective usage of infrastructure. That’s an example I would put on the list. Another example is just how we think about advice systems.
We’re moving and importantly improving how we dynamically assemble the UI for you. That allows us to then, as you are navigating the UI, actually change what we are presenting in real time based on explicit and implicit signals we get from you around your needs for Netflix today. This is an evolution. We talked about how we personalize present and where another folks are in that process. The next step for us is to think about what you request from us on a Thursday night versus what you request from us erstwhile your household is assembled in front of the tv on a Sunday afternoon. It’s different, and the UI should show up in a different way to service those needs differently.
How is your product squad structured? I’m guessing this is simply a beautiful functional organization. That’s quite a few goals. We gotta figure out game streaming, we’re working on personalization, we want this more semantic UI. How have you structured the product squad to pursuit all of those ideas?
We are a functionally organized group. Within that structure, we’ve got product leaders that are liable for various different product categories, and then they have respective engineering teams that they go with, with a small bit of a horizontal layer to it. We’ve got a platform squad that’s truly focused on infrastructural components, services that are mostly available to multiple different end-user-facing feature teams. That’s the core model.
And then the large Decoder question. You have quite a few decisions to make. You have a co-CEO to make decisions with. How do you make decisions? What’s the framework?
Well, possibly the first order of business — and this gets to the culture and how we operate as a company — would be, “Is this a decision that I should make, or is this a decision that should be made somewhere else in the company?” Part of what we want to do is enable folks throughout the full company to make as many decisions as possible. That might be the first order, like, “Okay, is this my decision, or should it be individual else’s decision?” And then, if it is my and Ted’s decision, partly, we’re trying to figure out what things are most material to the business. Companies can do a lot. You’re at a certain scale and there’s a lot that you can do. We’ve always been beautiful choosy about the strategical extensions that we’ve made.
We’ve been very focused as a company. Our orientation, alternatively than any of our peers who have a “let’s just effort something, shotgun stuff out there, and see what sticks” approach, we take the another extreme, which is, we start with the first principles argument around why this is critical to the business. The qualitative version of this might be, “Can you imagine a Netflix 10 years hence where we are not doing this?”
There’s a more wonky version of this, which is that you think about the materiality to the business: Do we have approval to play? Is there leverage off the core in success at scale? Does it lever back to the core? There are different ways of reasoning about the same question, but yet you’re saying, “Okay, we’re going to do a limited number of things. Does this materially drive the business?” And if it does, then our orientation is, “We are going to do it to win.” We may not be large erstwhile we start, but yet we will learn and grow. That’s very much, again, how we think about what our culture is, which is an iterative process of trying to get better and better and search excellence. That’s how I think about top-level decision-making.
This brings us to the culture memo. There is simply a fresh version of it. It just came out. The first 1 was released in 2009. It was a deck that had over 100 pages. Reed Hastings even wrote a book about this deck.
And Netflix streamlined it into a doc in 2017. So it went from being a 100-page PowerPoint to 1 sheet. Now there’s a fresh one, which is even more streamlined. 2 questions: Why make specified a large deal about these culture memos? And why does it keep getting shorter?
You typically have this triumvirate. There’s culture, strategy, and execution. There are most likely 100 business books that will tell you that execution is the most important, or strategy is the most important, or culture is the most important. We think, first of all, it’s crucial to note that you should be good at all 3 to be a truly successful company. So you can’t be awful at one. But if I were to think about a hierarchy, I would put culture at the top. The rationale for that is if you have an amazing culture and possibly you’re mediocre at strategy or execution, an amazing culture allows you to get better at the rest. It’s a vehicle to improve, so that’s why we make a large deal out of it.
If you truly think about what we’re trying to do with the culture memo and why it’s changed so much, we’re trying to constantly do a better occupation at articulating the practices we can employment as a company to grow and get better — to learn, to search excellence, and to constantly strive for that. That’s the rationale. And then, why does it get shorter? most likely due to the fact that we get better at articulating it. What’s the Mark Twain quote? If I had more time, I would’ve written you a shorter letter. It’s an investment in that. And one, knowing the things that matter. So it’s about seeking signal from sound and trying to constantly refine that articulation to have the maximum value for the time that individual spends on it.
Just before we started talking, I went back and read the first 1 from 2009. I gotta say, sitting here in 2024, I would describe the first deck as refreshingly harsh. It’s mean. It’s not a good document. It’s very blunt. It opens by saying, “Even Enron says it has integrity. But we’re not going to lie to you. Here’s what we actually value.” The fresh 1 is simply a small softer. It’s a small more corporate. It’s nicer. Is that just gathering a younger worker base? Why make it nicer?
Well, it’s interesting due to the fact that you called the first 1 “mean,” and I wouldn’t have utilized that word.
Direct would be the word that I would use. What we’re constantly trying to do is communicate effectively who we search to be and who we think we are. What we found is that, in the first articulation, the speech of it incorrectly communicated a sense that it was a harsh and possibly cutthroat place, which actually, it’s truly not. We want to be very clear that we do think excellence in having the colleagues around you is super important. We have this “dream team” concept in the latest version in which we are trying to be very clear about this being more of a sports squad model than a household model. We’re going to search the best player in all position. To the degree the business evolves or moves and we think there’s a change that needs to be made, we will make it.
We want to be very clear and honest about that. But we besides want the speech to reflect what people’s working experience is like inside of Netflix. It’s interesting you brought it up due to the fact that I think you’re looking at these 2 points, which is the first doc, and then where we are today. What happened in the mediate actually got softened a small besides much, I think. We moved the pendulum besides far in the another direction, and partially what we were doing in this version is trying to bring more of that directness in while inactive accurately conveying what it’s like to work at Netflix.
That mediate period coincided with quite a few controversy around the content on Netflix, peculiarly Dave Chappelle’s specials and whether Netflix’s employees were being reflected in the content that was on the service. There was a lot of tension inside the company at that time. I’m noticing, in the fresh memo, there’s no longer this celebrated section titled “freedom and responsibility.” Are those things connected? There is simply a section that discusses the diversity of the content on the service and how you’re going to meet the audience where they are. But there isn’t the sense that Netflix’s employees across the board are going to get a say on what appears on the service.
We actually explicitly say the opposite. You’re capturing 2 things that are beautiful distinct. So one, being direct and setting clear expectations about who we are as a company so people can make good decisions about whether they want to join us. We wanted to be very clear about the fact that we are trying to program for over half a billion people around the planet. Those people’s tastes are very varied, and we gotta bring a wide variety of content to be satisfying for those folks. We are definitely supporting artistic expression and a wide variety of creators to do that. We wanted to be very clear about that and take that head-on so folks could realize and decide that “hey, Netflix is simply a place that I can work for.”
And then [the section titled] “freedom and responsibility,” I would say that’s a different thing. What we found is that, in the many years since that first culture memo, people heard increasingly about the freedom part and little about the work part. We always meant that to be a balance. Essentially, what we were trying to say is, “If everyone’s super responsible, we don’t gotta have quite a few rules due to the fact that we can trust on people’s judgement and people will do large things.”
What people ended up proceeding was, “Oh, I can join Netflix and fundamentally all the decisions that I make are mine, and I don’t gotta worry about that overarching work to our collective corporate goals.” So we said, “Okay, this is an chance to effort and clarify that, rearticulate it in a way that grounds into the first concept.” That’s why we’ve shifted the language.
One of the key values that you’ve had the full time that I think connects to that is something called “People over Process,” where you’re just going to trust employees, where the expense policy is just “act in Netflix’s best interests.” That works erstwhile you’re the challenger, erstwhile you’re the startup and possibly you’re focused on 1 thing. It gets harder erstwhile you’re large and the company can do quite a few things. How do you keep that aligned at scale?
I don’t think of it that way. You got to size, which is an crucial dynamic. But going back to 1 of the core principles we have behind the culture memo is this thought that quite a few the way companies are run right now comes from the Industrial Revolution and industrial processes. There’s this thought that there’s a manufacturing process, and you get hyper-focused on how you can be amazing at that process. You think about defect simplification and it’s large because, if you’re doing that 1 thing, you can do it amazingly well. Look, if you’re TSMC and you’re building chips, that is your bread and butter. You do that all day long, and that’s an crucial part of corporate success.
For us, what we found is that refinement actually comes with brittleness. What happens is you get truly good at 1 thing and then, erstwhile you want to do something new, the brilliance and the optimization that you’ve built in creates quite a few rejection of the new. Either it’s incompetence or deficiency of capability or even what we see in large companies, where all the systems are refined to say “we do X, we don’t do Y” or “we don’t do X and Y.” You get quite a few antibody rejection of Y.
A lot of what we are doing is trying to figure out how we can be a company that can go through multiple iterations of changing the strategy — adding a Y, adding a Z — and have a culture that accommodates that. partially what we’re trying to do is have amazing judgment, have people in place that we have advanced expectations of, that are unusually liable compared to their peers, and that gives them the ability to be flexible and evolve and not have the brittleness of an overly processed company. We like a good process. There are any components of having people work together as a collective unit that require scaffolding and expectations and how you set that up for success. But quite a few the process that gets in is not about that.
Big company process is about how you defend against the worker that expensed something wrong, or whatever, and quite a few that stuff, erstwhile you look at it, smart people with good judgement are not going to go do that stuff at the end of the day. We don’t think about that as good process. We reject that. We’d alternatively thin into, “Let’s hire good people. Let’s set the anticipation that people are going to have large judgment, and then that gives them the flexibility to deal with the incredible nuance that exists around what we’re doing.”
You think about programming for over half a billion people — with countries in different situations and all title in a different situation. The user experience changes in these ways. Whether you’re a creator, an engineer, or a game developer, you want that flexibility to engage with that nuance and make smart decisions based on the circumstantial situation that you’re dealing with, and that’s what we effort to foster and encourage.
One more question here, then I want to put this into practice and come back to ads and culture. 1 of the most celebrated aspects of this memo, any of the most celebrated vocabulary words, are “loosely coupled, highly aligned” and “disagree and commit.” The second these words were introduced into American business, everyone started saying them. I utilized to work at AOL, and people would tell me we were loosely coupled and highly aligned. People say these things, but it’s hard to accomplish them. You have fresh people coming in, and Netflix is simply a very different company. I think about those ideas, and what I see is you request quite a few organization cognition to stay highly aligned.
People request to know what you’ve done, what you might do, the ideas that you’ve had, all that nuance you’re talking about. erstwhile you have employees coming in, erstwhile you have a ferocious conflict for talent and AI, for example, people are coming and going, how do you keep that? It feels like that relies on any amount of past and organization cognition to keep going. Otherwise, you’ve just got people reading wikis all day long.
To any degree, yes, but I think there are mechanisms you can employment that don’t trust on tribal knowledge. As an example, “knowing what your north star is” is simply a very strong mechanics to support alignment. In addition to this culture memo, we have another doc that we don’t publish, which is our strategy bets.
This is simply a formalization of ambiguous decisions, meaning the company could do A or B. We’re very clear about, “Okay, it’s ambiguous, but we are going to do A and not B, and this is why.” That is another touchstone that allows employees to operate independently to that loosely coupled model but with a sense of how this ladders up into an aligned position.
This brings me to ads and the culture of the company and the marketplace that you’re in. Ads are a tribe — you are in Cannes, you request an ad sales division. There are lots of ways to build an ad sales division, but that’s a different thing. Historically, at the large tech companies, the ad sales division does not look or feel or act like the product division, and there’s frequently any tension there. How are you bringing in a full group like that 1 that feels like the future of your gross without changing the culture of the company?
It’s comic that you mention it due to the fact that we have tribes already. We had tribes before this. Let’s break it down. Kernel engineers who work on our content transportation network versus mobile UI engineers, that’s a different tribe. They have different ways of reasoning about the world. We’ve always been balancing different groups of people that think about things differently.
That’s why we have these memos because, rather frankly, an evolution of the culture memo was going from the first deck that you talked about, which I would call highly anchored in Silicon Valley — there was a libertarian doctrine or ethos that you could read in there. And partially what we were trying to do over these multiple iterations was tease apart the actual outcomes, the excellence-enabling things that we wanted to identify, versus the behaviors and the articulations, and trying to make those more general.
That way, whether you’re 2 creatives in Amsterdam who might have a very different form of communication erstwhile you talk about direct feedback versus 2 engineers in Japan, you can have an honest conversation with each another about what we’re good at, what we’re not. We think that’s an crucial enabling origin that we want to have around the world, or around all those tribes. You mentioned ads as being a super distinct thing, and I don’t think of it as that distinct erstwhile it comes down to it due to the fact that we’ve always been trying to blend these different base cultures or different expectations and then figure out how to layer on top of that a way of working and a set of expectations that let us to be better together.
I don’t disagree, but it feels like the premium advertising, the brand advertising world, going to Upfronts and gathering with marketers and gathering their demands, that just places a different set of pressures on an engineering organization. You can see it at Google, at Meta. At scale, this is what they do. That’s who you’re competing with now, but you’re besides competing with linear tv for their ad dollars. How do you think about, “Okay, we’ve got to build a full bunch of ad tech now that competes with giant incumbents like Google and Meta but that besides takes the brand dollars distant from linear television”?
Part of this is knowing what function in the ads ecosystem we can or should play. What’s the strategy? Our position is the ability to bring what is amazing about tv advertising. So, if you think about the creative formats, how we were able to position brands next to titles that were culture-defining moments, essentially, which is, of course, where advertisers are excited to be. And then, you request to besides pair that with what is large about digital advertising. So, if you think about targeting performance measurement, the ability to do that at all levels in the funnel.
Our occupation is not to be the most amazing gigantic-scale digital advertiser, due to the fact that Google and Facebook are going to do a better occupation of that. Our occupation is not to be just a tv advertiser due to the fact that another folks can do that as well. So we’re trying to bring these 2 things together in a way that we’re uniquely suited over a five- to 10-year period to magnify the impact of both of those worlds, to make a premium, highly creative space. You couldn’t do these kinds of formats on TikTok but besides bring adequate targeting, adequate brand performance, in these different measurements to effort and give advertisers a sense that they’re getting something for their dollar as well. So that’s how I think about blending those.
You mentioned TikTok. I see quite a few younger people, they open Netflix, they just stream whatever in the background, and then they look at TikTok. That’s a real dynamic. TikTok, Instagram, YouTube — on the phone, they can convert. You see the thing, you push the button, you go buy whatever. TikTok wants to sale me quite a few off-brand power tool batteries. I feel like I’m going to light my home on fire, but that’s where they’re at right now. Netflix, you can’t convert on the TV. It’s much harder. Is that a challenge for you, to go to advertisers and say, “Look, you can’t actually shop, but possibly you’ll get more take-up, even though the kids are holding their phones”?
Again, it gets to what function we can play. The request conversion advertising, that plays a function in the ecosystem, so 100 percent that’s there. Or possibly that minute can’t happen on the telephone regardless — if you think you’re going to go out and buy a car, that’s likely not happening there. But there is simply a lot that we can do that fundamentally operates above the funnel in ways that brand advertisers believe is more compelling. Obviously, we should be able to measurement that performance as well. How are we doing in terms of brand affinity awareness? How are we reasoning about building request at certain levels? Our goal would be to operate at that part of the funnel and then think about fulfillment as happening in a wide scope of channels after that fact.
You perceive to Meta’s quarterly earnings, or you just read its statements, and it feels like it can turn the knob on ad burden and make more money and hit its numbers if it needs to. There’s a product manager at Meta who’s like, “It’s fine, Mark [Zuckerberg], I got it.” And then there are more ads in Instagram Reels today. You’ve been raising prices, you’ve been hiking the streaming subscription prices, and that seems to be going fine. Would you always increase the ad load? Is that a lever that you have at your disposal?
It is simply a lever that’s at our disposal. It’s a lever that you usage at your own peril. I would say my goal is that we will change the ad burden — we’ll decrease it over time. If we fulfill that promise that we just talked about, we should be able to increasingly supply higher-relevance, higher-value ads. That’s large for the member, they have a better experience as a result, and it’s large for the advertiser. rather frankly, advertisers will pay more for that kind of experience due to the fact that it’s more valuable. I think we should be able to do that.
You can decrease ad burden and say, “Look, these slots are more valuable due to the fact that there are less of them. We’re going to charge higher prices.” Has that played out yet? Have you seen evidence that’s true?
We’re very early in this process, so, at this point, we’re trying to build an ad server. We can see on the horizon tons of work to do. We have an amazing roadmap in front of us, and again, back to the culture memo, we’re very much comfortable starting from a position of “we’re at zero, and we will learn to be better at this.” That’s definitely the process that we’re at in terms of building ads is iterating toward that model.
Do you think you’re at the end of price hikes? I have a graph in front of me of Netflix price hikes, and the verticality of this line, especially for premium with no ads, is beautiful remarkable. It’s just gone up. And are you sending more people to the ads tier, is that the goal of that price increase? Are we done with this yet?
It’s definitely not the goal. What I would say is that our occupation is to add more value to the amusement service that we are offering. We see consistently, again and again, that our members want more entertainment, they want a higher diversity of shows, they want more quality shows, so that’s our job. If we do that well, we’ll go back and occasionally ask members to pay a small bit more to keep that flywheel running. Back to the ads component of this, it’s truly just how we then offer a wide range, and our goal will be to have an even wider scope over time — to have a set of prices with the right features so that fundamentally we can attract more members around the planet and they can enjoy the incredible stories that we have available.
I’m a immense tv nerd. I’ve got a giant Atmos and imagination setup in my house, and then all the streaming services ask me to pay extra for 4K. It seems like everyone’s defaulted to, “You’re going to be fine with 1080p. That’s what we’re going to deliver to most people.” Is that due to the fact that most consumers don’t care? Is it due to the fact that you can set the price higher and people do care so they will pay more? How is that playing out?
It goes back to what I said, which is that we’re trying to fundamentally find a scope of prices that have appropriate features connected to them so that people who value those features more have an chance to get them.
But I guess my question is: is it that people don’t value the features, or they value them so much that they will pay extra?
What’s the difference, really?
My explanation is that most people don’t value the features, so there’s a tiny subset of people who will pay, but most people don’t care. Whereas, if everyone cared, it would just become the default and everyone would price it in.
That’s most likely a fair statement. Yeah. I’m not sure. There’s clearly a community of folks that care.
Yeah, and they’re not a tiny minority. So we want to service them well, too.
I feel like I gotta ask you a question about AI before we end here. We’ve talked a lot about personalization, about modifying the UI, and making it more responsive. There’s a immense talent war for AI. That’s a immense amount of cost just to get, I’m assuming, Nvidia GPUs. That’s what everybody wants. They’re very expensive, and Nvidia seems to be the only company that’s actually making money with this stuff right now. The talent is expensive. What’s your approach to this? Is it “we’ll wait for the models to come and be good for us”? Is it “we gotta make our own foundation model”? How are you reasoning about it?
We think 1 of our competitive advantages is to bring 2 worlds together. So it’s amazing entertainment, the creativity required to produce that, as well as the technology component. We have a long past of utilizing device learning and artificial intelligence in our recommender systems. We’ve been doing that for 20-some years. Again, we think that our occupation is to be proactive about knowing where there’s method innovation. How do we usage that both to service creators, let them to tell their stories in more compelling ways, and besides then to service our members better user experiences?
I would besides say that we’ve mostly been careful about not getting caught up in the hype cycle that frequently informs Silicon Valley. I am so excited that we didn’t spend any energy on NFTs. If we go back 3 or 4 years ago, everybody told me, “My God, Netflix has to have an NFT strategy.” We didn’t request to have an NFT strategy. Now, I would say generative AI, that’s not an apt comparison due to the fact that I do think there are any interesting things associated with it. It’s not just smoke and mirrors.
But I would besides say we gotta realize what our function is in that ecosystem, and we’re not going to build frontier models. That’s not what our occupation is, really. Our occupation is to think about, “Okay, there are a bunch of interesting technologies that are being developed. How do we give these to creators in ways that let them to tell their stories in a more compelling fashion?” Just as amusement has evolved with the evolution of fresh technology, you can go back from cave painting to where we are today. You mentioned 4K and Atmos. Creators will figure out a way to leverage the newest tools to tell their stories in a more compelling way. Our occupation is to enable that at the end of the day.
When I think about usage cases you could usage AI for right now, 1 is to make different thumbnails for all the shows. It seems very obvious. You’re going to take any creative, you’re going to plug in any targeting keywords or personalization keywords, and you’re going to make a fresh poster for the show that is just for me. That would, charitably I think, piss off all single 1 of your creators. People doing that right now to make movie posters face tremendous amounts of fan and creator backlash.
This is the tension of the company. You’ve got the creator side and the tech side, and even evidently interesting ideas like “let’s improve personalization by making more customized art,” which you’re already automating in any way, seem very tense. How are you balancing out the tension with the creative side?
It’s interesting due to the fact that we do that right now. We have a squad of people that make a variety of assets that represent the titles so that we can find the biggest audience for that title. Now, we do that with a strong sense of authenticity, meaning that it should be reflective of the title. So we’ve been constantly utilizing tools, with the human in the loop that understands, is this an authentic representation of that title?
Now, if it’s authentic, it doesn’t misportray the title, which not only would capture any creator ire but is not good for members, either. You don’t want to tell them that it’s a communicative about something and have it be about something else. Clickbait is something that we completely reject in that regard. But if it is authentic, then it serves a intent that creators love, which is it finds a bigger audience for that story. If you talk to creators, generally, what they want to do is be able to tell their communicative in a compelling way and find the largest audience possible. We’ve fundamentally been navigating that situation already.
Do you think that you’ll start utilizing more AI in situations like that that bridge tech and creative due to the fact that that’s where any of the chance here is? If you’re just utilizing it for the personalization algorithm, I don’t think people would be so upset. erstwhile you start touching on the core creative, that’s at least where our audience has been the most vocal with us. Do you think you’re going to venture into the more creative side with AI?
Creators have been utilizing tools that, in my mind, service any of the same purposes that the AI that we’re seeing, the capabilities that we’re seeing today, serve. If you think about pixel manipulation or VFX, a large example is previsualization. So having a creator be able to have a more efficient way of knowing the script and be able to manipulate that and realize that in a way that then informs a shooting schedule. It’s a large example of how they can usage these technologies. Our creators are going to want to usage those tools. It’s besides crucial to admit that quite a few the creators that we usage are independent production companies. They decide what tools they want to use. We don’t tell them that.
I want to wrap up on the tv business as a full due to the fact that it is undergoing quite a few change. Netflix itself is changing in consequence to that. 1 of the big trends we’re seeing everywhere is bundles. We’re going to make a fresh sports company and bundle all of our sports together. The cable company, the ISP, is now going to bundle any streamer with it. You sign up for Verizon and you get any collection of things.
The celebrated line is, “There are only 2 media business models: bundling and unbundling.” We’re evidently in the bundling period. How is Netflix participating in that? Are we just headed back toward a cable bundle but with Netflix at the center?
I don’t think so, but let’s just step back. I think bundling works erstwhile it’s better for consumers: where they have an easy chance to buy a package of goods that make sense together, and then they see more value in the assemblage of those than they would with each discreet purchase. To be clear, we’ve done this with a variety of partners for a long time.
[We’ve done this for] six, seven, 8 years — whether it’s a pay tv operator or an ISP mobile operator. In any countries, we do it with utilities. You can literally, erstwhile you buy your energy, your power, you get Netflix with that as an option. We’ve done that due to the fact that it’s an efficient way for consumers to be able to decide to add Netflix, and it allows us to access an audience that possibly is little tech-forward, or we show up in a way that’s natural. Think about, “Hey, I’m watching tv on a set-top box. I can see that I can get Netflix as part of that.” It’s a model that’s good for consumers. We’ve been doing that for rather any time.
Some of the bundling behaviour that you see today, it’s not entirely clear to me that it’s actually going to work, that it’s pro-consumer. To any degree [the mentality] we’re getting is “let’s throw a bunch of stuff together and see what sticks.” We’ll see how that plays out. But I do think that a bundling of services is simply a logical thing and it’s pro-consumer, so I don’t see that going away.
Would you always bundle with a competitor the way that any of your competitors are bundling with each other?
I would never say never. I mean, we’ve done a bunch of things that we most likely besides powerfully had an oppositional position to. We want to stay intellectually open and humble about that. We’re being bundled with our competitors by our bundling partners right now. You can go out and buy a mobile service that includes us and individual else. So, again, we don’t think it changes what we do, which is we’ve got to supply an incredible amusement experience for our members. If we do that well, then they’re going to see value, and whether people buy straight from us or in a bundle, that’ll work out.
The place where most consumers, including me, would like all these services to get bundled is at the device level, where I open my Roku or my Apple tv and I just see a full bunch of content for a full bunch of services, and it figures out what I’ve paid for and I can go watch any stuff. Netflix has historically resisted those integrations. On the Apple TV, you’re not in their app. On another devices, you’re not in their unified experiences. Why is that? Is that due to the fact that you want people to come to Netflix and stay there? Is it due to the fact that the business terms aren’t agreeable? What’s the reason?
We do those integrations all the time. Actually, I would’ve described it as much more balanced in terms of erstwhile we do it and erstwhile we don’t. Essentially, we think that we’re investing importantly in creating a better user experience for discovering Netflix content within our application. We want to make certain that we have a level competitive field on the device for users who want that differentiated experience, who see that value, to be able to get to Netflix in a very easy, efficient way. Mostly, the terms that we have are around “is that a balanced place to do this?” And if it is, then we participate in things like an aggregated service discovery. And where it’s not, then we typically don’t.
Netflix is on fundamentally all platform that you can think of. Famously, there are Netflix buttons on remotes; it’s nonnegotiable for quite a few tv manufacturers. Most of those platforms want to take a cut of your revenue, either at signup on the subscription side and very much so on the advertising side. You cannot appear on a Roku device unless you give them a cut of your ad sales. Are you large adequate now that you can negociate better terms for gross splits across tv and on mobile, comparative to your competitors? Or are the the terms these platforms and tv makers request beautiful flat across the board?
I don’t know what our competitors get, so I can’t give you a definitive answer to that question. But I would anticipate that, comparative to any another folks who would supply different value, we most likely bring more to the platform, and that most likely shows up in any way, shape, or form.
The reason I ask that question is due to the fact that Netflix is 1 of the companies that’s always pushing back against app store rules from Apple and Google and the restrictions they’ve placed on signup flows, client acquisitions, and, of course, gross splits. There’s been a lot of regulatory activity in that area in fresh years. Are you starting to see the benefits of that regulatory action showing up in how you get fresh customers, get them to sign up to Netflix, and collect the subscription fee all month?
TV is simply a highly competitive ecosystem, so I would say there are tons of manufacturers out there, and there’s not truly a concentration of power. I’d say that’s a well-functioning marketplace that allows everyone to bring their value to it.
On mobile, we’re seeing marginal benefits as a consequence of any of the more fresh changes. We have somewhat better user experiences for our members on those platforms. We can be a small bit more communicative about how they can sign up for Netflix, which is great. Generally, I would say, consumers figure this stuff out, too. It’s been amazing how many people say, “Oh, this doesn’t work so I go to Netflix.com” and it all kind of figures itself out from there.
The power of Bridgerton marketing the service for you. I have 1 last question. It’s a full chaotic card. I’ve been dying to ask it the full time. Do you keep track of what TVs your subscribers are using?
Okay. So I have a explanation about the Samsung Frame TV, which is the most popular TV. The reason people like this tv is not due to the fact that it is simply a large TV; it’s due to the fact that it looks good erstwhile it’s off. But do you see the popularity of the Frame tv as any kind of symbol for the future of tv viewing? due to the fact that I see a tv that looks good erstwhile it’s off as being a sign that shortly there might not be a TV. due to the fact that if you value the off state more than the on state, something is happening.
I would totally disagree with you on that. There’s a full bunch of plan considerations that go into the things that we usage and how we interact with them in our regular lives, and any of those plan considerations are about functionality. How does it show up erstwhile I’m actually utilizing it? But quite a few the plan considerations are aesthetic considerations: it’s an object in my home and I care how it looks even erstwhile it’s just static and sitting there. In any cases, we evidently choose these things based on no functional goal and just having something that looks amazing and beautiful.
Yeah. I’m just saying my radar about this has been spinning for a while.
I think you’re reading into it considerably.
I mean, I’m sitting in front of a Frame TV. There are 3 of them in this house, don’t get me wrong. We buy the TVs, but I think about them as a cultural object rather often. I figured I had 1 shot to ask you that question.
And you inactive watch them?
No, we watch the beautiful OLED. That’s what I’m saying. We hang up these TVs, and after a while, I can just be like, “Why are these even here?”
Well, then the key is that a tv maker is going to be able to supply you both, right?
I think that’s what they would prefer. Alright, Greg, you’ve given me so much time. I’m going to let you get back to partying in France.
Thank you so much for being on Decoder.
Thank you. Appreciate it.
Decoder with Nilay Patel /
A podcast about large ideas and another problems.
