Q&A: Because of its success and intent to continue its growth largely by boosting its video-streaming popularity, Netflix is one of the most closely watched companies in home entertainment, and its founder, Reed Hastings, is one of its most closely watched executives. After founding and ultimately selling Pure Software, the 48-year-old Hastings, a former Peace Corps member, founded Netflix in 1997 and launched the service in 1999. The company, now the largest U.S. movie-rental service via mail, had sales of $1.36 billion in 2008 and surpassed 10 million subscribers earlier this year. He spoke with Video Business reporter Danny King.
VB: Last year, you said Netflix was still at least five years away from hitting its peak in DVD shipments. When do you think digital movies will become a meaningful part of the business, and what will it take for the availability of digital titles to approach that of DVDs?
Hastings: Our goal is to be able to write bigger and bigger checks to the studios to get better and better content. We're significantly investing in spending with the studios on streaming content already, and we're starting to see some significant benefits with consumers, but it's still quite early.
VB: Some industry analysts and executives are pinning Blu-ray Disc growth largely on Blu-ray players being capable of playing digital titles on televisions and the type of streaming-capable agreements Netflix has with Samsung and LG Electronics. Yet less than 10% of Netflix's subscribers are subscribing to Netflix's Blu-ray rental option. Is that disappointing, and what will it take to grow Blu-ray?
Hastings: We're very happy with the Blu-ray adoption. This fall, we hope to see some very low-priced Blu-ray players with increased adoption. The biggest factor would be how low they can get the player prices. Walmart had an offering at $99 last week. It would be great if that spread.
VB: You've reiterated that the growth of Redbox movie-rental kiosks and their $1-a-night rentals will have a detrimental effect on the home entertainment industry. With NCR looking to close the gap with Redbox by developing Blockbuster Express kiosks, are you all the more worried?
Hastings: I do still have the concern that $1 rentals will lower the value perception of DVD rental, but the NCR kiosks are still a very small total of that market.