Hastings, Reed

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Reed Hastings

President, Chief Executive Officer, and Board Chair of Netflix

Born Wilmot Reed Hastings Jr., c. 1961; married; children: two. Education: Earned undergraduate degree in mathematics from Bowdoin College, 1983; earned master's degrees from Stanford University, in computer science, 1988, and in education.

Addresses: Office—970 University Ave., Los Gatos, CA 95032.

Career

Served in the Peace Corps in Swaziland, 1983-86; worked as a software developer, c. 1988-90; founded Pure Atria Software, 1990, and sold it to Rational Software, 1997; director of TechNet, a political lobbying group; president of the California State Board of Education, 2001-05; founded Netflix, Inc., 1998, and serves as president, chief executive officer, and board chair.

Sidelights

Reed Hastings founded the phenomenally successful DVD-rental company, Netflix, but the Web-based mail-order service was not his first entrepreneurial venture. Hastings was already wealthy from the software company he founded and sold in the dot-com boom of the 1990s. His own experience with an exorbitant late-rental fee from his local video store led him to launch Netflix in 1998. "Netflix is a powerful idea, " wrote Stacey Grenrock Woods in Esquire, "one that combines old-timey mail, newfangled Internet, freedom of choice, and our God-given right to be lazy."

Hastings was born in the early 1960s and grew up in Washington, D.C., and the Boston area. His father was an attorney for the U.S. Department of Health, Education, and Welfare. After graduating from a private school in Cambridge, Massachusetts, Hastings went on to Bowdoin College in Maine, where he studied mathematics. He earned his degree in 1983 and immediately joined the Peace Corps, a U.S.-administered organization that sends trained volunteers to struggling parts of the non-industrialized world. Hastings spent three years teaching math to students in Swaziland, and then returned to California to earn a graduate degree in computer science from Stanford University.

Hastings became a software developer, and in 1990 started his own company, Pure Atria Software, which he then sold several years later to a larger software firm for a sum in the neighborhood of $750 million. When USA Today did a feature story on the growing number of instant millionaires in the Silicon Valley area of northern California, one of the photographs that ran with it showed Hastings and his Porsche sports car with the caption, "boom! you are rich!" Over the next few years, Hastings became active in educational philanthropy, working to increase the number of charter schools in the state and advocating stronger math and science curricula in all schools. Teaming with a well-known Silicon Valley venture capitalist, John Doerr, Hastings successfully organized a drive to get a new proposal on the California ballot, called Proposition 39, in 2000, which decreased the minimum number of votes needed for school millage elections to pass. During this period Hastings even returned to school himself, earning a graduate degree in education from Stanford University.

Hastings came up with the idea for Netflix in 1997, when he had to pay $40 in late fees for a copy of Apollo 13. At the time, the bulky videocassette format was the standard still, but a smaller, cheaper, CD-based digital movie format, the DVD, had recently come onto the market; within a few years, affordable DVD players for the home would flood the consumer electronics market. Hastings thought that a company that sent out the lightweight DVDs to subscription customers by mail, and without a time limit to return them, might be a better alternative to the video store and its onerous return policies. He and a co-founder, Marc Randolph, set up Netflix in 1998, and began offering subscriptions a year later. Subscribers paid a $20 monthly fee, and in return, could have unlimited DVD rentals. Their selections were made from the company website, www.netflix.com, and a subscriber could take up to three movies at a time. Returning them was simple: a postage-paid envelope arrived with each rental, and every time one was returned, the subscriber's next choice was sent out.

Netflix struck deals with all the major Hollywood studios to provide newly released DVDs, and began amassing an inventory of DVDs which were stockpiled in their warehouse/distribution centers across the United States. In 2000, the company entered into an arrangement with electronics retailer Best Buy, which agreed to place Netflix stickers on boxes of new DVD players it sold; in return, a Netflix subscriber had the option to purchase a movie they had liked on the Netflix website via a "buy" button that took them directly to the Best Buy retail site.

Hastings was determined to grow his company carefully, and his prudence attracted the attention of Wall Street. In May of 2002, Netflix became a publicly traded company with an initial public offering (IPO) of stock. The company had 600, 000 subscribers by then, but hit the one-million mark less than a year later. There was a 50 percent increase in subscribers for 2004, to 1.5 million, and by September of 2005 there were 3.5 million Netflix devotees. But perhaps the most telling sign of Netflix's success was the copycat-factor: both Blockbuster and Wal-Mart copied the DVD-by-mail concept. The ubiquitous rental chain had once dismissed Netflix as an insignificant competitor. "Blockbuster said, 'Well, they'll never get to 100, 000 [customers].'" Hastings told Video Business writer Laura Dunphy. "Then they estimated our total market at a million. Now that we've passed a million, they've estimated our total market at three million." In the end, Wal-Mart eventually gave up, and even sold off the remainder of its venture to Netflix.

Future plans for Netflix have been debated in the business press almost since its inception. Might it become the primary provider, some day, of online, on-demand content? "We're starting to invest now, " in the online content realm, Hastings told Newsweek International writers Karen Breslau and Daniel McGinn in 2003, "even though there's no real market for it today, so that when it comes, we're ready. [But] DVD will last as long as the gasoline engine, newspaper—any of your 'obsolete' in the very long term industries."

In 2004, Hastings's company announced a deal with TiVo, the digital recording service, but details about what they were planning remained somewhat murky. The basic premise of Netflix was going to be the cornerstone of the company for some time, the chief executive officer told Newsweek's Brad Stone. "The U.S. mail, with its 800, 000 employees delivering to 100 million homes six days a week, is the ultimate digital distribution network, " Hastings asserted.

Hastings remained active in education issues, and between 2001 and 2005 served as president of the California State Board of Education. He is the father of two children, and admits that he still visits the old-school DVD rental stores when they are eager to see a new movie, and want it that same day.