November 19, 2025 • 46 mins
Are algorithms controlling our lives? In Part Two, we continue the story behind the creation of Netflix’s algorithm, and how they used it to do the seemingly impossible…become the king of Hollywood. The streaming service’s rise was astonishing – but their success would set the company on a path to clash with perhaps the most powerful company in the world.
Support the show: https://redpilledamerica.com/support/
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
This is Red Pilled America.
Speaker 2 (00:08):
Before we start the show, just a reminder to share, like,
and subscribe to this podcast wherever you're listening to it,
and please give us a five star rating. It helps
us beat the big tech algorithm. Also, if you love
Red Pilled America, please consider supporting the show. You can
buy one of our one made in America products. We
have hats, candles, a book. That's right, we wrote a book.
(00:29):
Or you can become a backstage subscriber. Well you'll have
access to our entire archive and you can hear the
behind the scenes of each episode along with Patrick and
I are arguing over who's a better storyteller. Or you
can just make a donation to support the show. Please
visit Redpilled America dot com and click support or shop
in the topmenu. That's red Pilled America dot com and
click support or shop in the topmenu. Support what you
(00:51):
love or it goes away. Thanks everyone.
Speaker 1 (01:01):
Previously on Red Pilled America, you know.
Speaker 3 (01:03):
Who hates me the most?
Speaker 4 (01:04):
The transgender community.
Speaker 1 (01:08):
A certain segment within the alphabet movement didn't appreciate Dave's jokes.
Speaker 5 (01:12):
I don't want to write these jokes, but I just
Can't Stop.
Speaker 6 (01:16):
Chappelle's comments about the transgender and LGBTQ plus communities have
outraged many, who are now calling for the special to
be removed. Tonight, Netflix employees walking out of the company's
Hollywood office, what.
Speaker 1 (01:29):
The public had just witnessed was a new type of conflict.
It was actually a battle between two algorithms.
Speaker 7 (01:36):
Netflix has a really specialized platform and they crack their
customers really closely.
Speaker 1 (01:42):
Our algorithms Controlling American lives.
Speaker 2 (01:48):
I'm Patrick Currelchi and I'm Adrianna Cortez.
Speaker 1 (01:51):
And this is Red Pilled America, a storytelling show.
Speaker 2 (01:55):
This is not another talk show covering the day's news.
We are all about telling stories.
Speaker 1 (02:01):
Stories. Hollywood doesn't want you to hear stories.
Speaker 2 (02:04):
The media marks stories about everyday Americans if the globalist ignore.
Speaker 1 (02:09):
You could think of Red Pilled America as audio documentaries,
and we promise only one thing, the truth.
Speaker 5 (02:21):
Welcome to Red Pilled America.
Speaker 1 (02:34):
We're at part two of our series of episodes entitled
The Algorithms. If you haven't heard Part one, stop and
go back and listen. From the beginning. We're looking for
the answer to the question our algorithms controlling American lives
by telling the story of the clash between two algorithms,
one made by Netflix and the other crafted by perhaps
the most powerful company in the world. So to pick
(02:56):
up where we left off, Mark Randolph and Reed Hastings
wanted to bring the movie rental experience online. On April fourteenth,
nineteen ninety eight, the two launched Netflix, an internet DVD
rental by mail business. They were told that it would
never work, and in the early days it looked like
the naysayers were right. It took the company a year
(03:17):
and a half to land on a business model that
worked a combination of no late fees and renting DVDs
through a subscription service. But the thing that actually drew
people back was a recommendation algorithm that suggested films that
Netflix thought a particular customer would like. Their algorithm was
even better than Amazon's because Netflix was almost exclusively capturing
(03:40):
the personal likes and preferences of their customers, where at
Amazon a gift for Aunt may could make it into
the mix.
Speaker 8 (03:47):
Now.
Speaker 1 (03:47):
At launch, Reed Hastings played more of an investor's role
while Mark Randolph ran the company. But as the year
two thousand approached, Netflix needed to raise money.
Speaker 6 (03:57):
You know, Read was not active full time. I mean,
he was my chairman, he was my angel investor, but
he was going to school and I was running the company,
starting and running the company.
Speaker 1 (04:07):
That's Netflix co founder Mark Randolph.
Speaker 6 (04:10):
But you know, he was involved, and it was great
to have his sounding board. We talked all the time,
and so it wasn't unusual for him to stop in
to the office and his way home in the evening,
and he stopped in one night and no knocks and
basically says Mark, We've got to talk. Reid was concerned.
(04:35):
He was concerned about the business, and more specifically, he
was concerned about my judgment. And these weren't necessarily big
things he was seeing, but he was seeing patterns that
he was concerned that as the company got bigger, as
we moved faster, would become problems.
Speaker 1 (04:53):
And Netflix was going to have to start moving fast
because it was burning through cash at an alarming rate.
The company needed to raise money. The problem was that
tech investors liked a certain kind of credentials at the
top of the company, the kind of credentials Mark Randolph lacked,
but Reed Hastings possessed. Red had sold his previous tech
(05:14):
company a few years earlier for what was at the
time the biggest Silicon Valley sale in history, so to
raise money and get the company out of the red
Reid believed that he was better suited to be Netflix CEO.
Speaker 6 (05:26):
I thought he was firing me he had more stock
than I did. But what I learned as we talked
some more was he was saying something very different. He
was really saying that this company would be stronger if
we ran it together, and he was proposing that he'd
joined the company full time, he'd commit a CEO, that
I'd move over as president. We'd do it together. And
(05:49):
it was a hard ego moment, and I can't say
that I went Okay, this was hard.
Speaker 9 (05:55):
You know.
Speaker 6 (05:56):
There was a lot of wine drunk on the porch
with my wife as we kind of worked through that.
But fundamentally I realized, you know, Read was right, that
it was almost inarguable the company would be stronger with
the two of us doing it together.
Speaker 1 (06:14):
So Reed took over a CEO, Mark became president and
the two got to work. They had no time to
waste because the industry was on fire. The mid to
late nineteen nineties was the gold Rush era of e commerce.
Speaker 6 (06:28):
Well, I'm tracked.
Speaker 9 (06:29):
It looks like to hit a billion shares.
Speaker 10 (06:30):
Today's Internet stocks drove a powerful surge on Wall Street.
Speaker 7 (06:33):
Today that to say the Internet is so revolutionary that
the usual rules for valuing a stock, such as revenues
and earnings.
Speaker 4 (06:40):
No longer apl farce.
Speaker 11 (06:41):
Line dot Com is the latest beneficiary of the Internet
stock craze. Shares of the Internet commerce company debuted at
sixteen dollars. They closed at sixty nine dollars, arrives of
over three hundred and thirty percent. Earthweb was up three
hundred and seventy nine percent in the globe.
Speaker 6 (06:55):
Dot Com, which only traded.
Speaker 11 (06:57):
One day, gained six hundred and six percent on the weak.
Speaker 9 (07:00):
The Amazon dot Com of drug stores went public today
in the latest smashing net debut.
Speaker 7 (07:06):
Drugstore dot Com nearly tripled in price.
Speaker 1 (07:09):
As late as April two thousand, Wall Street money was
practically being given away to e commerce websites. Again, Mark Randolph.
Speaker 6 (07:17):
Back in April, you could go out in Highway seventeen
over here and put a sign up for the flag,
and the truck would pull over and then dump all
the money into your driveway.
Speaker 1 (07:24):
From nineteen ninety to mid two thousand, nearly five thousand
new companies went public. Netflix wanted to get in on
the action, and by the beginning of the New millennium,
the company started preparing for an initial public offering or IPO.
Speaker 12 (07:38):
But then it's described as nothing short of breathtaking, a
points drop never before seen on the US markets. His
closing bill might as well have been an alarmed So
savage was the silly.
Speaker 1 (07:50):
The dot com bubble had burst.
Speaker 12 (07:52):
It was enough to force the Dow Jones down six
hundred and sixteen points, a drop of five and a
half percent. The fragile technology stocks even harder, hit the
Nasdaq Index in free full down nearly ten percent. It
lost a quarter of its value in just one week.
Speaker 1 (08:09):
Netflix arrived at the party too late, and now the
company was in trouble.
Speaker 6 (08:14):
So we're screwed. No way to raise money, We're hemorrhage
and cash.
Speaker 1 (08:18):
The company had found a solid business model and their
algorithm was the magnet that kept customers coming back for more.
But the crash was a drag on the entire e
commerce universe, and it made every dot com look like
a dot com. Investors saw them as too risky. Their
free money completely dried up, so Read and Mark had
(08:38):
to pull their plans for going public. They had to
come up with a new strategy to stay alive that year.
Speaker 6 (08:45):
We're going to close the year with what five million
bucks in revenue, but we're going to lose about fifty
million dollars getting there, So not sustainable, not without some miracle.
Speaker 1 (08:55):
They needed to sell the company and fast. So they
decided to turn to their brick and mortar competitor, Blockbuster
for a lifeline.
Speaker 2 (09:11):
Now this was going to be a bit of a
tricky proposition. In late two thousand, comparing Netflix to Blockbuster
was like measuring a mouse against a wooly mammoth. Netflix
was on track to pull in five million a year
in revenue. For Blockbuster it was six billion. Netflix had
a few hundred employees. Blockbuster had sixty thousand employees. Blockbuster
(09:33):
had nine thousand stores. Netflix had zilch again, Mark Randolph, and.
Speaker 6 (09:39):
So we called them for meeting, you know nothing. We
had our vcs do the go between nothing, silence, and
then we go about our business. Go okay, I guess
we're gonna have to get out of this some other way.
And we were at a corporate retreat. We were in
Santa Barbara in the foothills and a little resort called
Alasol Ranch. And it's pretty casual, you know, and we're
(09:59):
of course back riding and all the usual BSU do
in a corporate tree and I had packed pretty lightly.
I had T shirts and shorts and flip flops and
that was it. And that, of course is when Blockbuster
calls and says, we'll see you. We have an opening
tomorrow morning, and we're going, how are we going to
get from here to Dallas by tomorrow morning?
Speaker 2 (10:24):
They decided to splurge and chartered a private jet.
Speaker 6 (10:28):
So we fly a Blockbuster fled at Dallas, go up
to their huge skyscraper, up to the thirty seventh floor
whatever it was, in this huge conference room and it's
me and Reed Hastings and our CFO Barry McCarthy, and
I'm in shorts and a T shirt and Barry has
on Hawaiian shirt, so I'm jealous that he has buttons.
(10:50):
And the Blockbuster guys come in their fancy clothes and
the fancy expensive shoes.
Speaker 5 (10:53):
And the whole thing.
Speaker 2 (10:54):
Blockbuster CEO John Antiocho walked in as.
Speaker 6 (10:57):
Well, and it was this symbolic representation of out of
our league.
Speaker 5 (11:01):
We were.
Speaker 6 (11:03):
We make the pitch, we'll combine forces and we'll find
the synergies that we will run the online part of
the business, they'll run the stores. We'll do a blended
model and we'll promote it in the stores. It's a
win win for everybody. And it was going great. You know,
they were nodding their head and they're asking good questions,
(11:24):
and then they asked the big question, which is how much?
How much should we pay for you? We figured that
was going.
Speaker 2 (11:30):
To come up since they were fifty million dollars in
the hole, they decided that would be the.
Speaker 6 (11:35):
Number, So fifty million dollars.
Speaker 2 (11:37):
But when they hit Antiocha with the fifty million dollar
price tag, Mark noticed that the Blockbuster CEO took on
a different demeanor.
Speaker 6 (11:45):
He was had this expression on his face and I
couldn't quite read it, and what I eventually realized is
that he was trying to hold in laughter.
Speaker 2 (12:01):
In reality, it wasn't outlandish offer given their revenue, but
with the dead bodies of other e commerce businesses still
stinking up Wall Street, the CEO of Blockbuster thought the
offer was preposterous.
Speaker 6 (12:13):
And he was watching all these companies. He's looking at
the Webvan, Cosmo, dot Com, all of them crashing and burning.
No apparent viable economic model for dot com. If you
had a dot com, it was the scarlet mark on you.
We ended up at We flew home disappointed. It would
be the understatement we're desperate. We didn't know where else
(12:36):
we were going to go. We're flying back going, oh man,
not only do we not have Blockbusters saving us, now
we're going to have to compete with them. And it
was extremely sobering.
Speaker 2 (12:48):
But what Mark and Reid didn't know was it a
historic shift was underway and they were about to be
the right company, in the right place at the right time.
Speaker 1 (13:03):
Shows that every market eventually falls, every currency collapses, and
today the US dollar is hanging by a thread, twillions
in national debt, record high. Markets to find gravity, but
stocks can't go up forever. Meanwhile, your groceries, housing, and
transportation costs are all going up, and your dollar it's
buying less every single day. So when the system breaks,
(13:25):
when the crash hits, your stocks won't save you, and
your dollars won't either. But one thing will.
Speaker 8 (13:30):
Gold.
Speaker 1 (13:31):
Gold has always survived a collapse. That's why central banks
are buying gold by the ton, billionaires are stalking up,
and everyday Americans are protecting their savings in retirement with
physical gold before the next shoe drops. Don't wait for
headlines when the panic sets in it's too late. Call
Lear Capital now at eight hundred four to eight zero
(13:53):
one one zero zero to get your free twenty twenty
five gold investment kit and protect your wealth if the
system breaks with real physical gold. With over three billion
million dollars in transactions and thousands of five star reviews,
Lear is your leading source. Call now and get up
to fifteen thousand dollars in bonus gold with a qualified purchase.
(14:14):
Call eight hundred four to eight zero one one zero zero.
That's eight hundred four to eight zero one one zero zero.
Keep in mind that any investment has a certain amount
of risk associated with it, and you should only invest
if you can afford to bear the risk of loss.
Before making investment decisions, you should carefully consider and review
all risks involved.
Speaker 2 (14:34):
Welcome back to red pilled America. I'm Adriana Qortez. In
two thousand and one, Netflix was in dire financial straits.
They had landed on a business model that was generating revenue,
but they'd burnt through too much cash to get there.
They were fifty million dollars in the hole. To look
for a lifeline, co founders Mark Randolph and Read Hastings
(14:56):
went to Dallas, Texas to pitch the goliath Blockbuster on
purchasing the company for fifty million dollars. The CEO of
the retail movie rental giant practically laughed them out of
their office. The two went home dejected and desperate. They
had no idea how they were going to save the company.
But despite their predicament, Netflix was onto something. When they
(15:19):
pitched Blockbuster in two thousand, they were on track to
pull in roughly five million dollars a year. By two
thousand and two, revenue grew to a whopping twenty one
million in just one quarter. And what caused this enormous
upswing answer DVD players. In two thousand and one, an
astonishing one hundred and twenty seven million DVD players were sold.
(15:43):
Consumer spending was searching for this new technology, and Netflix
was there to reap the rewards. Even as other e
commerce sites were dying. Wall Street took notice of netflix
stunning growth.
Speaker 13 (15:56):
Most of the people who are involved in the IPO
market now still have some very deep battle scars as
it relates to anything dot com.
Speaker 10 (16:04):
Netflix has found success in its business by renting DVDs
to a growing group of subscribers.
Speaker 2 (16:11):
In mid two thousand and two, the company decided it
was time to reapproach Wall Street.
Speaker 11 (16:17):
Netflix made a spectacular debut on the Nasdaq stock market
Today the online DVD rental company priced five point five
million shares at fifteen bucks a pop.
Speaker 10 (16:26):
Netflix incorporated with public at an eighty two point five
million dollar valuation.
Speaker 2 (16:31):
By the end of the initial public offering, Read Hastings
was firmly in charge of Netflix and had become the
public face of the company.
Speaker 4 (16:38):
An IPO is like high school graduation. It's big at
the time, but with hindsight, it's only really a beginning
of something else.
Speaker 2 (16:51):
Mark Randolph left the company the following year. Read Hastings
took hold of the reins from there, and people were
gunning for him because the Dallas big wigs that lapped
him out of their office just three years earlier now
saw Netflix as a real threat. In two thousand and four,
Blockbuster launched a Netflix copycat site.
Speaker 3 (17:10):
Well with Blockbuster Total Access, you can do something you
can't do with Netflix. Exchange your movies for new ones
right in the store, no extra charge, just in case
you need them. Movies for the mail, plus movies for
the store, one low price. That's Blockbuster Total Access. Get
a free trial at your Blockbuster store or Blockbuster dot com.
Speaker 2 (17:27):
It was game on. But in the eyes of Reed Hastings,
it was too little, too late.
Speaker 4 (17:35):
Blockbuster didn't start competing against us until two thousand and four,
so five years after launch. Okay, so that was too.
Speaker 12 (17:43):
Long to wait.
Speaker 4 (17:44):
However, once you wait that long, it may well be
better not to enter because by that time, you know,
we had a couple hundred million in revenue, We had
a big Mallanchiet. We were going to be really hard
to profitably dislodge.
Speaker 2 (17:57):
Netflix had a serious head start. For over five years,
their recommendation, which an algorithm, was getting better and better.
It was giving them a competitive edge. I few understood
that advantage, but their success started making people curious. Journalists
began to wonder how they were doing it.
Speaker 7 (18:16):
I was the beat reporter at Reuter's in Los Angeles,
and I covered entertainment companies, and I covered the entire
entertainment vertical, so that meant studios to distribution companies to
movie theaters.
Speaker 2 (18:28):
That's Gina Keating, author of Netflixed, The epic Battle for
America's eyeballs. In two thousand and two, Gina began noticing
the small DVD rental outfit.
Speaker 7 (18:38):
And then I had this little company, Netflix, which had
about five hundred thousand subscribers, and they were mainly on
the coasts, and I couldn't really figure out how it
worked because back in those days, they shipped DVDs.
Speaker 6 (18:53):
In the mail.
Speaker 7 (18:54):
They had a pretty rudimentary website, and I couldn't figure
out why we were covering this company because there were
other alternatives that the studios were trying to do, like
download boxes and things like that. So that's how I
found out about them. And in the next eight years,
at every juncture where they had to make a decision
(19:17):
about where the entertainment industry was going, they were right
and the studios were wrong. And it was just remarkable
to me. And if you remember, you know, we had
a recession, a huge recession at that time, and every
time that Netflix was faced with some kind of an
economic downturn, they seemed to get stronger because they correctly
(19:39):
predicted that people were going to want to consume entertainment
in their homes and that the trend towards entertainment was
getting more individual, so that I wanted to explore how
they did that.
Speaker 2 (19:51):
She came to the conclusion that in large part, it
was their user interface that fed their algorithm.
Speaker 7 (19:57):
They made sure that that user interface was loaded with
ways to watch the people who went on that site.
Speaker 2 (20:08):
By two thousand and five, a year after Blockbuster launched
their Netflix copycat service, Netflix was raking in six hundred
and eighty eight million dollars a year in revenue, and
it was largely because their six year old algorithm was
predicting a demand in forgotten films.
Speaker 7 (20:26):
Netflix had people on that site browsing and pretty much
telling them about their lives, and they were really able
to catch a lot of trends that the studios didn't
see coming.
Speaker 2 (20:38):
By two thousand and six, the media started catching on
to this competitive advantage.
Speaker 14 (20:43):
But what are these stars?
Speaker 4 (20:44):
Those are those stars are the key to the system. Okay,
they show what other people that have my movie taste
think of this movie.
Speaker 14 (20:53):
That's part of their recommendation system. So let's say you
rent on the Waterfront. I could have been a cot
and give it five stars. Netflix software searches for what
other on the waterfront renters have rated highly. Figures out
from other movies you've rated, whether it's Brando, you like
(21:13):
films in black and white or mob flicks, and voila.
Speaker 5 (21:18):
I'm gonna make them an offer again.
Speaker 14 (21:19):
With you they offer you other movies. Hastings thinks the
recommendations have transformed the movie business by giving new life
to thousands of forgotten or overlooked films.
Speaker 3 (21:30):
We need to help one another.
Speaker 14 (21:32):
Like Hotel Rowande.
Speaker 12 (21:34):
I cannot leave these people today.
Speaker 4 (21:35):
It did very little theatrical business, but our members like
it a lot. They rated it very highly, so our
website promotes it to more and more people. And now
Hotel Rwanda is the number five all time rented film
at Netflix, which is above Wedding Crashers, which is a
great mainstream film.
Speaker 1 (21:57):
And as Netflix exploited its algorithm, others were looking to
get in on the action.
Speaker 15 (22:02):
We start last October with five.
Speaker 1 (22:04):
Shows, that's Steve Jobs. Out of two thousand and six
Apple Conference, only.
Speaker 15 (22:09):
Five shows, and we've been adding them since. We now
have over two hundred and twenty TV shows. Customers have
purchased and downloaded over forty five million TV shows. There
is one more thing, and that is movies. We are
(22:29):
making available over seventy five films online starting today. We're
going to be adding more every week and every month.
Movies are going to be available on the iTunes store
the same day as they are released on DVD.
Speaker 1 (22:44):
Netflix was facing the juggernaut of all juggernauts, but Apple's
entry didn't seem to worry Netflix CEO Read Hastings.
Speaker 14 (22:52):
Netflix itself will be a movie downloader, says Hastings, who
claims he'll be able to beat the big dot coms
like Apple that have announced they're getting into the game.
Too successful than Apple with the iPod and all of that.
Speaker 4 (23:06):
More successful than Apple, Yahoo, Amazon, absolutely, because those companies
they focus on a lot of things, you know, books
and music, and we think that he can be the
winning firm by focusing on movies.
Speaker 1 (23:18):
But the future was anything but certain. Netflix was a
DVD rental by mail service. Apple was on its way
to revolutionizing the way movies and TV shows could be
purchased and rented. It was anyone's game to win, but
Netflix was about to choose a subtly but profoundly different
path forward. Netflix saw subscription based streaming as the future.
(23:42):
In early two thousand and seven, Netflix launched this new service. Initially,
they didn't have much in their library, only around one
thousand titles out of the more than seventy thousand that
were available on DVD, and that's because Hollywood studios didn't
want to play ball. Since the birth of file sharing
sites like Napster, Hollywood had been resisting the digital era
(24:04):
again Gina keating, they were terrified.
Speaker 7 (24:06):
You know, they didn't like the idea of digital media
because it was so easily copyable.
Speaker 1 (24:11):
So the Hollywood studios were only willing to license bottom
shelf titles to Netflix, titles they didn't value as much
as their big tent pole films and hit TV shows.
But Netflix took what they could get, and they used
their algorithm to see a gap in the market that
Hollywood studios couldn't see, like.
Speaker 7 (24:29):
The desire for old television. They couldn't get great content
because nobody wanted to sell it to them, and there
wasn't even a digital write at first, so they actually
had to go in and say, okay, give us the
worst stuff that you have and we'll take it. But
they were able to get a lot of niche content,
(24:51):
which was international movies, anime, Bollywood, you know, stuff that
people in Middle America, you know, maybe didn't even know about, right,
but a lot of it was great content. And so
they had to design an algorithm that would put people
out of their comfort zone, you know what I mean, Like,
if you liked steel magnolias, maybe you'll like the steel
(25:13):
magnolias of Italy. So you're broadening your horizon. It's really
kind of great because you know, you never knew that
you might like this. But the algorithm was was that
good that people had a lot of satisfaction being turned
outward away from the things that they would normally pick
that were in their comfort zone. And Netflix had to
(25:34):
do this because they had to make these kind of
tenuous connections to get people to come back.
Speaker 1 (25:40):
And Netflix found other unexpected behavior.
Speaker 7 (25:43):
Then they realized that, oh my gosh, everybody wants to
watch the entire catalog of Billiams Island. Who would have
thought that. Who would have thought they'd sit down for
a whole weekend and watch catalog of an old television show.
But they figured that out and they kept it secret,
and then they started buying stuff.
Speaker 1 (26:01):
They were able to keep it secret for a while,
gobbling up forgotten TV shows and films at bargain prices.
But once they'd begun pioneering subscription streaming content, Netflix entered
a new kind of deal making arena. You see, when
they were just a DVD rental business, their model was simple,
read Hastings.
Speaker 4 (26:19):
Everybody's got every DVD. Blockbuster US had the same content
offering because it's non exclusive licensing to get DVDs.
Speaker 1 (26:26):
Generally speaking, Netflix was just buying movie DVDs and renting
them out. But now that they were streaming, Netflix was
more beholden to Hollywood studios because the studios could withhold
the streaming licenses. The film studios held all the cards
because Netflix wasn't making the content.
Speaker 7 (26:44):
Gina Keaty, but they didn't have any experts in Los
Angeles and New York. Everybody was in Silicon Valley. So
you had this idea of how do we gather the
biggest audience that we possibly can and sell to them?
And they had the gather it and the algorithm down,
but they couldn't make content, so they really needed Hollywood.
Speaker 1 (27:05):
But Hollywood didn't need Netflix, that is, until two thousand
and eight.
Speaker 16 (27:11):
The Dow tumbled more than five hundred points after two
pillars of the Street tumbled over the weekend. Lehman Brothers,
a one hundred and fifty eight year old firm, filed
for bankruptcy.
Speaker 2 (27:21):
As a two thousand and eight financial crisis hit, Americans
began to tighten their wallet. The nighttime ritual of dinner
in a movie shifted to eating takeout in front of
your home. Entertainment system and film studios were feeling the.
Speaker 7 (27:35):
Pinch in two thousand and eight, two thousand and nine,
twenty ten. All of them are publicly traded right so,
and they're all considered value stocks. So they had to
make their numbers. And the way that they were trying
to make their numbers when people couldn't go to the
theme parks and they couldn't buy stuff was to sell rights,
(27:57):
to sell off rights to their content. So they were
selling off their rights to Netflix to try to make
their earnings numbers so that their stock wouldn't crash.
Speaker 2 (28:07):
And it was no longer just old second shelf content.
Speaker 7 (28:10):
They sold off a lot of really good stuff to
Netflix catalog to help Netflix.
Speaker 2 (28:15):
Grow films like Spider Man three and parts of the
Pirates of the Caribbean franchise began streaming on Netflix.
Speaker 7 (28:21):
During the downturn, when people had no money and they
wanted to have Netflix instead of going to the movies.
Netflix was just raking in this massive amount of content
because they were willing to pay for it.
Speaker 2 (28:32):
Netflix's wallet was fat In two thousand and six, the
year prior to launching its streaming service, Netflix had a
reported six point one five million subscribers. By the end
of twenty ten, that number nearly tripled to eighteen point
two six million subscribers, so the company had the cash
to go on a buying spree. They struck up a
(28:55):
deal with Stars, gaining the digital rights to about one
thousand movies. They inked deals with Warner Brothers and the
Walt Disney Company. Hollywood industry insiders began to see a
problem brewing.
Speaker 9 (29:07):
It's about the content.
Speaker 2 (29:09):
That's the former CEO of the Walt Disney Company, Michael Eisner,
talking to Read Hastings at the twenty ten Churchill Club Conference.
Eisner saw a growing problem for Netflix. The Hollywood veteran
viewed content is king. Whoever created original movies and TV
shows had the advantage.
Speaker 9 (29:26):
But in the streaming world, you have to have the
rights so to compete with cable pay television, subscription pay television.
Somebody in the streaming world is going to step up
and get those rights, and then eventually those rights are
going to be less important and the distribution company that
is in that business will start making its own original product, sopranos, whatever,
(29:49):
because library footage is only going to get you so far,
in my opinion, so you're going to have to have
current films, current television shows, or make your own. Because
they're having trouble now studios selling the way they used
to sell their films to a because HBO discovered that
original product actually is more exciting to their customers than
(30:10):
non effusive redreads.
Speaker 2 (30:12):
Read Hastings probe the Hollywood veteran on this topic, and.
Speaker 4 (30:15):
Would your advice be that we're better paying a lot
for the movies against those firms or to invest in
scripted original content like HBO did.
Speaker 9 (30:25):
Depends who you are. If you're Rubert Murdoch and you're
willing to bet the company as he has, often you
go in to whichever company is on their knees and
you make them offer they can't turn down, because that
will be cheaper for you in the short term than
trying to create your own product in enough volume to
(30:48):
make a difference. Or you could shortcut that whole thing
and say, I am going to make a continuing flow
of original content, not movies, not Avatar, but Sopranos, Sex
and the City, mad Men, whatever it is. But I'm
going to tell my customers if they want original product,
(31:10):
they get it here first. But if you don't do
one of the two of those things, somebody else will. Okay,
So what's your strategy.
Speaker 4 (31:19):
Our preferred strategy is to carry those companies product. So
we distribute Stars today, we distribute a number of showtime shows,
but not current season. But our view is we should
write them large checks and carry the content. However, at
the end of the day, they may decide that they're
not willing to do that, and so it's not clear
(31:40):
that what the success strategy that will be either. So
our primary strategy, like we do with Stars, is to
carry the content and then write them big checks.
Speaker 2 (31:49):
Michael Eisner was intrigued by read Hasting's comment and felt
the path forward for Netflix was clear.
Speaker 9 (31:58):
Now you're convincing me that the solution is original, semi
or exclusive product only you have because if I can
get everything you described everywhere, other than you being faster
and quicker technologically, what do you have to offer to
me because some other guy in another company figures out
a better way to do You've created a recommendation tool,
(32:21):
so you've built a better mouse trap. But what happens
when the guy next door takes advantage of the fact
that you're all on vacation it's unlimited vacation, and gets
the same or better mouse trap.
Speaker 17 (32:35):
Is there not a point in time that you must
consider originality and exclusivity or does that never come in
this world of infinite opportunity.
Speaker 4 (32:49):
It's something we think about a lot.
Speaker 2 (32:51):
It was clear that Netflix was at a crossroads, and
its CEO wasn't sure which direction to go. Netflix was
either going to be solely a distributor of other people's films,
or it would have to start creating its own original
content as well. The path forward wasn't obvious, but the
company was about to receive some signs that would help
(33:11):
it make a decision. Do you want to hear red
pilled America stories ad free then become a backstage subscriber.
Just log onto Redpilldamerica dot com and click join in
the topmenu. Join today and help us save America one
story at a time.
Speaker 1 (33:30):
Welcome back to red Pilled America. So by twenty ten,
Netflix had reached a crossroads. Should the company continue to
be just a distributor of other people's TV shows and
movies or should it take the plunge into creating its
own original content. Both were pricey endeavors. Staying the course
(33:51):
as a distributor, Netflix was going to have to pay
big bucks for films that studios could cut them off
from at any time. Or Netflix could go another route.
It could begin making their own original content, but to
do that would cost a pretty penny as well. In
order to make Netflix at all tantalizing to subscribers, they
(34:11):
need to make a lot of original content. And then
there was the very difficult decision of what they should make.
And this is where we get to the core of
how Netflix beat Hollywood. You see, Netflix had been building
something that no studio possessed by creating and fine tuning
their recommendation algorithm for almost fifteen years. Netflix understood the
(34:34):
wants and desires of their subscribers in a way the
studios could only dream of knowing, so Netflix had an
advantage on selecting what original content to produce. If Netflix's
path forward wasn't already clear, a series of reports would
make the decision obvious.
Speaker 8 (34:51):
Video rental chain Blockbuster has filed for Chapter eleven bankruptcy protection.
Speaker 1 (34:56):
In September twenty ten, Netflix finely defeated Blockbuster.
Speaker 8 (35:00):
Blockbuster has been synonymous with the whole video market, but
it's been losing money and market share for years. Competition
from the likes of Netflix wait on the retailer dependent
on its brick and mortar infrastructure.
Speaker 1 (35:13):
Netflix won the DVD rental war, but their original service
as a distributor of other people's content was about to
become a risky business.
Speaker 18 (35:22):
You can't google Netflix at the moment without seeing the
naysays and doom says telling me that the loss of
the Stars contract on content is going to be your
Achilles hil and you may as well switch the lights off.
Speaker 1 (35:38):
In September twenty eleven, Stars ended their deal with Netflix.
The streaming service was going to lose an enormous amount
of content. Reed Hastings attempted to downplay the development.
Speaker 4 (35:49):
The Stars deals only in the United States, and it's
less than ten percent of our content, so you know
it is something, but it's not a huge deal, and
where we're actively working to replace that content by March
when the Star's content goes off.
Speaker 1 (36:05):
It was clear even to layman in the media that
Netflix was in trouble if they had to continue to
rely purely on Hollywood for content.
Speaker 18 (36:13):
Who has the whip hand in all of this. Is
it the content providers who have the material that you
so badly want and demand, or is it yourselves as
the distributors. I can't decide who actually is in the
driving seat here.
Speaker 4 (36:30):
Well, I'd say the content owners are really in the
driving seat. We put forth offers to license that content
for millions of dollars per year, and then it's up
to them if they have a better offer or want
to accept our offer. So mostly it's us making offers
to them.
Speaker 1 (36:51):
Read Hastings could no doubt see his back was against
the wall. Hollywood could cut Netflix off in a moment's notice.
It was time to consider taking the plunge again. Read Hastings.
Speaker 4 (37:02):
Cable network from all time have started on other people's
content and then grown into doing their own originals, so
we knew of the general idea for quite a while,
and we had actually tried to get into original content
back in two thousand and five when we were on
DVD only and buying films at Sundance Maggie Jillenhall's Sherry
(37:22):
Baby and we published on We were a mini studio,
and it didn't work out because we were.
Speaker 1 (37:27):
Subscale, meaning they weren't big enough yet to make independent
film projects profitable. But by twenty eleven the company had
grown astronomically. At the same time that Hollywood flirted with
holding its content, Netflix was seriously considering taking the plunge
into original content, but it wasn't until an off the
hand comment in a meeting. It started the company down
(37:49):
the treacherous path.
Speaker 19 (37:50):
So we were meeting at Netflix with the company called MRC,
who mostly make independent films, large scale independent films, and
Celton Studios.
Speaker 2 (37:59):
That's Ted Sarandos. In twenty eleven, Sirandos was a head
of Netflix Content.
Speaker 19 (38:04):
And at the end of the meeting they said, by
the way, we are taking out our first TV show,
and we bought the rights to this British TV show
called House of Cards, which I knew very well I
love the show from watching it on DVD and David
Fincher's directing the pilot and exec producing.
Speaker 2 (38:20):
Actors Kevin Spacey and Robin Wright were signed on to star,
and three great scripts were apparently already written by an
OSCAR nominated screenwriter.
Speaker 19 (38:29):
We're not in the business original programming at all, and
I said, we'd love to look at it, and we
started talking about it, and I said, you know, if
what we are all building here is true, and that
all TV networks and channels would become dot coms, that
ABC eventually would become an app. And we've talked about
this very confidently for many years. If all that's true,
(38:51):
then what are the chances that any of these networks
are going to sell us their programming. They're going to
need it for themselves. So if that's the case, then
we better get good at doing this ourselves.
Speaker 2 (38:58):
But this House of Cards project was a hot commodity
in Hollywood.
Speaker 19 (39:02):
Everybody wanted it. I know HBO wanted I know Fax
wanted it, and there was no reason to sell it
to Netflix. We've never launched an original anything, and the
idea that we were going to transform the business on it,
that we would know how to market it, do we
know how to launch it? Those are all not a given.
Speaker 2 (39:18):
So Ted Sarandos immediately started digging into the Netflix data.
He looked into how many Netflix subscribers watched movies featuring
Kevin Spacey, whether those subscribers watched other movies he was in,
and what types of roles drew him the largest audience
on their platform. The data that Netflix had been gathering
from its subscribers showed that viewers would likely watch a
(39:39):
show with Spacey in a serious role, and those were
the same subscribers that also liked political dramas. The algorithm
was telling Ted Sarandos that House of Cards could be
a hit, so.
Speaker 19 (39:51):
He said, look, let's go for this. And at the
time they wanted, they were inviting everyone to come to
Sony where David was working on a film, and they
were going to do the pitch to everybody at Sony
on Saturday, and I said, we don't I want to
come on Saturday. I'm telling you yes right now, and
I want to come on Monday and meet David and
tell him why he should do it with us.
Speaker 2 (40:10):
Sarandos wanted to make director David Fincher an offer he
couldn't refuse.
Speaker 19 (40:15):
And I walked in the room and I said, there's
a thousand reasons not to do this in Netflix. I
want to give you one reason to say yes, which
is I'm going to give you two seasons with no
piot and you have absolute creative freedom and the only
thing we ask is that you have to put your
name on it.
Speaker 2 (40:30):
Again, Read Hastings.
Speaker 4 (40:32):
Ted Sarandos, my partner in Netflix who runs content, got
very excited about House of Cards, and at that time
it was one hundred million dollars.
Speaker 2 (40:41):
David Fincher took the deal.
Speaker 4 (40:43):
It was a fantastic investment, and it was in competition
with HBO and that was really the breakthrough that he
picked right up front.
Speaker 2 (40:52):
Again, Gina Keaty back.
Speaker 7 (40:53):
In twenty twelve, when they were trying to make House
of Cards, it seems sort of embarrassing, you know that
Netflix would be your studio. That they really had to
overcome that part of it because people weren't sure, how
are these people going to treat me? But it was
a great deal at first, and again they did a
great job by saying, you know, do whatever you want.
(41:14):
Here's one hundred million dollars. All we want is for
you to deliver what you say you're going to deliver.
Because they'd already done all the research on the front end.
They had said, you know, we have this nexus with
House of Cards people and Kevin Spacey people and people
you know who love British thrillers and stuff like that.
So they had already a masked an audience, so they
(41:34):
could kind of give the creatives their way, their their
head and they could do what they wanted. And then
they developed this fabulous reputation for paying a lot of
money and then just stepping out of the picture.
Speaker 2 (41:45):
And the approach was a smashing success, and the Golden
Globe Ghost too, Kevin Spacey, House of Cards.
Speaker 6 (41:54):
The WGA Award goes to the writers of House of Cards.
Speaker 2 (42:00):
As the years progressed, Netflix appeared to have the Midas touch.
The Emmy for Lead Actress and a Drama Series goes
to Clarifoy The.
Speaker 14 (42:09):
Crown Oranges, Black Stranger Things.
Speaker 5 (42:13):
I want to thank Netflix.
Speaker 2 (42:15):
Thank you to Netflix.
Speaker 7 (42:16):
We would like to say everyone at Netflix, at Serrandas.
Speaker 8 (42:19):
We'd like to thank Netflix.
Speaker 2 (42:21):
Netflix would create one hit show after another, The Crown
Oranges and New Black, Stranger Things Narcos again, read Hastings.
Speaker 4 (42:33):
Well, we've done this, invest a lot on the algorithms
so that we feature the right content to the right people,
and try to make it fun and easy to explore.
Speaker 2 (42:41):
They were also changing the nature of the business. Before Netflix,
screenwriters and producers were relied upon to help pick the
types of shows to produce, the category and themes which
actors were in demand, but their expertise was largely becoming
obsolete for a Netflix production. Their algorithm helped them put
those pieces together.
Speaker 4 (43:02):
Everyone would Rache Hill's list five stars, and then they'd
write eight Adam Sandler, you know, the do over three stars, okay,
But in fact, when you looked at what they watched,
it was almost always Adam Sandler.
Speaker 2 (43:13):
By looking at the data captured by their algorithm, Netflix
could see that their subscribers watched five hundred million hours
of Adam Sandler movies. So they cut a deal with
the actor four movies for two hundred and fifty million dollars.
Before that deal was even finished, Netflix extended the deal
for another four movies at the same price tag, and
(43:35):
that strategy was paying off.
Speaker 11 (43:37):
Four point three million.
Speaker 13 (43:38):
That's a number of new subscribers Netflix added last quarter,
beating estimates and setting Netflix shares soaring today.
Speaker 2 (43:45):
By twenty eighteen, Netflix's production budget ballooned again. Read Hastings.
Speaker 4 (43:51):
It's about eight billion dollars around the world, and it's
not enough. There are so many great shows on other networks,
and so we have a long way to go.
Speaker 1 (44:02):
In just twenty years, Netflix went from a floundering DVD
rental by mail business to surpassing the Walt Disney Company's
production budget.
Speaker 20 (44:11):
A few years ago, it seemed absolutely preposterous that this
former DVD mail rental company would actually start creating content,
and yet Netflix did a terrific job with it. Their
hit ratio is astaging. It's the envy of any Hollywood studio.
Speaker 1 (44:33):
It was an astonishing, almost unbelievable feat. By twenty twenty,
Netflix had tallied over two hundred million subscribers, all by
using their algorithm to mine their audience's likes and desires,
but their content began to take a noticeably woke detour.
From their first endeavor into original content. Netflix appeared to
(44:56):
make an attempt at being even handed, but as the
years passed, the company began to display a liberal.
Speaker 6 (45:02):
Bias Netflix is taking a stand against Georgia's so called
Heartbeat Lab.
Speaker 1 (45:06):
They signed a production deal with Barack and Michelle Obama,
and Netflix began to air shows that no one appeared
to be asking for.
Speaker 14 (45:14):
Dear white people.
Speaker 7 (45:15):
I get that being reduced to a race based generalization
is a new and devastating experience for some of you.
Speaker 11 (45:23):
This morning.
Speaker 2 (45:24):
Netflix is undergrowing fire after its release of the award
winning French film Cuties.
Speaker 12 (45:29):
It is beyond repulsive. It is actual soft core child porn.
Speaker 16 (45:33):
Elon Musk he said, the woke mind virus is making
Netflix unwatchable.
Speaker 1 (45:38):
What happened? How did Netflix go from their algorithm having
the Mitas touch to instead touching a cultural nerve? The
answer is surprising. Netflix's algorithm appeared to come up against
an even more powerful algorithm crafted by a social architect
looking to manipulate American culture.
Speaker 2 (45:58):
Coming up on red pilled America.
Speaker 13 (46:00):
Well, Black Rock has been the leader and in some
way the ringleader of all of Wall Street in pushing
something called ESG investing. But really, what ESG is is
an excuse for Wall Street to push politics into corporate America.
They can push in their own environmental policies. They can
push in social and governance policies that could never be
achieved at the ballot box.
Speaker 2 (46:20):
Red Pilled America is an iHeartRadio original podcast. It's produced
by me Adrianna Quortes and Patrick Carrelci for Inform Ventures.
Now you can get access to our entire back catalog
of episodes and are behind the scenes podcast by becoming
a backstage subscriber. To subscribe, just visit Redpilled America dot
com and click join in the top menu. Thanks for listening.
This is Red Pilled America.
Speaker 2 (00:08):
Before we start the show, just a reminder to share, like,
and subscribe to this podcast wherever you're listening to it,
and please give us a five star rating. It helps
us beat the big tech algorithm. Also, if you love
Red Pilled America, please consider supporting the show. You can
buy one of our one made in America products. We
have hats, candles, a book. That's right, we wrote a book.
(00:29):
Or you can become a backstage subscriber. Well you'll have
access to our entire archive and you can hear the
behind the scenes of each episode along with Patrick and
I are arguing over who's a better storyteller. Or you
can just make a donation to support the show. Please
visit Redpilled America dot com and click support or shop
in the topmenu. That's red Pilled America dot com and
click support or shop in the topmenu. Support what you
(00:51):
love or it goes away. Thanks everyone.
Speaker 1 (01:01):
Previously on Red Pilled America, you know.
Speaker 3 (01:03):
Who hates me the most?
Speaker 4 (01:04):
The transgender community.
Speaker 1 (01:08):
A certain segment within the alphabet movement didn't appreciate Dave's jokes.
Speaker 5 (01:12):
I don't want to write these jokes, but I just
Can't Stop.
Speaker 6 (01:16):
Chappelle's comments about the transgender and LGBTQ plus communities have
outraged many, who are now calling for the special to
be removed. Tonight, Netflix employees walking out of the company's
Hollywood office, what.
Speaker 1 (01:29):
The public had just witnessed was a new type of conflict.
It was actually a battle between two algorithms.
Speaker 7 (01:36):
Netflix has a really specialized platform and they crack their
customers really closely.
Speaker 1 (01:42):
Our algorithms Controlling American lives.
Speaker 2 (01:48):
I'm Patrick Currelchi and I'm Adrianna Cortez.
Speaker 1 (01:51):
And this is Red Pilled America, a storytelling show.
Speaker 2 (01:55):
This is not another talk show covering the day's news.
We are all about telling stories.
Speaker 1 (02:01):
Stories. Hollywood doesn't want you to hear stories.
Speaker 2 (02:04):
The media marks stories about everyday Americans if the globalist ignore.
Speaker 1 (02:09):
You could think of Red Pilled America as audio documentaries,
and we promise only one thing, the truth.
Speaker 5 (02:21):
Welcome to Red Pilled America.
Speaker 1 (02:34):
We're at part two of our series of episodes entitled
The Algorithms. If you haven't heard Part one, stop and
go back and listen. From the beginning. We're looking for
the answer to the question our algorithms controlling American lives
by telling the story of the clash between two algorithms,
one made by Netflix and the other crafted by perhaps
the most powerful company in the world. So to pick
(02:56):
up where we left off, Mark Randolph and Reed Hastings
wanted to bring the movie rental experience online. On April fourteenth,
nineteen ninety eight, the two launched Netflix, an internet DVD
rental by mail business. They were told that it would
never work, and in the early days it looked like
the naysayers were right. It took the company a year
(03:17):
and a half to land on a business model that
worked a combination of no late fees and renting DVDs
through a subscription service. But the thing that actually drew
people back was a recommendation algorithm that suggested films that
Netflix thought a particular customer would like. Their algorithm was
even better than Amazon's because Netflix was almost exclusively capturing
(03:40):
the personal likes and preferences of their customers, where at
Amazon a gift for Aunt may could make it into
the mix.
Speaker 8 (03:47):
Now.
Speaker 1 (03:47):
At launch, Reed Hastings played more of an investor's role
while Mark Randolph ran the company. But as the year
two thousand approached, Netflix needed to raise money.
Speaker 6 (03:57):
You know, Read was not active full time. I mean,
he was my chairman, he was my angel investor, but
he was going to school and I was running the company,
starting and running the company.
Speaker 1 (04:07):
That's Netflix co founder Mark Randolph.
Speaker 6 (04:10):
But you know, he was involved, and it was great
to have his sounding board. We talked all the time,
and so it wasn't unusual for him to stop in
to the office and his way home in the evening,
and he stopped in one night and no knocks and
basically says Mark, We've got to talk. Reid was concerned.
(04:35):
He was concerned about the business, and more specifically, he
was concerned about my judgment. And these weren't necessarily big
things he was seeing, but he was seeing patterns that
he was concerned that as the company got bigger, as
we moved faster, would become problems.
Speaker 1 (04:53):
And Netflix was going to have to start moving fast
because it was burning through cash at an alarming rate.
The company needed to raise money. The problem was that
tech investors liked a certain kind of credentials at the
top of the company, the kind of credentials Mark Randolph lacked,
but Reed Hastings possessed. Red had sold his previous tech
(05:14):
company a few years earlier for what was at the
time the biggest Silicon Valley sale in history, so to
raise money and get the company out of the red
Reid believed that he was better suited to be Netflix CEO.
Speaker 6 (05:26):
I thought he was firing me he had more stock
than I did. But what I learned as we talked
some more was he was saying something very different. He
was really saying that this company would be stronger if
we ran it together, and he was proposing that he'd
joined the company full time, he'd commit a CEO, that
I'd move over as president. We'd do it together. And
(05:49):
it was a hard ego moment, and I can't say
that I went Okay, this was hard.
Speaker 9 (05:55):
You know.
Speaker 6 (05:56):
There was a lot of wine drunk on the porch
with my wife as we kind of worked through that.
But fundamentally I realized, you know, Read was right, that
it was almost inarguable the company would be stronger with
the two of us doing it together.
Speaker 1 (06:14):
So Reed took over a CEO, Mark became president and
the two got to work. They had no time to
waste because the industry was on fire. The mid to
late nineteen nineties was the gold Rush era of e commerce.
Speaker 6 (06:28):
Well, I'm tracked.
Speaker 9 (06:29):
It looks like to hit a billion shares.
Speaker 10 (06:30):
Today's Internet stocks drove a powerful surge on Wall Street.
Speaker 7 (06:33):
Today that to say the Internet is so revolutionary that
the usual rules for valuing a stock, such as revenues
and earnings.
Speaker 4 (06:40):
No longer apl farce.
Speaker 11 (06:41):
Line dot Com is the latest beneficiary of the Internet
stock craze. Shares of the Internet commerce company debuted at
sixteen dollars. They closed at sixty nine dollars, arrives of
over three hundred and thirty percent. Earthweb was up three
hundred and seventy nine percent in the globe.
Speaker 6 (06:55):
Dot Com, which only traded.
Speaker 11 (06:57):
One day, gained six hundred and six percent on the weak.
Speaker 9 (07:00):
The Amazon dot Com of drug stores went public today
in the latest smashing net debut.
Speaker 7 (07:06):
Drugstore dot Com nearly tripled in price.
Speaker 1 (07:09):
As late as April two thousand, Wall Street money was
practically being given away to e commerce websites. Again, Mark Randolph.
Speaker 6 (07:17):
Back in April, you could go out in Highway seventeen
over here and put a sign up for the flag,
and the truck would pull over and then dump all
the money into your driveway.
Speaker 1 (07:24):
From nineteen ninety to mid two thousand, nearly five thousand
new companies went public. Netflix wanted to get in on
the action, and by the beginning of the New millennium,
the company started preparing for an initial public offering or IPO.
Speaker 12 (07:38):
But then it's described as nothing short of breathtaking, a
points drop never before seen on the US markets. His
closing bill might as well have been an alarmed So
savage was the silly.
Speaker 1 (07:50):
The dot com bubble had burst.
Speaker 12 (07:52):
It was enough to force the Dow Jones down six
hundred and sixteen points, a drop of five and a
half percent. The fragile technology stocks even harder, hit the
Nasdaq Index in free full down nearly ten percent. It
lost a quarter of its value in just one week.
Speaker 1 (08:09):
Netflix arrived at the party too late, and now the
company was in trouble.
Speaker 6 (08:14):
So we're screwed. No way to raise money, We're hemorrhage
and cash.
Speaker 1 (08:18):
The company had found a solid business model and their
algorithm was the magnet that kept customers coming back for more.
But the crash was a drag on the entire e
commerce universe, and it made every dot com look like
a dot com. Investors saw them as too risky. Their
free money completely dried up, so Read and Mark had
(08:38):
to pull their plans for going public. They had to
come up with a new strategy to stay alive that year.
Speaker 6 (08:45):
We're going to close the year with what five million
bucks in revenue, but we're going to lose about fifty
million dollars getting there, So not sustainable, not without some miracle.
Speaker 1 (08:55):
They needed to sell the company and fast. So they
decided to turn to their brick and mortar competitor, Blockbuster
for a lifeline.
Speaker 2 (09:11):
Now this was going to be a bit of a
tricky proposition. In late two thousand, comparing Netflix to Blockbuster
was like measuring a mouse against a wooly mammoth. Netflix
was on track to pull in five million a year
in revenue. For Blockbuster it was six billion. Netflix had
a few hundred employees. Blockbuster had sixty thousand employees. Blockbuster
(09:33):
had nine thousand stores. Netflix had zilch again, Mark Randolph, and.
Speaker 6 (09:39):
So we called them for meeting, you know nothing. We
had our vcs do the go between nothing, silence, and
then we go about our business. Go okay, I guess
we're gonna have to get out of this some other way.
And we were at a corporate retreat. We were in
Santa Barbara in the foothills and a little resort called
Alasol Ranch. And it's pretty casual, you know, and we're
(09:59):
of course back riding and all the usual BSU do
in a corporate tree and I had packed pretty lightly.
I had T shirts and shorts and flip flops and
that was it. And that, of course is when Blockbuster
calls and says, we'll see you. We have an opening
tomorrow morning, and we're going, how are we going to
get from here to Dallas by tomorrow morning?
Speaker 2 (10:24):
They decided to splurge and chartered a private jet.
Speaker 6 (10:28):
So we fly a Blockbuster fled at Dallas, go up
to their huge skyscraper, up to the thirty seventh floor
whatever it was, in this huge conference room and it's
me and Reed Hastings and our CFO Barry McCarthy, and
I'm in shorts and a T shirt and Barry has
on Hawaiian shirt, so I'm jealous that he has buttons.
(10:50):
And the Blockbuster guys come in their fancy clothes and
the fancy expensive shoes.
Speaker 5 (10:53):
And the whole thing.
Speaker 2 (10:54):
Blockbuster CEO John Antiocho walked in as.
Speaker 6 (10:57):
Well, and it was this symbolic representation of out of
our league.
Speaker 5 (11:01):
We were.
Speaker 6 (11:03):
We make the pitch, we'll combine forces and we'll find
the synergies that we will run the online part of
the business, they'll run the stores. We'll do a blended
model and we'll promote it in the stores. It's a
win win for everybody. And it was going great. You know,
they were nodding their head and they're asking good questions,
(11:24):
and then they asked the big question, which is how much?
How much should we pay for you? We figured that
was going.
Speaker 2 (11:30):
To come up since they were fifty million dollars in
the hole, they decided that would be the.
Speaker 6 (11:35):
Number, So fifty million dollars.
Speaker 2 (11:37):
But when they hit Antiocha with the fifty million dollar
price tag, Mark noticed that the Blockbuster CEO took on
a different demeanor.
Speaker 6 (11:45):
He was had this expression on his face and I
couldn't quite read it, and what I eventually realized is
that he was trying to hold in laughter.
Speaker 2 (12:01):
In reality, it wasn't outlandish offer given their revenue, but
with the dead bodies of other e commerce businesses still
stinking up Wall Street, the CEO of Blockbuster thought the
offer was preposterous.
Speaker 6 (12:13):
And he was watching all these companies. He's looking at
the Webvan, Cosmo, dot Com, all of them crashing and burning.
No apparent viable economic model for dot com. If you
had a dot com, it was the scarlet mark on you.
We ended up at We flew home disappointed. It would
be the understatement we're desperate. We didn't know where else
(12:36):
we were going to go. We're flying back going, oh man,
not only do we not have Blockbusters saving us, now
we're going to have to compete with them. And it
was extremely sobering.
Speaker 2 (12:48):
But what Mark and Reid didn't know was it a
historic shift was underway and they were about to be
the right company, in the right place at the right time.
Speaker 1 (13:03):
Shows that every market eventually falls, every currency collapses, and
today the US dollar is hanging by a thread, twillions
in national debt, record high. Markets to find gravity, but
stocks can't go up forever. Meanwhile, your groceries, housing, and
transportation costs are all going up, and your dollar it's
buying less every single day. So when the system breaks,
(13:25):
when the crash hits, your stocks won't save you, and
your dollars won't either. But one thing will.
Speaker 8 (13:30):
Gold.
Speaker 1 (13:31):
Gold has always survived a collapse. That's why central banks
are buying gold by the ton, billionaires are stalking up,
and everyday Americans are protecting their savings in retirement with
physical gold before the next shoe drops. Don't wait for
headlines when the panic sets in it's too late. Call
Lear Capital now at eight hundred four to eight zero
(13:53):
one one zero zero to get your free twenty twenty
five gold investment kit and protect your wealth if the
system breaks with real physical gold. With over three billion
million dollars in transactions and thousands of five star reviews,
Lear is your leading source. Call now and get up
to fifteen thousand dollars in bonus gold with a qualified purchase.
(14:14):
Call eight hundred four to eight zero one one zero zero.
That's eight hundred four to eight zero one one zero zero.
Keep in mind that any investment has a certain amount
of risk associated with it, and you should only invest
if you can afford to bear the risk of loss.
Before making investment decisions, you should carefully consider and review
all risks involved.
Speaker 2 (14:34):
Welcome back to red pilled America. I'm Adriana Qortez. In
two thousand and one, Netflix was in dire financial straits.
They had landed on a business model that was generating revenue,
but they'd burnt through too much cash to get there.
They were fifty million dollars in the hole. To look
for a lifeline, co founders Mark Randolph and Read Hastings
(14:56):
went to Dallas, Texas to pitch the goliath Blockbuster on
purchasing the company for fifty million dollars. The CEO of
the retail movie rental giant practically laughed them out of
their office. The two went home dejected and desperate. They
had no idea how they were going to save the company.
But despite their predicament, Netflix was onto something. When they
(15:19):
pitched Blockbuster in two thousand, they were on track to
pull in roughly five million dollars a year. By two
thousand and two, revenue grew to a whopping twenty one
million in just one quarter. And what caused this enormous
upswing answer DVD players. In two thousand and one, an
astonishing one hundred and twenty seven million DVD players were sold.
(15:43):
Consumer spending was searching for this new technology, and Netflix
was there to reap the rewards. Even as other e
commerce sites were dying. Wall Street took notice of netflix
stunning growth.
Speaker 13 (15:56):
Most of the people who are involved in the IPO
market now still have some very deep battle scars as
it relates to anything dot com.
Speaker 10 (16:04):
Netflix has found success in its business by renting DVDs
to a growing group of subscribers.
Speaker 2 (16:11):
In mid two thousand and two, the company decided it
was time to reapproach Wall Street.
Speaker 11 (16:17):
Netflix made a spectacular debut on the Nasdaq stock market
Today the online DVD rental company priced five point five
million shares at fifteen bucks a pop.
Speaker 10 (16:26):
Netflix incorporated with public at an eighty two point five
million dollar valuation.
Speaker 2 (16:31):
By the end of the initial public offering, Read Hastings
was firmly in charge of Netflix and had become the
public face of the company.
Speaker 4 (16:38):
An IPO is like high school graduation. It's big at
the time, but with hindsight, it's only really a beginning
of something else.
Speaker 2 (16:51):
Mark Randolph left the company the following year. Read Hastings
took hold of the reins from there, and people were
gunning for him because the Dallas big wigs that lapped
him out of their office just three years earlier now
saw Netflix as a real threat. In two thousand and four,
Blockbuster launched a Netflix copycat site.
Speaker 3 (17:10):
Well with Blockbuster Total Access, you can do something you
can't do with Netflix. Exchange your movies for new ones
right in the store, no extra charge, just in case
you need them. Movies for the mail, plus movies for
the store, one low price. That's Blockbuster Total Access. Get
a free trial at your Blockbuster store or Blockbuster dot com.
Speaker 2 (17:27):
It was game on. But in the eyes of Reed Hastings,
it was too little, too late.
Speaker 4 (17:35):
Blockbuster didn't start competing against us until two thousand and four,
so five years after launch. Okay, so that was too.
Speaker 12 (17:43):
Long to wait.
Speaker 4 (17:44):
However, once you wait that long, it may well be
better not to enter because by that time, you know,
we had a couple hundred million in revenue, We had
a big Mallanchiet. We were going to be really hard
to profitably dislodge.
Speaker 2 (17:57):
Netflix had a serious head start. For over five years,
their recommendation, which an algorithm, was getting better and better.
It was giving them a competitive edge. I few understood
that advantage, but their success started making people curious. Journalists
began to wonder how they were doing it.
Speaker 7 (18:16):
I was the beat reporter at Reuter's in Los Angeles,
and I covered entertainment companies, and I covered the entire
entertainment vertical, so that meant studios to distribution companies to
movie theaters.
Speaker 2 (18:28):
That's Gina Keating, author of Netflixed, The epic Battle for
America's eyeballs. In two thousand and two, Gina began noticing
the small DVD rental outfit.
Speaker 7 (18:38):
And then I had this little company, Netflix, which had
about five hundred thousand subscribers, and they were mainly on
the coasts, and I couldn't really figure out how it
worked because back in those days, they shipped DVDs.
Speaker 6 (18:53):
In the mail.
Speaker 7 (18:54):
They had a pretty rudimentary website, and I couldn't figure
out why we were covering this company because there were
other alternatives that the studios were trying to do, like
download boxes and things like that. So that's how I
found out about them. And in the next eight years,
at every juncture where they had to make a decision
(19:17):
about where the entertainment industry was going, they were right
and the studios were wrong. And it was just remarkable
to me. And if you remember, you know, we had
a recession, a huge recession at that time, and every
time that Netflix was faced with some kind of an
economic downturn, they seemed to get stronger because they correctly
(19:39):
predicted that people were going to want to consume entertainment
in their homes and that the trend towards entertainment was
getting more individual, so that I wanted to explore how
they did that.
Speaker 2 (19:51):
She came to the conclusion that in large part, it
was their user interface that fed their algorithm.
Speaker 7 (19:57):
They made sure that that user interface was loaded with
ways to watch the people who went on that site.
Speaker 2 (20:08):
By two thousand and five, a year after Blockbuster launched
their Netflix copycat service, Netflix was raking in six hundred
and eighty eight million dollars a year in revenue, and
it was largely because their six year old algorithm was
predicting a demand in forgotten films.
Speaker 7 (20:26):
Netflix had people on that site browsing and pretty much
telling them about their lives, and they were really able
to catch a lot of trends that the studios didn't
see coming.
Speaker 2 (20:38):
By two thousand and six, the media started catching on
to this competitive advantage.
Speaker 14 (20:43):
But what are these stars?
Speaker 4 (20:44):
Those are those stars are the key to the system. Okay,
they show what other people that have my movie taste
think of this movie.
Speaker 14 (20:53):
That's part of their recommendation system. So let's say you
rent on the Waterfront. I could have been a cot
and give it five stars. Netflix software searches for what
other on the waterfront renters have rated highly. Figures out
from other movies you've rated, whether it's Brando, you like
(21:13):
films in black and white or mob flicks, and voila.
Speaker 5 (21:18):
I'm gonna make them an offer again.
Speaker 14 (21:19):
With you they offer you other movies. Hastings thinks the
recommendations have transformed the movie business by giving new life
to thousands of forgotten or overlooked films.
Speaker 3 (21:30):
We need to help one another.
Speaker 14 (21:32):
Like Hotel Rowande.
Speaker 12 (21:34):
I cannot leave these people today.
Speaker 4 (21:35):
It did very little theatrical business, but our members like
it a lot. They rated it very highly, so our
website promotes it to more and more people. And now
Hotel Rwanda is the number five all time rented film
at Netflix, which is above Wedding Crashers, which is a
great mainstream film.
Speaker 1 (21:57):
And as Netflix exploited its algorithm, others were looking to
get in on the action.
Speaker 15 (22:02):
We start last October with five.
Speaker 1 (22:04):
Shows, that's Steve Jobs. Out of two thousand and six
Apple Conference, only.
Speaker 15 (22:09):
Five shows, and we've been adding them since. We now
have over two hundred and twenty TV shows. Customers have
purchased and downloaded over forty five million TV shows. There
is one more thing, and that is movies. We are
(22:29):
making available over seventy five films online starting today. We're
going to be adding more every week and every month.
Movies are going to be available on the iTunes store
the same day as they are released on DVD.
Speaker 1 (22:44):
Netflix was facing the juggernaut of all juggernauts, but Apple's
entry didn't seem to worry Netflix CEO Read Hastings.
Speaker 14 (22:52):
Netflix itself will be a movie downloader, says Hastings, who
claims he'll be able to beat the big dot coms
like Apple that have announced they're getting into the game.
Too successful than Apple with the iPod and all of that.
Speaker 4 (23:06):
More successful than Apple, Yahoo, Amazon, absolutely, because those companies
they focus on a lot of things, you know, books
and music, and we think that he can be the
winning firm by focusing on movies.
Speaker 1 (23:18):
But the future was anything but certain. Netflix was a
DVD rental by mail service. Apple was on its way
to revolutionizing the way movies and TV shows could be
purchased and rented. It was anyone's game to win, but
Netflix was about to choose a subtly but profoundly different
path forward. Netflix saw subscription based streaming as the future.
(23:42):
In early two thousand and seven, Netflix launched this new service. Initially,
they didn't have much in their library, only around one
thousand titles out of the more than seventy thousand that
were available on DVD, and that's because Hollywood studios didn't
want to play ball. Since the birth of file sharing
sites like Napster, Hollywood had been resisting the digital era
(24:04):
again Gina keating, they were terrified.
Speaker 7 (24:06):
You know, they didn't like the idea of digital media
because it was so easily copyable.
Speaker 1 (24:11):
So the Hollywood studios were only willing to license bottom
shelf titles to Netflix, titles they didn't value as much
as their big tent pole films and hit TV shows.
But Netflix took what they could get, and they used
their algorithm to see a gap in the market that
Hollywood studios couldn't see, like.
Speaker 7 (24:29):
The desire for old television. They couldn't get great content
because nobody wanted to sell it to them, and there
wasn't even a digital write at first, so they actually
had to go in and say, okay, give us the
worst stuff that you have and we'll take it. But
they were able to get a lot of niche content,
(24:51):
which was international movies, anime, Bollywood, you know, stuff that
people in Middle America, you know, maybe didn't even know about, right,
but a lot of it was great content. And so
they had to design an algorithm that would put people
out of their comfort zone, you know what I mean, Like,
if you liked steel magnolias, maybe you'll like the steel
(25:13):
magnolias of Italy. So you're broadening your horizon. It's really
kind of great because you know, you never knew that
you might like this. But the algorithm was was that
good that people had a lot of satisfaction being turned
outward away from the things that they would normally pick
that were in their comfort zone. And Netflix had to
(25:34):
do this because they had to make these kind of
tenuous connections to get people to come back.
Speaker 1 (25:40):
And Netflix found other unexpected behavior.
Speaker 7 (25:43):
Then they realized that, oh my gosh, everybody wants to
watch the entire catalog of Billiams Island. Who would have
thought that. Who would have thought they'd sit down for
a whole weekend and watch catalog of an old television show.
But they figured that out and they kept it secret,
and then they started buying stuff.
Speaker 1 (26:01):
They were able to keep it secret for a while,
gobbling up forgotten TV shows and films at bargain prices.
But once they'd begun pioneering subscription streaming content, Netflix entered
a new kind of deal making arena. You see, when
they were just a DVD rental business, their model was simple,
read Hastings.
Speaker 4 (26:19):
Everybody's got every DVD. Blockbuster US had the same content
offering because it's non exclusive licensing to get DVDs.
Speaker 1 (26:26):
Generally speaking, Netflix was just buying movie DVDs and renting
them out. But now that they were streaming, Netflix was
more beholden to Hollywood studios because the studios could withhold
the streaming licenses. The film studios held all the cards
because Netflix wasn't making the content.
Speaker 7 (26:44):
Gina Keaty, but they didn't have any experts in Los
Angeles and New York. Everybody was in Silicon Valley. So
you had this idea of how do we gather the
biggest audience that we possibly can and sell to them?
And they had the gather it and the algorithm down,
but they couldn't make content, so they really needed Hollywood.
Speaker 1 (27:05):
But Hollywood didn't need Netflix, that is, until two thousand
and eight.
Speaker 16 (27:11):
The Dow tumbled more than five hundred points after two
pillars of the Street tumbled over the weekend. Lehman Brothers,
a one hundred and fifty eight year old firm, filed
for bankruptcy.
Speaker 2 (27:21):
As a two thousand and eight financial crisis hit, Americans
began to tighten their wallet. The nighttime ritual of dinner
in a movie shifted to eating takeout in front of
your home. Entertainment system and film studios were feeling the.
Speaker 7 (27:35):
Pinch in two thousand and eight, two thousand and nine,
twenty ten. All of them are publicly traded right so,
and they're all considered value stocks. So they had to
make their numbers. And the way that they were trying
to make their numbers when people couldn't go to the
theme parks and they couldn't buy stuff was to sell rights,
(27:57):
to sell off rights to their content. So they were
selling off their rights to Netflix to try to make
their earnings numbers so that their stock wouldn't crash.
Speaker 2 (28:07):
And it was no longer just old second shelf content.
Speaker 7 (28:10):
They sold off a lot of really good stuff to
Netflix catalog to help Netflix.
Speaker 2 (28:15):
Grow films like Spider Man three and parts of the
Pirates of the Caribbean franchise began streaming on Netflix.
Speaker 7 (28:21):
During the downturn, when people had no money and they
wanted to have Netflix instead of going to the movies.
Netflix was just raking in this massive amount of content
because they were willing to pay for it.
Speaker 2 (28:32):
Netflix's wallet was fat In two thousand and six, the
year prior to launching its streaming service, Netflix had a
reported six point one five million subscribers. By the end
of twenty ten, that number nearly tripled to eighteen point
two six million subscribers, so the company had the cash
to go on a buying spree. They struck up a
(28:55):
deal with Stars, gaining the digital rights to about one
thousand movies. They inked deals with Warner Brothers and the
Walt Disney Company. Hollywood industry insiders began to see a
problem brewing.
Speaker 9 (29:07):
It's about the content.
Speaker 2 (29:09):
That's the former CEO of the Walt Disney Company, Michael Eisner,
talking to Read Hastings at the twenty ten Churchill Club Conference.
Eisner saw a growing problem for Netflix. The Hollywood veteran
viewed content is king. Whoever created original movies and TV
shows had the advantage.
Speaker 9 (29:26):
But in the streaming world, you have to have the
rights so to compete with cable pay television, subscription pay television.
Somebody in the streaming world is going to step up
and get those rights, and then eventually those rights are
going to be less important and the distribution company that
is in that business will start making its own original product, sopranos, whatever,
(29:49):
because library footage is only going to get you so far,
in my opinion, so you're going to have to have
current films, current television shows, or make your own. Because
they're having trouble now studios selling the way they used
to sell their films to a because HBO discovered that
original product actually is more exciting to their customers than
(30:10):
non effusive redreads.
Speaker 2 (30:12):
Read Hastings probe the Hollywood veteran on this topic, and.
Speaker 4 (30:15):
Would your advice be that we're better paying a lot
for the movies against those firms or to invest in
scripted original content like HBO did.
Speaker 9 (30:25):
Depends who you are. If you're Rubert Murdoch and you're
willing to bet the company as he has, often you
go in to whichever company is on their knees and
you make them offer they can't turn down, because that
will be cheaper for you in the short term than
trying to create your own product in enough volume to
(30:48):
make a difference. Or you could shortcut that whole thing
and say, I am going to make a continuing flow
of original content, not movies, not Avatar, but Sopranos, Sex
and the City, mad Men, whatever it is. But I'm
going to tell my customers if they want original product,
(31:10):
they get it here first. But if you don't do
one of the two of those things, somebody else will. Okay,
So what's your strategy.
Speaker 4 (31:19):
Our preferred strategy is to carry those companies product. So
we distribute Stars today, we distribute a number of showtime shows,
but not current season. But our view is we should
write them large checks and carry the content. However, at
the end of the day, they may decide that they're
not willing to do that, and so it's not clear
(31:40):
that what the success strategy that will be either. So
our primary strategy, like we do with Stars, is to
carry the content and then write them big checks.
Speaker 2 (31:49):
Michael Eisner was intrigued by read Hasting's comment and felt
the path forward for Netflix was clear.
Speaker 9 (31:58):
Now you're convincing me that the solution is original, semi
or exclusive product only you have because if I can
get everything you described everywhere, other than you being faster
and quicker technologically, what do you have to offer to
me because some other guy in another company figures out
a better way to do You've created a recommendation tool,
(32:21):
so you've built a better mouse trap. But what happens
when the guy next door takes advantage of the fact
that you're all on vacation it's unlimited vacation, and gets
the same or better mouse trap.
Speaker 17 (32:35):
Is there not a point in time that you must
consider originality and exclusivity or does that never come in
this world of infinite opportunity.
Speaker 4 (32:49):
It's something we think about a lot.
Speaker 2 (32:51):
It was clear that Netflix was at a crossroads, and
its CEO wasn't sure which direction to go. Netflix was
either going to be solely a distributor of other people's films,
or it would have to start creating its own original
content as well. The path forward wasn't obvious, but the
company was about to receive some signs that would help
(33:11):
it make a decision. Do you want to hear red
pilled America stories ad free then become a backstage subscriber.
Just log onto Redpilldamerica dot com and click join in
the topmenu. Join today and help us save America one
story at a time.
Speaker 1 (33:30):
Welcome back to red Pilled America. So by twenty ten,
Netflix had reached a crossroads. Should the company continue to
be just a distributor of other people's TV shows and
movies or should it take the plunge into creating its
own original content. Both were pricey endeavors. Staying the course
(33:51):
as a distributor, Netflix was going to have to pay
big bucks for films that studios could cut them off
from at any time. Or Netflix could go another route.
It could begin making their own original content, but to
do that would cost a pretty penny as well. In
order to make Netflix at all tantalizing to subscribers, they
(34:11):
need to make a lot of original content. And then
there was the very difficult decision of what they should make.
And this is where we get to the core of
how Netflix beat Hollywood. You see, Netflix had been building
something that no studio possessed by creating and fine tuning
their recommendation algorithm for almost fifteen years. Netflix understood the
(34:34):
wants and desires of their subscribers in a way the
studios could only dream of knowing, so Netflix had an
advantage on selecting what original content to produce. If Netflix's
path forward wasn't already clear, a series of reports would
make the decision obvious.
Speaker 8 (34:51):
Video rental chain Blockbuster has filed for Chapter eleven bankruptcy protection.
Speaker 1 (34:56):
In September twenty ten, Netflix finely defeated Blockbuster.
Speaker 8 (35:00):
Blockbuster has been synonymous with the whole video market, but
it's been losing money and market share for years. Competition
from the likes of Netflix wait on the retailer dependent
on its brick and mortar infrastructure.
Speaker 1 (35:13):
Netflix won the DVD rental war, but their original service
as a distributor of other people's content was about to
become a risky business.
Speaker 18 (35:22):
You can't google Netflix at the moment without seeing the
naysays and doom says telling me that the loss of
the Stars contract on content is going to be your
Achilles hil and you may as well switch the lights off.
Speaker 1 (35:38):
In September twenty eleven, Stars ended their deal with Netflix.
The streaming service was going to lose an enormous amount
of content. Reed Hastings attempted to downplay the development.
Speaker 4 (35:49):
The Stars deals only in the United States, and it's
less than ten percent of our content, so you know
it is something, but it's not a huge deal, and
where we're actively working to replace that content by March
when the Star's content goes off.
Speaker 1 (36:05):
It was clear even to layman in the media that
Netflix was in trouble if they had to continue to
rely purely on Hollywood for content.
Speaker 18 (36:13):
Who has the whip hand in all of this. Is
it the content providers who have the material that you
so badly want and demand, or is it yourselves as
the distributors. I can't decide who actually is in the
driving seat here.
Speaker 4 (36:30):
Well, I'd say the content owners are really in the
driving seat. We put forth offers to license that content
for millions of dollars per year, and then it's up
to them if they have a better offer or want
to accept our offer. So mostly it's us making offers
to them.
Speaker 1 (36:51):
Read Hastings could no doubt see his back was against
the wall. Hollywood could cut Netflix off in a moment's notice.
It was time to consider taking the plunge again. Read Hastings.
Speaker 4 (37:02):
Cable network from all time have started on other people's
content and then grown into doing their own originals, so
we knew of the general idea for quite a while,
and we had actually tried to get into original content
back in two thousand and five when we were on
DVD only and buying films at Sundance Maggie Jillenhall's Sherry
(37:22):
Baby and we published on We were a mini studio,
and it didn't work out because we were.
Speaker 1 (37:27):
Subscale, meaning they weren't big enough yet to make independent
film projects profitable. But by twenty eleven the company had
grown astronomically. At the same time that Hollywood flirted with
holding its content, Netflix was seriously considering taking the plunge
into original content, but it wasn't until an off the
hand comment in a meeting. It started the company down
(37:49):
the treacherous path.
Speaker 19 (37:50):
So we were meeting at Netflix with the company called MRC,
who mostly make independent films, large scale independent films, and
Celton Studios.
Speaker 2 (37:59):
That's Ted Sarandos. In twenty eleven, Sirandos was a head
of Netflix Content.
Speaker 19 (38:04):
And at the end of the meeting they said, by
the way, we are taking out our first TV show,
and we bought the rights to this British TV show
called House of Cards, which I knew very well I
love the show from watching it on DVD and David
Fincher's directing the pilot and exec producing.
Speaker 2 (38:20):
Actors Kevin Spacey and Robin Wright were signed on to star,
and three great scripts were apparently already written by an
OSCAR nominated screenwriter.
Speaker 19 (38:29):
We're not in the business original programming at all, and
I said, we'd love to look at it, and we
started talking about it, and I said, you know, if
what we are all building here is true, and that
all TV networks and channels would become dot coms, that
ABC eventually would become an app. And we've talked about
this very confidently for many years. If all that's true,
(38:51):
then what are the chances that any of these networks
are going to sell us their programming. They're going to
need it for themselves. So if that's the case, then
we better get good at doing this ourselves.
Speaker 2 (38:58):
But this House of Cards project was a hot commodity
in Hollywood.
Speaker 19 (39:02):
Everybody wanted it. I know HBO wanted I know Fax
wanted it, and there was no reason to sell it
to Netflix. We've never launched an original anything, and the
idea that we were going to transform the business on it,
that we would know how to market it, do we
know how to launch it? Those are all not a given.
Speaker 2 (39:18):
So Ted Sarandos immediately started digging into the Netflix data.
He looked into how many Netflix subscribers watched movies featuring
Kevin Spacey, whether those subscribers watched other movies he was in,
and what types of roles drew him the largest audience
on their platform. The data that Netflix had been gathering
from its subscribers showed that viewers would likely watch a
(39:39):
show with Spacey in a serious role, and those were
the same subscribers that also liked political dramas. The algorithm
was telling Ted Sarandos that House of Cards could be
a hit, so.
Speaker 19 (39:51):
He said, look, let's go for this. And at the
time they wanted, they were inviting everyone to come to
Sony where David was working on a film, and they
were going to do the pitch to everybody at Sony
on Saturday, and I said, we don't I want to
come on Saturday. I'm telling you yes right now, and
I want to come on Monday and meet David and
tell him why he should do it with us.
Speaker 2 (40:10):
Sarandos wanted to make director David Fincher an offer he
couldn't refuse.
Speaker 19 (40:15):
And I walked in the room and I said, there's
a thousand reasons not to do this in Netflix. I
want to give you one reason to say yes, which
is I'm going to give you two seasons with no
piot and you have absolute creative freedom and the only
thing we ask is that you have to put your
name on it.
Speaker 2 (40:30):
Again, Read Hastings.
Speaker 4 (40:32):
Ted Sarandos, my partner in Netflix who runs content, got
very excited about House of Cards, and at that time
it was one hundred million dollars.
Speaker 2 (40:41):
David Fincher took the deal.
Speaker 4 (40:43):
It was a fantastic investment, and it was in competition
with HBO and that was really the breakthrough that he
picked right up front.
Speaker 2 (40:52):
Again, Gina Keaty back.
Speaker 7 (40:53):
In twenty twelve, when they were trying to make House
of Cards, it seems sort of embarrassing, you know that
Netflix would be your studio. That they really had to
overcome that part of it because people weren't sure, how
are these people going to treat me? But it was
a great deal at first, and again they did a
great job by saying, you know, do whatever you want.
(41:14):
Here's one hundred million dollars. All we want is for
you to deliver what you say you're going to deliver.
Because they'd already done all the research on the front end.
They had said, you know, we have this nexus with
House of Cards people and Kevin Spacey people and people
you know who love British thrillers and stuff like that.
So they had already a masked an audience, so they
(41:34):
could kind of give the creatives their way, their their
head and they could do what they wanted. And then
they developed this fabulous reputation for paying a lot of
money and then just stepping out of the picture.
Speaker 2 (41:45):
And the approach was a smashing success, and the Golden
Globe Ghost too, Kevin Spacey, House of Cards.
Speaker 6 (41:54):
The WGA Award goes to the writers of House of Cards.
Speaker 2 (42:00):
As the years progressed, Netflix appeared to have the Midas touch.
The Emmy for Lead Actress and a Drama Series goes
to Clarifoy The.
Speaker 14 (42:09):
Crown Oranges, Black Stranger Things.
Speaker 5 (42:13):
I want to thank Netflix.
Speaker 2 (42:15):
Thank you to Netflix.
Speaker 7 (42:16):
We would like to say everyone at Netflix, at Serrandas.
Speaker 8 (42:19):
We'd like to thank Netflix.
Speaker 2 (42:21):
Netflix would create one hit show after another, The Crown
Oranges and New Black, Stranger Things Narcos again, read Hastings.
Speaker 4 (42:33):
Well, we've done this, invest a lot on the algorithms
so that we feature the right content to the right people,
and try to make it fun and easy to explore.
Speaker 2 (42:41):
They were also changing the nature of the business. Before Netflix,
screenwriters and producers were relied upon to help pick the
types of shows to produce, the category and themes which
actors were in demand, but their expertise was largely becoming
obsolete for a Netflix production. Their algorithm helped them put
those pieces together.
Speaker 4 (43:02):
Everyone would Rache Hill's list five stars, and then they'd
write eight Adam Sandler, you know, the do over three stars, okay,
But in fact, when you looked at what they watched,
it was almost always Adam Sandler.
Speaker 2 (43:13):
By looking at the data captured by their algorithm, Netflix
could see that their subscribers watched five hundred million hours
of Adam Sandler movies. So they cut a deal with
the actor four movies for two hundred and fifty million dollars.
Before that deal was even finished, Netflix extended the deal
for another four movies at the same price tag, and
(43:35):
that strategy was paying off.
Speaker 11 (43:37):
Four point three million.
Speaker 13 (43:38):
That's a number of new subscribers Netflix added last quarter,
beating estimates and setting Netflix shares soaring today.
Speaker 2 (43:45):
By twenty eighteen, Netflix's production budget ballooned again. Read Hastings.
Speaker 4 (43:51):
It's about eight billion dollars around the world, and it's
not enough. There are so many great shows on other networks,
and so we have a long way to go.
Speaker 1 (44:02):
In just twenty years, Netflix went from a floundering DVD
rental by mail business to surpassing the Walt Disney Company's
production budget.
Speaker 20 (44:11):
A few years ago, it seemed absolutely preposterous that this
former DVD mail rental company would actually start creating content,
and yet Netflix did a terrific job with it. Their
hit ratio is astaging. It's the envy of any Hollywood studio.
Speaker 1 (44:33):
It was an astonishing, almost unbelievable feat. By twenty twenty,
Netflix had tallied over two hundred million subscribers, all by
using their algorithm to mine their audience's likes and desires,
but their content began to take a noticeably woke detour.
From their first endeavor into original content. Netflix appeared to
(44:56):
make an attempt at being even handed, but as the
years passed, the company began to display a liberal.
Speaker 6 (45:02):
Bias Netflix is taking a stand against Georgia's so called
Heartbeat Lab.
Speaker 1 (45:06):
They signed a production deal with Barack and Michelle Obama,
and Netflix began to air shows that no one appeared
to be asking for.
Speaker 14 (45:14):
Dear white people.
Speaker 7 (45:15):
I get that being reduced to a race based generalization
is a new and devastating experience for some of you.
Speaker 11 (45:23):
This morning.
Speaker 2 (45:24):
Netflix is undergrowing fire after its release of the award
winning French film Cuties.
Speaker 12 (45:29):
It is beyond repulsive. It is actual soft core child porn.
Speaker 16 (45:33):
Elon Musk he said, the woke mind virus is making
Netflix unwatchable.
Speaker 1 (45:38):
What happened? How did Netflix go from their algorithm having
the Mitas touch to instead touching a cultural nerve? The
answer is surprising. Netflix's algorithm appeared to come up against
an even more powerful algorithm crafted by a social architect
looking to manipulate American culture.
Speaker 2 (45:58):
Coming up on red pilled America.
Speaker 13 (46:00):
Well, Black Rock has been the leader and in some
way the ringleader of all of Wall Street in pushing
something called ESG investing. But really, what ESG is is
an excuse for Wall Street to push politics into corporate America.
They can push in their own environmental policies. They can
push in social and governance policies that could never be
achieved at the ballot box.
Speaker 2 (46:20):
Red Pilled America is an iHeartRadio original podcast. It's produced
by me Adrianna Quortes and Patrick Carrelci for Inform Ventures.
Now you can get access to our entire back catalog
of episodes and are behind the scenes podcast by becoming
a backstage subscriber. To subscribe, just visit Redpilled America dot
com and click join in the top menu. Thanks for listening.
Hosts And Creators
Adryana Cortez
Patrick Courrielche
Popular Podcasts
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.