Silicon Valley’s Churchill Club held a sold out event last evening. About 400 people attended a packed event to listen to a conversation between Reed Hastings, CEO of Netflix and Michael Eisner, CEO of Tonante that creates original content and incubates startups. Before this Eisner was the former CEO of Walt Disney, who turned around the company and transformed it into a multi-billion dollar generating entertainment powerhouse. (BTW: Tornante funded online video company Veoh filed for bankruptcy last week.)
The very first question that Eisner asked Hastings was about the unlimited leave policy that Netflix supposedly extends to its employees. And that question set the tone for the evening, where Eisner constantly probed, prodded and questioned Hastings about Netflix, its strategy, whether it is a content company and how it plans to work in the changing digital environment (think streaming movies). You could immediately sense the faultlines between the two people through the sub-text of the conversation. It seemed like Eisner was trying to understand the startup and innovative culture of Silicon Valley, and what makes Silicon Valley companies different. It does not seem like Eisner is a big fan of free massages/flex hours and options. But that is what people tend to focus and not on the long, interminable work hours, the broken promises to your family to attend a birthday party or your child’s first show that is so common in Silicon Valley. Those long hours, those broken promises are the unspoken parts of what goes behind the success of Silicon Valley companies. But how do you bottle the essence of Silicon Valley culture and help folks understand the power of ideas and dreams? As an observer to the conversation between Hastings and Eisner you could spot the difference between Northern (Silicon Valley) and Southern (Hollywood) culture and the difference between old and new media world. I don’t think Eisner would be very flattered to be referred to as a member of the old media since his current company creates content for the online world.
I digressed. Back to the conversation between two very different CEOs and their views on how content should be served to the audience.
Hastings talked about the culture at Netflix, which in many ways is a reflection of a unique work culture that exists in the valley. He defined Netflix as “a specialist firm” that has adapted itself to changing business scenarios and went from renting DVDs to streaming content online. Netflix started by renting out DVDs in the 1990s and currently has about 12 million members in the USA.
Eisner was curious to know about Netflix’s strategy for streaming content, and pointed out to Hastings that “unless you get the rights for the first run of the films” for streaming it might be difficult to break into Hollywood. Hastings replied that Netflix’s strategy is to stream and pay big checks to the companies. Hastings believes that the new model for viewing content will be click and view and that is what they are focused on working. He was also quick to point out that their DVD mailing business continues to grow simultaneously.
Do you change strategy as you grow asked Eisner? Hastings responded that innovation is key to their strategy and pointed out that companies in Silicon Valley fail when they stop innovating (he offered Sun Microsystems as an example). Which is when Eisner shared his experience of Disney’s acquisition of InfoSeek, and how that acquisition did not work out for them. “InfoSeek was McKinsey’s fault,” said Eisner, who clearly stated that he is not a big believer in acquiring companies.
Throughout the conversation at various points Eisner kept going back to how Netflix was going to acquire original content besides Hollywood movies. At one point he told Hastings that Netflix has made a better mousetrap and then quickly tagged on a question about content. At the end of the conversation Eisner made this pronouncement: “My take is you are way too close to content than you are admitting.” And added that Netflix is right now in the licensing business but “you are totally in the environment of content.”
Listening to the exchange between Eisner and Hastings it was interesting to get a feel for the kind of conversations that might be taking placed behind the closed doors of many, many companies in Hollywood, Netflix, HBO, NBC, Hulu, Amazon and others as they struggle to figure out what is the right model/strategy for serving content online. These are early days and nobody has the right answer on how to tap into this growing opportunity. Eisner was right in emphasizing in creating quality content, and Hastings was right in saying Netflix will pay big checks to stream content. But do either of them have the answer to this question: What does the audience really want?
What I tried to say in my post was brilliantly captured in less than 140 characters by @Wildgw #churchill club event…reed hastings and michael eisner was like two 747s passing in the sky… many great points… different plans……