Netflix recently announced that their subscriber base increased by 7.41 million for a total 125 million subscribers worldwide. Their earlier forecast was an increase of 6.5 million. In the U.S., the number grew by 1.96 million, topping their 1.48 million forecast. Along with this growth, the streaming media provider’s stock prices continue to grow. For instance, it now has a 60% growth rate since the start of the year. Much of this growth is because of the management structure and their bold leadership style. This business also operates differently from other media companies.
Structure for Growth
The company started with DVD sales and rental by mail in 1997. However, the following year, it dropped the DVD sales service, focusing on DVD rentals until 2007. It started offering streaming media in the same year. Netflix started expanding internationally in 2010, starting off in Canada. In 2016, it became available worldwide, except in China, Syria, North Korea and Crimea.
The secret to the Netflix success has been attributed to their programming, with over 126 new series and films in 2016. This is the most number of new offerings from a media distributor, TV network or cable content provider.
Uniquely, Netflix has been able to produce this much content due to their structure and strategy for acquiring content.
In most studios or cable companies, only one department handles content. The projects are also usually only signed up for one season, with the discretion to pull out at any time. Netflix has an entire committee, and any of the members can approve or recommend a series or film. Series that are approved are given two seasons. This allows Netflix subscribers to binge-watch.
Programming head Ted Sarandos is at the top of the decision-making committee. People up to two levels under Sarandos have the authority to approve a series or buy the streaming rights to a movie or show. A Netflix culture aptly called “Freedom and Responsibility” encourages faster decisions while also accommodating audience preferences.
Moreover, this also allows Netflix to spend more on programming compared to their competitors. In 2018, they would be spending up to $8 billion for 700 original series, films, documentaries and other programming.
R-Staff and E-Staff
CEO Reed Hastings meets with a group of people called the “R-staff”. They directly report to him and meets monthly. The group includes Netflix veterans like Sarandos and the company’s general counsel, David Hyman.
Under the “R-staff” are the “E-staff”, or executive staff who oversee various teams within the company, each with their own particular focus like platform engineering, regional marketing, and content. With their global reach, the E-staff has reached more than 100. The R and E-staff meet together about 10 ten times a year to discuss strategic initiatives. Furthermore, these discussions include which country to prioritize, and the level of broadband penetration in a particular country.
Additionally, there is another larger group composed of directors, those below vice presidents, who meet quarterly to review the current state of Netflix.
Sarandos works with seven vice presidents on the content team. They discuss shows and movies, including original content and unscripted series. Each of the vice presidents have their own team directly reporting to them.
The hub of Netflix is Sarandos’ content team. He currently has seven VPs reporting to him in areas ranging from original shows, movies and unscripted series to licensing movies and TV shows. Each of these vice presidents also has his own team. Incidentally, the company’s expansion outside of the United States resulted in the expansion of the international content team.