Netflix CEO Reed Hastings Part 2 The Road To The Top Mad Money CNBC

We're back with Reed Hastings, the visionary CEO of Netflix, just came back from Italy, my honeymoon. And I gotta tell you, the wife, I gave her a promise. I said I would watch Princess Bride. We go on Netflix, we're in Florence, everything's going right in this honeymoon. It says Netflix isn't yet in Italy. I pay four bucks to watch it on Amazon. That's already half of what I pay for a month. How come, and I know it's going to Italy, how come the rollout takes that long? Q4 next quarter, you're going to get Netflix in Italy, but it's because we have to pay for all the content. We have to win the bidding for the content, and that's why we're going country by country. All right, that makes sense. I want to talk about a high Sierra moment I just had. You may not know Sierra. She works for you. I'm going to see my daughter in Tulane this weekend. She always has a new documentary or movie about the fall of Berlin in World War II. I went to Sierra this morning, I called her. There was 42 seconds before she picked up. She knew exactly how to put things in my queue. Where do you find these people? You know, there's so much that people come for a company about entertainment, and so we've got just the greatest employees around the world that are attracted to this idea of everyone loves Netflix, great content, enjoyment. You still have people. I've been having some problems with Twitter. I'd really like to get someone on the phone. A lot of the companies don't want to put people on the phone because it hurts their numbers, okay? There are humans, and humans cost money. It sounds like you're willing to pay your humans more than anybody else because you Yeah, our basic philosophy is to have the right people and to pay them really well. And through that, we've got tremendous loyalty and low turnover and high commitment to the customer. Well, let's talk about values. High performance, freedom, responsibility, context, not control. These are obviously not mal. It seems like that if you want to do well at Netflix, you have to subscribe to the values. And if you don't, you're out. Yeah, and the reason that we publish our culture deck is so people can figure out before they come to Netflix, is this the right fit for them? Well, what's intriguing for me, because you're a competitive guy, is I looked at everything that you sent out in the last five years, and I would like to think that you've told me enough to replicate Netflix, but no one can. Why is that? You know, it's probably a little like Starbucks. It doesn't seem that hard to make coffee, and yet one coffee chain is amazing around the world. So there's a lot of heart and passion that goes in it that doesn't come across in the words. It's the execution. It's the people at Netflix. Well, the people who watch Netflix seem to be an important group because, you know what, they've been able to prove that binging and buffering don't get together. Why are you able to win over the politicians and defeat what would be a cable initiative that says he's got to pay his own way? He's using 30 percent of our bandwidth. Why isn't he paying more? And why isn't a Netflix customer paying more? You know, we're on the side of the Internet, and the Internet hasn't lost a lot of battles in politics. And so when you have that great tailwind, people love the Internet, the thing that gives them more options, and they certainly don't like buffering. Well, typically what happens when you're in this situation is the people who are on the other side get together. They gang up. Is there more media consolidation coming simply because you're so disruptive and you're going to be market cap, I believe, worth all of it at one point? You know, the taxi cabs haven't been able to hold back Uber. Walmart has not been able to hold back Amazon. So really, it's a sector thing that the Internet just offers such a such power. Well, but when we think about the Internet, we don't think of programming. What made you realize that the customers are not getting what they want? That is antithetical to the idea of you being some programmer somewhere. Or maybe it isn't. Maybe algorithmically, you know what we want, and that's why we are such pro-Netflix. You know, people love to have selection and be able to just click and watch, click and watch. It's just a much more normal interaction than waiting until 6 o'clock or 8 o'clock for a particular show. All right. Well, let's talk about click and watch. China has hurt a lot of companies. We don't like China. If you're big in China, we want to sell your stock. But here you are, Crouching Tiger, Hidden Dragon 2, which, by the way, you're starting in big screen 3-D. Now, how are you going to be able to transfer that? And why are you confident in China when every other company that I know is saying, oh, boy, China, I don't know where it's going? Well, with Netflix, we're not yet in China. So we do have this movie that the great Crouching Tiger, Hidden Dragon 2 that's coming out next spring. It'll be both in movie theaters and on Netflix around the world, not just in China. Now, when I go when I see a program that I like, you know, Crouching Tiger, I know that will work here, too. I don't want to stop watching. I want to watch it all weekend. The numbers for weekend watching are rather extraordinary. How much of people's mind share is Netflix now? You know, it's hard to say. We look at the particular shows that come out and they're huge that weekend. But it might be 10 weekends a year that we have a big new show. So we have 42 weekends more to grow. In Orange is the New Black, just in terms of a weekend, I'm not talking about TimeSlate. I'm not talking about Nielsen. Orange is the New Black won, so to speak, mind share and won binging over NBA. I thought that sports was something we always had to watch. Disney, the day that will live in infamy, August 4th, when they reported and told us that there were a decline in subs. Is it happening right now? We're cutting cord and we're binging. There's a few people that have cut the cord, but it's very, very small still today. But it's a worry about the long term. But what's happening now is in sports networks will go to on demand. You'll be able to watch any game. You'll be able to watch it on any device. And so think of all the current linear networks. They're going to go to on demand also, just like HBO has. My kids don't have TV. They have Netflix. They regard Netflix in the way that I regarded Kleenex and Xerox. This happened very quickly. Why? You know, as the Internet grows, people are adapting all these new scenarios like they probably use Uber. They don't have a car. They use Amazon. Again, you have to think of it as there's this big Internet sector story that's transforming our society, not as fast as we thought in the 90s. But, you know, when you look at the big picture now, it's pretty impressive. We want to know how much you care about winning, including Emmys this weekend. Is that a way? Should I be thinking about Netflix as Emmys per share? No, Emmys is a long term game. We'll do better at it every year. We'll have more shows. But really, the Emmys reflect elite taste. And, you know, that's an exciting sector. But we also want to be super popular and very broad. So it's only part of the picture. Super popular and very broad means getting the best actor from Brazil, getting the best director from Mexico. How do you know these people? How do you know that that's going to play worldwide? Well, Netflix has been operating internationally for many years now. And if you're a great Brazilian talent or great French talent, you want to be on Netflix because it's global. Because Brad Pitt wants to be on it. Amy Poehler wants to be on Netflix. They know when they're doing these things that it's going to be on Netflix. I thought they would want to be in the big screen. Brad Pitt's doing a big movie for us, War Machine. It'll come out next year. That'll be both movie theaters and Netflix. So we're not anti-movie theaters. We just want to provide consumers selection and choice. Is Netflix bigger than Hollywood? No, Netflix is one little part of Hollywood. Well, look, I like it. Let's leave it in a humble way. I think that's true because you're a humble man who's had tremendous success and therefore inspiration to many of us. That's Reed Hastings. He's the co-founder and CEO of Netflix. I hope you enjoy it as much as I did. Stick with Kramer. Booyah! Jim Kramer here for Mad Money. Thanks for watching CNBC on YouTube. Click here to subscribe and get the jump on my exclusives with CEOs. Plus, market news, investing advice, and a whole lot more.