CES 2016: Reed Hastings on the Future of Netflix

By Markets Fool.com

Netflix CEO Reed Hastings has always had enormous ambitions for his company.

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The streaming service took a big step toward achieving them on Jan. 6 when it launched in nearly every country around the world it was not currently serving. Aside from China (and a few countries where American companies are not allowed to operate), Netflix is now available pretty much everywhere -- though much work remains to be done. Although the streaming giant has content in over 20 languages, in some markets, including Turkey, Russia, and Poland, it has launched only in English.

Hastings, who was introduced as the man who invented the term "binge watching," gave a keynote speech at the 2016 Consumer Electronics Show in Las Vegas on the day of the global launch in which he talked about his company's world domination plans. He also shared insights on the changing habits of viewers.

"We are just beginning to break down the barriers so the world's best storytellers can reach audiences all over the world," he said during his opening remarks. "Thepossibilitiesforbuilding connections between cultures and people are endless and important."

Hastings delivered one of the keynote speeches at the Consumer Electronics Show. Source: CES

Growth has come quickly
Hastings pointed out that it was only eight years ago when Netflix was at CES to announce its first partnership, where the service was integrated into a consumer electronics (CE) product (a Blu-ray player). At that point, the company had just started streaming and the integration of the Internet into CE devices had just begun.

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"Since then Netflix has reached almost half of all U.S. households, something that it took the cable industry almost 20 years to achieve," he said.

How we watch has been changed
The CEO said that his company has not only succeeded in gaining market penetration in the U.S. and around the world, it has also fundamentally changed how people consumer television.

"Tune in has been replaced by personal choice," Hastings said. "We live in an on-demand world and there's no going back."

Hastings also noted that Netflix was the first company to put all episodes of a show up at once, a practice that is not universal with streaming services -- Hulu originals are sometimes presented as weekly releases, but Amazon.com Prime series are usually released all at once -- but one that consumers have clearly accepted.

He called it the start of the "binge era" and said that Netflix was also the first company to release content globally at the same time, creating worldwide shared experiences.

The Internet is getting better
Hastings cited internal viewing stats and noted that in the fourth quarter people watched 12 billion hours of Netflix, up from 8.25 billion a year ago. Hastings noted that cheaper, faster Internet across the globe has made this possible.

"While some countries are making more progress than others, they have all figured out that a robust Internet is key to economic prosperity and a better quality of life," he said.

We're at the start of a global revolution
The streaming leader added 130 countries simultaneously on Jan. 6, the day of Hastings' speech. "You are witnessing the birth of a global TV network," he said.

As part of its global launch, Netflix has made its user interface available in 17 languages. It also allows users to view content with any mix of subtitles and voice languages, which can be changed while watching a program. He also said: "We're working with telephone and cable companies to allow consumers around the world to sign up for Netflix with a single click."

The CEO ceded the stage for a few minutes to his content chief, Ted Sarandos, who said that everyone, everywhere should be able to watch shows and films at the same time.

"The technology is there, it's the business model that stands in the way," he said. That, Sarandos explained, is why the company started creating originals. Because it owns the content, it is not bound by territorial rights issues.

Netflix can take risks
Because it has lower marketing costs for individual shows and its original content has an essentially eternal shelf life, Hastings said that his company can succeed with smaller, quirkier programming. The same has certainly been true for Amazon and Hulu, which have added users due to "hit" shows that would almost certainly have been canceled by the big broadcast networks.

"To make a baseball analogy, linear TV only scores with home runs. We score with home runs, too, but we also score with singles, and doubles, and triples," he said.

Because of that, the CEO explained, the company can take risks, which appeals to creators, allowing the company to attract top talent. Amazon and Hulu have also used this approach and in the case of all three, just knowing that a certain amount of episodes will be produced and released frees up talent to create a series rather than just a pilot.

"We can commit to publishing books rather than chapters," he explained. "A creator can work on episode 11 knowing that a viewer has very recently watched episode one through 10."

Hastings added that pilots, ratings, the fall season, and even shows having specific lengths are all trappings of the old TV industry, which Netflix has done away with. He expects the company to do the same in the movie industry.

"We're not anti-theater, we are just pro-movies," the CEO said. "We think giving people what they want in a timely manner at a reasonable price is great for the movie industry because it removes one of the key reasons people turn to piracy."

The risks are paying off
It's very clear that Netflix has changed the television industry. Going forward, the company has plans to expand its film slate, launch a talk show from Chelsea Handler, and continue to grow its documentary slate. The company has forced streaming rivals Hulu and Amazon Prime, and even traditional TV, to change their approach to programming.

For example, while shows still get canceled, lower-performing series have been kept on the air longer, giving them a chance to win an audience. In addition, cable, like the streaming services, has been more willing in recent years to commit to a show for at least a full season and in some cases multiple seasons.

Netflix has put decision-making into the hands of its viewers and that's also something that traditional TV has at least dabbled in copying. A number of new shows this year had episodes released on-demand before their air dates and NBC'sAquariuseven released all its episodes at once to allow for binge viewing.

Going forward, with its massive global expansion just launching, Netflix should be on a path to push these changes across the world. That will likely be a bumpier ride than Hastings expects, but using its now-impressive library of originals to pave the way should make it easier.

The article CES 2016: Reed Hastings on the Future of Netflix originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. He is currently watching one Jessica Jones episode each night.The Motley Fool owns shares of and recommends Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.