Reed Hastings on Innovation

The project that became Netflix's first flagship original began at an independent studio. Media Rights Capital, founded by Mordecai Wiczyk and Asif Satchu, purchased the rights to House of Cards, the political story based on Michael Dobbs's 1989 novel and the 1990 BBC series starring Ian Richardson, with the intention of creating an American series. While wrapping production on his 2008 film The Curious Case of Benjamin Button, director David Fincher was shown the BBC series by his agent and became interested in television's long-form possibilities, reasoning that film did not allow the complex characterizations television did. Beau Willimon, who had served as an aide to Chuck Schumer, Howard Dean, and Hillary Clinton, was hired as writer and completed the pilot script in early 2011, seeing the chance to build an entirely new series from the original and deepen its story. The pieces, a prestige director, a political insider writer, and a rights-holder without a network, were assembled just as Netflix began looking for a show that would announce its ambitions.

Media Rights Capital approached HBO, Showtime, and AMC about House of Cards, but Netflix, hoping to launch its own original programming, outbid the cable networks. The decision inside Netflix was famously data-driven: chief content officer Ted Sarandos looked at the streaming habits of Netflix users and concluded there was an audience for David Fincher and Kevin Spacey, calling the alignment of material and talent an almost perfect storm. The project was announced in March 2011 with Spacey attached to star and executive produce and Fincher directing the first two episodes. Netflix ordered twenty-six episodes to air over two seasons, an extraordinary commitment for an untested platform. Spacey later noted the contrast at the Edinburgh International Television Festival: every other interested network wanted a pilot first, whereas Netflix, relying solely on its statistics, ordered the series directly, and the commitment to two full seasons gave the writers continuity, a clear sense of where the story was going from the start.

Hastings had told the producer Mynette Louie in the late 1990s that streaming was always the goal, with DVDs merely a way to build the customer base for the eventual service. By the mid-2000s, data speeds and bandwidth costs had improved enough for customers to download movies from the internet. The first concept was a Netflix box that would fetch movies overnight so they were ready to watch the next morning; by 2005 the company had acquired film rights and designed both the device and the service. Then the plan changed. Once it became clear that a streaming service like YouTube could win huge audiences even without high-definition content, the hardware concept was scrapped and replaced with a pure streaming service. The decision is one of the quiet pivots that made Netflix what it became: rather than defend a proprietary box business, Hastings chose to be everywhere the internet already was, a strategy that would later make Netflix a layer on every connected screen rather than a gadget maker.

Netflix released the first thirteen-episode season of House of Cards on February 1, 2013, marketed as the first Netflix Original. It was the first television series produced by a studio for Netflix, and among the first series ever released in a binge format, with every episode available simultaneously. The show, starring Spacey as the scheming congressman Frank Underwood and Robin Wright as his equally ambitious wife Claire, received highly positive reviews and thirty-three Primetime Emmy Award nominations, including Outstanding Drama Series and lead acting nominations for Spacey and Wright, becoming the first original online-only streaming series to receive major Emmy nominations. Wright won the Golden Globe for best actress in a television drama in 2014 and Spacey won best actor in 2015. The arc ended in rupture: in 2017, after allegations of sexual misconduct against Spacey, Netflix cut ties with him, and the sixth and final season was produced and released in 2018 without the star.

The transition years between 2007 and 2008 supplied Netflix's foundational infrastructure stories. In February 2007 the company delivered its billionth DVD, a copy of Babel to a customer in Texas. In April 2007 it recruited ReplayTV founder Anthony Wood to build a Netflix Player that would bring streaming to televisions; Hastings eventually shut the project down to encourage other hardware manufacturers to build in Netflix support, and the effort was spun off as the digital media player company Roku. In January 2008 all rental-disc subscribers became entitled to unlimited streaming at no additional cost, a response to the introduction of Hulu and Apple's new video-rental services. In August 2008 the Netflix database was corrupted and the company could not ship DVDs for three days, leading it to move all its data to the Amazon Web Services cloud, a migration that became a textbook case study in cloud architecture and incidentally tied Netflix's fate to the infrastructure of its eventual competitor's parent.

Netflix had long closely analyzed its customers' preferences, and Watch Now gave the company real-time data on behavior, such as which scenes customers replayed or skipped and when they stopped watching. In March 2011 it made a straight-to-series order from Media Rights Capital for the Spacey-led political drama House of Cards, outbidding the American cable networks; executives said customers' love of films by Spacey and the show's director David Fincher had driven the acquisition. The binge-watching tendency of its customers caused Netflix to release all thirteen episodes of the first season at the same time, a complete departure from broadcast scheduling. In November 2011 it added two more significant productions: Orange Is the New Black, based on Piper Kerman's memoir, and a fresh season of Arrested Development, the Fox sitcom that had been canceled. House of Cards was released on February 1, 2013, marketed as the first Netflix Original production, and the company said its originals drew audiences comparable to successful shows on cable and broadcast television.

Hastings said that when he founded Netflix he had no idea whether customers would actually use the service, but he was a committed proponent of internet television and saw it as the future. He credited YouTube with his shift in strategy toward developing a video streaming service, reasoning that if audiences would watch lower-definition video online in those volumes, a licensed catalog could scale. Netflix accordingly launched a service in 2007 to stream movies and television shows to computers, and under his leadership the company amassed a collection of one hundred thousand titles and more than one hundred million subscribers. The trajectory vindicated a bet he had held since the DVD era: the red envelope was always a transitional technology, a way to build the customer base, the data, and the content relationships that a streaming business would eventually require. His willingness to run Netflix's most profitable business as a bridge to be crossed, rather than a fortress to be defended, became the defining strategic pattern of his tenure.