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Search Wix Studio today to explore the full range of features. Finance leaders, do your arms hurt? It's hard getting bold in two different directions every day. Somehow you're supposed to cut costs and drive growth? Not easy. But it can be if you use Brex. Brex is the only corporate card and AI powered spend platform that lets you control spend before it happens.
Brex also automates busy work and gives you real time visibility. So you have more time for strategic work. Ready to save and grow? Get Brex, the platform that helps you make every dollar count. Visit Brex.com slash Fox 2024. Hello and welcome to Decoder. I'm Nilay Patel, Editor and Chief of the Verge, and Decoder is my show about big ideas and other problems.
Today I'm talking with Greg Peters, the co-CEO of Netflix. I caught up with Greg while he was at the Cannes Lion Festival in France, which is basically the world's biggest gathering of advertisers and marketers. That's an increasingly important place for Greg to be, as Netflix's new ad tier has nearly doubled in size in just six months to more than 40 million subscribers, and it feels like an increasingly important part of the future of the company.
On top of that, Netflix is releasing an update to its famous culture memo, so I wanted to talk with Greg about the changes he's made to that document and how he's thinking about maintaining Netflix's culture as it grows into things like gaming and advertising. Greg has been the co-CEO of Netflix for roughly 18 months now. He was promoted from Chief Operating Officer after co-founder and former co-CEO Reed Hastings retired last year.
Netflix's other CEO is Ted Sarandos, who's in charge of all the content on the service. He's been in that role since 2020. It's a complicated setup, and there are a lot of stories about co-CEO arrangements not working out all that well. Just look at Blackberry or SAP or more recently, Salesforce. But Netflix seems to be the exception, which is pure decoder bay. How does that structure actually work? How do decisions get made when there are two CEOs?
A lot of Netflix's success is the marriage of content and technology and having those split between Greg and Ted seems like a recipe for conflict or at least confusion. Greg and I talked about all of this, and so many of his answers rest on Netflix's unique culture, which gives employees an enormous amount of freedom. The culture was first laid out in 2009 in a hundred slide deck, which former meta-COO Cheryl Sandberg once called the most important document to ever come out of Silicon Valley.
That deck was refined into a memo in 2017, the new version, which the company is releasing, is even shorter and more streamlined. Now, I've always loved the original Netflix culture deck. It's written in a pretty brash and direct style. You should look it up. It's a fun read, and it makes clear that just saying a company has values isn't enough. That the real test of a culture is the behaviors and skills that a company values and rewards.
Most importantly, it said that Netflix wasn't trying to be a family, that the company's approached hiring and firing would be more like a sports team, where low performers would be given generous severance packages and replaced with better players on a consistent basis. If you haven't read it before, you should take a minute and go look at it. It is a remarkable document.
This newest version of Netflix's culture memo is not quite so in your face as that original. In fact, it's a lot nicer and more corporate sounding. I ask Greg about that change, and his answer was fascinating, as the company grows, the memo needs to reach a bigger audience. There are more employees of the company from more backgrounds, and the tone really matters. You'll hear him talk about that in detail.
Another big change, Greg, and I talked about is the removal of a section titled Freedom in Responsibility, which was very influential and has been quoted many times over the years. You'll hear Greg say that the memo needed to more clearly balance the fact that freedom requires responsibility, and that hadn't been coming through. This conversation really hit on a lot of the big themes that come up so often on decoder. I think you're really going to like it.
Also, I found a way to ask Greg what he thinks of the Samsung frame TV, which, if you're a rich cast fan, you know I had no choice. Oh, and before we start, I should disclose that I executive produced a Netflix show called The Future of Back in 2022. It's really good. You should go watch it. Okay, Netflix, co-ceo, Greg Peters. Here we go. Greg Peters, you're at a co-ceo of Netflix. Welcome to decoder. Thanks for having me. It's Greg's beer.
I am really excited to talk to you. You have been the co-ceo for about 18 months now. You were the chief product officer and the chief operating officer before. That's correct. There's also just a lot going on and streaming generally. We seem to be in a time of bundling and consolidation. And then on top of it, there's a new culture memo at Netflix, which is a big deal.
Netflix's culture memos tend to set the tone for this whole industry. Our show is about workshops and decisions and corporate culture. So I have a lot of questions about that. But I want to start at the start, which is used to work at Tivo. And I used to cover Tivo like every minute of every day. So are you ready for a full hour of Tivo questions?
We can do it if you want. And just to be clear, I did a start up that was acquired by Mac revision, which eventually became RoVie, which eventually became Tivo. So there's a long history of those names there. All of that is why I used to cover every minute of the twists and turns of that company. But let's set that aside. Let's start with Netflix. There's a lot of similarities between what happened on that side with cable and what is going on with streaming now.
So I want to start with a big question. How do you think of Netflix right now? Is this a streaming company? Is it TV company? Is it entertainment? You have games? What's the big picture definition of this company? Well, we definitely think of ourselves as an entertainment company. We seek to be an entertainment company that does what's very hard, I think, for other companies to do, which is bring a real capability and competency at the creative aspect of it.
So you see those competencies in many traditional media companies, Disney, etc. They do a great job at these things, movie studios, broadcasters around the world. But we also try and bring a real tech and product capability and sensibility as well. And I think that you see that in other companies like Google is amazing at that. Apple is amazing at that. But it's very rare to be able to bring these two centers together and be strong at both. And that's sort of what we're trying to go do.
And really be a global entertainment company as well. So partly what we're trying to do is help entertain the over half a billion people around the world that currently come to us for that entertainment and hopefully grow that number over time. Read Hastings, the former CEO of Netflix once famously said the company's biggest competitor was sleep.
Yeah, this is like a statement of purpose about the attention economy. You're only awake so many hours a day, your eyes are only looking at so many things. This is a zero some game. And the thing that people will choose over everything is sleep if they can. Is that still the framework that you're using the attention is zero some we got to go win.
Yeah, I think generally yes, I think that import of that is still relevant. I would say I don't think of it as strictly zero some because there is some magnifying effects across you know different things and I think that what we see is that your enthusiasm your fandom for a certain title can show up on social media for example in a way that's additive.
But in the general sense that the entertainment landscape is highly competitive right now humans on the planet have more opportunity to do something themselves in multiple different ways than has ever existed before.
So in that sense, yeah, we have to basically make sure that the entertain that we're providing is highly compelling it's highly attractive and it can win more of those hours we call moments of truth is sort of our way of thinking about like are we doing a good job at entertaining our members.
One thing in the framework of there's only so many hours a day we're competing for attention that I think is challenging and I have never heard anyone really pull apart well is Netflix famously pays for content Hollywood famously pays for content your streaming competitors pay a lot of money for content that's a huge part of your economics.
The user generated content platforms do not where they pay extraordinarily low rates if they do I look at some of the TikTok it's full of pirated content like it is a playground of copyright infringement it's very clever actually really as a former corporate attorney. I find myself very entertained by the innovation that occurs on TikTok on that scale.
You look at some of the suits suits as a phenomenon that started with a whole bunch of copy are infringement on a whole bunch of social media platforms what's that pipeline like for you is that okay that's fine that's just our marketing or are you actually competing with the social media platforms directly.
Well we're clearly competing at the margin back to your attention in an economy kind of model but I would say I think that you know we're doing two different entertainment jobs and so I don't think of the competition is strictly substitutable or head to head in that regard.
And so in some sense those social media channels can operate as a way of magnifying fandom and be something that you know it's a great mechanism for people to talk about shows that they're watching you mentioned suits for example when we saw you know a huge amount of engagement in suits we saw part of that magnified and reflected in what people were talking about on social media.
So you know I think you you mentioned copyright I'd say you know we in the industry and generally governors on the world are supportive of protecting the rights of the people that you know hold those copyrights and you see that but you know people talking about the shows that they love is that's a good thing.
I guess I just like on the basic economics it's still challenging to me those platforms get to take a lot of content for free or very very low rates and address a big audience and then their model is to sell targeted advertising netflix is model until recently was you paid a whole bunch of money for content.
The very high rates and then your model is subscription fees are not higher but now your model is targeted advertising are you getting the higher rates from the ads to support how much money is going into making the content or you finding the pressure of the social media platforms that are just getting it for free to be a real driver of your decisions.
So I think it's competitive dynamic that you're describing there I don't think is a sharp as you're relying and evidence of that is you know YouTube for example has largely been unsuccessful at delivering the kind of content that we deliver right and there's a bunch of examples like this co-work eyes my favorite right which started on YouTube didn't do particularly well there and then you know we picked it up from them and has become a gigantic show.
So I think they're serving you know one need one entertainment needs state if you will and we're serving a different one and then you talked about ads and I would say my principle orientation towards what we are doing in ads is that it allows us to offer consumers around the world a lower price point and that's a real powerful thing to do it because now you know we can say to folks hey you know you can have access to all the amazing stories the films series the games that we are doing at a lower price.
And that's super important for them but then also we can then work with advertisers to sort of make up the difference if you will between that what we would otherwise charge and subscription via the advertising revenue that we get there.
Do you think that the introduction of ads is changing how you think about running the company right you're at con right now which is a big advertising festival in France when you ran a subscription business I'm guessing you don't have to spend as much time talking advertisers in France. It's tough work I feel very badly for you but I'm guessing that's a new piece of the puzzle right to build up that capability.
Yeah for sure I mean so this is it's a new capability from a technology perspective so you know we're building technology that supports what we hope is at some point in time and we're still very much in the progress of building us but you know the best in class streaming solution for consumers are members and for advertisers. You know we're also building capabilities that we haven't had in the company before we never had ad sales for example that's a you know whole new muscle for us to go build.
So it's definitely you know about growing that but maybe the question behind your question and a question that I've you know gotten internally for sure is are we programming differently as a result of you know being a now adding advertising to our model.
And the answer that questions no because at the end of the day whether it's subscription or whether it's advertising both are really really anchored in something that you know consumers want to watch that our members are dying to watch and so that engagement is at the center both models it's mutually supportive in that regard and so we
were much think about our programming job is to think about what are members need and how do we give them something that they will love and that drives in the fuels both models in a positive way.
I want to come back to that because I think that shift or that perceive shift is really important especially as you add advertising because the market for advertising is dominated by other big tech companies that maybe don't like you said like YouTube is not out there selling premium programming the way that you are.
But it's still all just advertising so I want to come back to that because I want to unpack that a little bit but I want to make sure I get to the decoder questions because I think they will help me understand how that works in your brain. Famously there are two CEOs and that flexors you and Ted Sarandas historically to see us has gone sideways like blackberry didn't work out the two c. I was that structure between you and Ted and how is that working out after 18 months.
Two c. O's I think is that is an incredibly powerful model especially embodies what I mentioned at the beginning right which is we seek to be a company that brings to very strong centers of excellence or capability you know on the creative side and then on the product and tech side and bring those together and I would say that if you look around the world right at our competitors in the space.
They typically are run by one CEO and who is he is either you know really anchored in one of those worlds or the other world and I think that that reflects the strengths and weaknesses that those companies have.
So I think it's a very powerful model I think it's hard to pull off and I think the reason we've seen it not be done so often historically is because you really need a culture and a set of folks that you know really are bought into this model and that's where I go back to our culture and think about.
It is an enabling function for why the co CEO model works at Netflix and you think about what we do in culture you know the willingness to be transparent with each other to have honest conversations to be selfless to put the company first before these are all I think things that make the co CEO model work where in other places it's you know without those culture elements it's very hard or harder to pull it off.
We did do a little bit of a historical look and I would say that the performance of co CEO led companies is by model so it's either significantly underperforms peers or it's significantly overperforms peers right and I think the real discriminating factor there is do you have that culture and do you have a set of CEOs who are bought into the model and see it as a positive rather than something that's like a compromise or they have to work around.
Yeah, maybe over index on the historical underperformers. I think the way people think about it reductively is that you are the tech CEO and Ted is the content CEO is that simple or what's the overlap there.
I mean there's definitely a truth to that so I would say we both think that we're responsible for the company at the end of the day right and so you know the next level of leaders both report into us all the major decisions that we take as the company we feel like we have to take together we always say speaking to one of us is speaking to both of us so we feel like we are.
So we feel like we owe each other clarity and transparency and all those conversations but it is also true that one of the reasons that this model functions for us is that we get the benefits of that collaboration but also when you think about speed of decision making and not getting stuck in things like that that we also have you know lanes that we are primary in and we know that we can focus on so if there's a big content strategy question depending on big it is well both way in it but maybe something that sits there and we know that we can't do that.
But maybe something that sits below that you know Ted's going to have a much better informed position than I will and he's going to you know take a call on that more quickly and quite frankly even more so our chief content officer Bella will be doing that but that allows a speed of decision making that I think is part of why this works. So how is Netflix structure you said that line below reports to both of you how does that work.
Next set of leaders reports to both of us now we have a primary sort of responsibility so you think about content marketing legal comms and publicity those are a side on my side for example we've got product tech ads games finance that's an example of how we sort of are taking primary responsibility for the activities that sit at that level.
On your set of house you've got the core engineering functions the core product functions there's a real dynamic between the product like how it works and what people experience which is a bunch of content tiles and content recommendations where's the balance there I think a lot of companies think video streaming is just like a white label product and you can just buy it and put your content in your after the races.
Netflix is not that like famously not that but how do you think about that mix because everyone's kind of standardized on your approach like everything kind of looks like Netflix now is there still room there to innovate. Oh there's definitely room to innovate in fact we've just launched a new version of our TV UI which is you know where the majority of engagement takes place on Netflix so we definitely think there's room to innovate.
I also think that it's important to distinguish what is coppable and what is not coppable right so you're absolutely right that you know we do an update to our UI and I can click a stop watch and be basically counting the time until our competitors all align on on the pixel component of that of that version right and it ranges are ranges from like the better competitors you know to can do it in 18 to 24 months and then the some of the folks
that take a little bit longer to get going can be years before they get there but they all get there eventually but that's a component of what makes the user experience and a important component of what makes the user experience is all the things that sort of then populate those pixels essentially right how do we think about title recommendations how do we think about how we present titles and use assets in different ways that
get more compelling for different users around the world because you know you and I might both be interested in season three of Bridgerton and be super excited about watching but we might be actually interested about it for different reasons and our ability to communicate those differences effectively is super important to unlocking the value of all of that incredible story telling so that's
a part of copy no one's done I think is good a job is we've done about it some folks have even are not even not even personalizing you know which is remarkable to me name name is not personalizing well I'll you know let you you know do your I have some reason I'm wondering if you want to say that no I will you look at I mean it's it's what you'd expect which is the more traditional media folks are slower to that process right and so
that's a strength that we can bring that they don't necessarily have the same fluency of accessing but then also on the flip side I think you've got you know incredible tech companies that like live eat breathe personalization but then the quality of their content offering is not the same and their ability to produce amazing shows at scale around the world is something that they just don't have as well so you know we see both sides of things and really the magic for us is
bringing those two things together in a way that magnify each other that's the user experience that's the most forward facing part of the product stack Netflix is famous for spending a lot of time and a lot of money on core engineering problems moving video on the internet was not a solve problem in early days and Netflix how much of a time is spent there on video encoding and caching and network distribution deals
arrangements well it's still an important part of why I we think we can improve the user experience so it's remarkable to me you mentioned encoding right and encoding efficiency I would have thought five seven eight years ago we had grounded out on like the ability to squeeze actually more efficiency which is you know delivering higher quality video under you know less and less good network conditions yet we you know in the industry writ large is something we participate in but I would say
that the industry is is been able to uncover even more advances in that space which is like shocking to me but it's incredibly impressive so you know we think that there are more and more opportunities out there to do that level of work and deliver better experiences to our members I give you other examples you know you mentioned content delivery moving video around the internet you know part of this is what we're working on in games as well what we want to do ultimately is actually be able to
play game experiences to the TV and we're going to do that by rendering the actual game in the cloud and usually and streaming it as a video essentially and so that's an opportunity to do to leverage the infrastructure work that we do the work that we do by being deeply embedded as a client on TV silicon and working with TV manufacturers to make sure that we can bring those high quality experiences to those devices as well.
Game streaming is one of those things that I hear about constantly on the show Microsoft for a while would just you would like look at Microsoft game streaming is going to happen it has not happened why do you think it hasn't taken off the way that everyone wanted to.
I'm convinced it's going to happen as well and I think that then we get into the is going to happen like self driving cars is going to happen or is it going to happen like yeah that's the internet that's going to where I was going to go with this right which is so then we say it's what is it going to happen right which would be
more clear about what that means so I would say if you think about the pinnacle of what that could be which is called it console like experiences at console like latency that is a very high bar technically and so the cost dynamics of that what we think about the infrastructural requirements around that super hard and I would say quite frankly that part of the market is incredibly well served right now
I mean you're talking about sort of the apex of you know an ecosystem that's evolved to support that so you think about the software development model the software development cost what the consumer model is it's a solve problem for so many people around the world right and so I would say you know back to streaming
I think where is the opportunity opportunities actually not to come in from that level but to come up from the bottom and say hey there's a range of game experiences we can deliver to folks that are very capable technically today where the cost dynamics around it are manageable for sure when you think about family game night you know couch co up there's a whole you know set of quite impressive you know interactive experiences that I think we can do one of the
challenging parts of games is people play them all over the place I play them on airplanes or you don't have the connectivity yep with video you have an out right you can just like put the bits on my phone
and you're not streaming them to anymore but my phone can probably just play them back with a game there's all kinds of other things that might happen right you can't just put the whole game on my phone necessarily or my phone might not be as powerful as your server that's making the game to stream it to me as a video file how are you solving that
problem well I would say we're delivering games in multiple different ways so cloud is one way to do it and I'd say cloud is relevant because I don't lock TVs which haven't really been a source of gameplay you know except as they are the screen at which you know connected devices like consoles you know manifest themselves
you should the TV manufacturers think that they will be able to do this is why you got like self-driving cars comparison every thing's they're going to be able to just do this we think we will be able to do it in the way that I described it you know and that that envelope of what we can deliver will change
every year right so like we've seen it'll grow and grow and you know I don't know when it would get to that ultimate level but it's going to be a ways away I think and we've seen that again again you know from the folks that have tried it but back to your question phone is way more capable general gaming device than a TV is right it has way more compute power in that regard and so we will deliver
downloaded games to your phone in a way that are you know it's totally different than what we would do with TV do you want to get to that triple aid set of games at the end of the day or are you going to compete for more casual games people play right now.
Ultimately if you step back and look at what you know we do we're in the business of working with creators the most amazing storytellers on the planet having them build compelling universes that we can then deliver to people around the world in a variety of different ways
so that could be non interactive modes like film and TV and it could be interactive modes like games and then ultimately I think to give fans the most compelling immersive experiences it will you know eventually will get to something that looks like a triple a model. So I would definitely not rule that out and we sort of walk the same path in other places you know in the company if you think about when we add new genres and things like that sometimes we start.
You know smaller and then develop a you know more more capability and more aspiration to do it at the highest level I think that's a pretty common trajectory for us to follow and I expect that's where we'll go with games as well.
Games is it seems like a new interesting kind of engineering problem video encoding you said you're surprised the industry can keep figuring this out are there core engineering problems that would give you an advantage if you solve them today that you're putting resources against.
Sure there always are I mean back to games for example the ability to virtualize multiple game instances on a single GPU if we can do that more efficiently that yields sort of a better effective use of infrastructure that's an example I would put on the list.
I think another example is just how we think about recommendation systems right you know we're moving and significantly improving how we think about how we dynamically assemble the UI for you which allows us to then as you are navigating the UI actually change what we are presenting in real time.
Based on signals explicit implicit signals we get from you around what is your need for Netflix today and I think this is sort of an evolution we talked about sort of like how we personalize today and where other folks are in that process you know the next step for us is to think about.
You know what you need from us on a Thursday night versus what you need from us maybe when your families you know assembled in front of the TV on a Sunday afternoon is different and the UI should show up in a different way to serve those needs differently. We need to take a quick break one more back I ask Greg how is Netflix co CEO he structured the organization.
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This is the platform that helps you make every dollar count visit brex dot com slash box 2024. We're back with Netflix coca Greg Peters for the final and most important to code our questions. How is your product structure I'm guessing is a pretty functional organization right that's a lot of goals we got to figure out game streaming we're working on personalization we want this sort of more semantic you idea.
How have you structured the product team to to go chase all those ideas yeah we are a functionally organized group and then within that structure you know we've got product leaders that are responsible for you know various different product categories and then they have respective engineering teams that they go with with a little bit of a horizontal layer onto it so you can you know we've got a platform team that's you know really focused on infrastructural components services that are generally available to to multiple different sort of end user you know facing future teams that's the core model.
And then big decoder question this is a lot of things yeah a lot of decisions to make you have a coca to make decisions with how do you make decisions what's the framework.
The first order question would be like is this the decision that I should make or the decision that should be made somewhere in the company because I know part of what we really want to do is enable folks throughout the entire company to you know make as many decisions as possible so that might be the first order is like okay so my decision or this should be somebody else's decision.
And then if it is you know my or my inteds decision I would say you know partly we're trying to figure out like what are the things that are most material to the business companies can do a lot you know you're at the certain scale and there's a lot that you can go do we've always been pretty choosy about the strategic extensions that we've made in fact we've been very very focused as a company.
And so our orientation rather than some of our peers who have sort of like a let's just try something shotgun stuff out there and see what sticks kind of approach we take almost like the other end of the extreme which is we start with the first principles argument around why is this critical to the business right the qualitative version of this might be can you imagine a Netflix 10 years hence where we are not doing this right you know there's a more wonky version of this which is you think about the materiality of the business.
So we have permission to play as a leverage off the core in success at scale does it lever back to the core so there's a different ways of thinking about the same question but ultimately you're saying like okay we're going to do a limit of things does this materially drive the business and if it does then our orientation is we are going to do it to win we may start and may not be great but ultimately we will learn and grow and that's very much again sort of how we think about the what our culture is which is an iterative process of seeking to get better and better and better and better and see you.
So that's sort of how I think about the top level decision making. So this brings us to the culture memo there's a new version of it just came out the first one was released 2009 it was deck it had over 100 pages I think rehastings even order book about this deck you do stream lined it into a dock in 2017 so went from being like a hundred page PowerPoint to like a one cheat and now it's there's a new one which is even more streamlined.
Two questions why makes such a big deal about these culture man knows and why does it keep getting shorter. You typically have this triumvirate culture there strategy there's execution right and we can go and look out and then there's like you know probably a hundred business books that will tell you that you know executions the most important
here's how you do great strategies the most important has a great culture with point I would say that there is we think first of all I guess maybe the important to note that you actually I think have to be good at all three to be really successful company so you can't you know be awful at one.
But if I were to think about a hierarchy culture I would put at the top of the list and the rationale for that is you can have if you have an amazing culture and maybe your mediocre at execution and amazing culture allows you to get better at strategy and execution so it's a vehicle to actually improve so that's why we make a big deal out of it and if you really think about what we're trying to do with the culture
memo and why it's changed so much is we're trying to just constantly do a better job at articulating what are the practices that we think we can employ as a company to just grow and get better to learn to seek excellence is what we call it to constantly strive for that that's the rationale for it and then why does it get shorter probably because we get
better at articulating it what's the marketing quote if I had more time I would have written you a shorter letter I think you know it's you know it's an investing in that and one understanding like one of the things that really matter right so seeking signal from no ways and just trying to constantly refine that articulation to be the maximum value for the time that somebody spends on it.
Just before we start talking I went back and I read the first one from 2009 I read the deck I have to say sitting here in 2024 that original deck is I would describe it as refreshingly harsh like it's mean it is not a nice document it's very blunt it opens by saying even
and Ron says it has integrity like we're not going to lie to you like here's what we actually value the new one is a little softer it's a little more corporate it's just like a nicer thing is that just meeting a younger employee base like why why make it nicer
well it's interesting because you called it the original mean and I wouldn't have used this like I mean like it's like it's written how I would yeah right in that way right it's very direct direct is it be the word that I would use you know what we're constantly trying to do is communicate effectively who we seek to be and who we think that we are and what we found is that in the original articulation the tone of it incorrectly communicated a sense that it was a harsh place and it was maybe cut
through or things like which is actually it's really not right and so we want to be very very clear that we do think excellence in having you know the colleagues around you is super important and so we have this dream team concept in the latest version which we're trying to be very clear about like we are a sports team model not a family model
right and so when you come we're going to seek the best player in every position if you will and to the degree the business of all's removes and we think that there's a change in these we will make that change it's we want to be very clear and honest about that but we also want the tone to reflect what people's working experience is inside Netflix it's interesting you brought it up because I think you're you're looking at these two points which is the original
doc and then where we are today but what happened in the middle was actually that got softened a little too much I think right and so what we you know we maybe move the pendulum a little bit too much in the other direction and partly what we're doing in this version is actually trying to bring a little bit more of that directness in while also still trying to you know accurately convey what the working experience in Netflix is that middle period coincided with a lot of controversy around the
content on Netflix particularly Dave Chappelle specials whether Netflix employees were being reflected in the content that was on the service there was a lot of tension inside the company at that time I'm noticing in the new memo there's no longer this famous section titled freedom and responsibility there's things connected there's a section that discusses the diversity of the content on the service and how we're going to meet the audience where we are but there isn't the sense that
Netflix is employees across the board are going to get a say on what appears on the surface well rather we actually explicitly say the opposite right you're capturing two things which are pretty distinct so one back to being direct and sitting clear expectations about who we are as a company so people can make good decisions about do they want to join us or not we wanted to be very clear around the fact that we're trying to
program for over half a billion people around the planet those people's tastes are very varied and we have to bring a wide variety content to be satisfying for those folks and we're definitely supporting artistic expression and a wide variety of creators to go do that so we wanted to be very clear about that and take that head on so folks can understand that and decide that hey Netflix is a place that I can work for as a result of that
or not and then freedom and responsibility I would say is a that's a different thing and what we found is that through the you know many years from that original culture memo that you talked about the culture slides really right the freedom and responsibility component people heard increasingly the freedom part and less the responsibility part and we
always meant that to be a balance right essentially if you know what we're trying to say is hey hey if everyone super super responsible we don't have to have a lot of rules because we can rely on people's great judgment and people will do great things but you know what ended up as people hearing like oh you know I can join Netflix and essentially all the decisions that I make our mind and I don't have to really worry about that sort of overarching
responsibility to our collective corporate goals and so again we said okay this is an opportunity to try and clarify that we articulate in a way that we have grounds into the original concept and so that's why we've we've shifted the language this time one of the key values that you've had the whole time and I think connects that is something people over process where you're just going to trust the people where the expense policy is just acting that
flexes best interests that works when you're the challenger right when you're the the start up and you maybe you're focused on one thing it's harder when you're big right when the company can just do a lot of things how do you keep that aligned at scale yeah it's interesting that you say that because you said harder when a challenge I don't really think of that way you got
a size which is an important dynamic of it but maybe just going back to one of the core tenants or principles that we have behind the culture memo it's this idea that a lot of the way companies are run right now come from the industrial revolution industrial processes right so there's this idea that there's like a manufacturing process and you get hyper focused on how do you be amazing at that process you think about defect reduction and like and it's great because if you're doing that one thing
you can do it amazingly well and like look if you're TSMC and your building ships that is you know your bread and butter and you do that all day long and that's an important part of corporate success for us what we thought is that that refinement actually comes with brittleness because what happens is you get really really good at one thing and then actually when you want to do something new that brilliance and the optimization that you built in actually creates a lot of rejection of the new
or either it's incompetence or lack of capability or it's even what we see in big companies is like all the systems are refined to say like we do X we don't do Y or we don't do X and Y so you get a lot of like antibody reject rejection of Y and so a lot of what we are doing is trying to figure out
how do we be a company that can go through multiple iterations of changing you know the strategy adding a Y adding a Z and have a culture that accommodates that and so this is really around what we thought about partly what we're trying to do is have amazing judgment
have people in place that we have high expectations of there unusually responsible compared to their peers and that gives them ability to be flexible and to evolve and not have this brittleness that sits in which is an from an overly processed company we like good process there's still you know there's some components of like having people work together as a collective unit requires a little bit of like scaffolding and expectations
and how do you you know set that up for success but a lot of process that gets in is not about that you know big company process is about how do you defend against the employee that you know expense something wrong whatever and a lot of that stuff when you look at it like smart people to judgment they're just not going to go do that stuff at the end of the day right and so we don't think about that is good process and we reject that
and we really rather lean into let's hire good people let's hire people and set the expectation that they're going to have great judgment and then that gives them the flexibility to deal with the incredible nuance that exists around what we're doing right you think about programming you know for these you know over half a billion people
countries in different situations every title is a different you know situation the user experience changes in these ways and you know whether you're a creator whether you're an engineer you know whether you're a game developer
you really want that flexibility to engage with that nuance and make smart decisions based on the specific situation that you're dealing with and that's what we try and foster and encourage one more question here that I want to put this into practice and come back to ads and culture
because I this is the foundation for me one of those famous aspects of this memo some of the most famous vocabulary words are loosely coupled highly aligned and disagree and commit and the second these words were introduced into American business everyone just started saying I used to work at a well and people would tell me we were loosely coupled and highly we were super loosely coupled that was
obvious yeah but people say these things and it's hard to achieve them you have people coming in right like Netflix is a very different company I think about those ideas and what I see is you need a lot of institutional
knowledge right to stay highly aligned people need to know what we've done what we might do the ideas that we've had all that new answer talking about when you've been in employees coming in when you got a ferocious battle for talent and AI for example right people are coming and going how do you
actually maintain that because it feels like that relies on some amount of history and some amount of institutional knowledge to keep going otherwise you've just got people reading wiki's all day long thumb degree yes but I actually think that there are mechanisms that you can do which aren't the tribal knowledge don't rely on the tribal lodge so examples are like knowing what your nor star is is a very strong mechanism to support alignment right so we do
another you know in addition to this culture memo which we publish we have another memo another doc that we don't publish which is our strategy bets so this is a formalization of ambiguous decisions meaning the company could do a or could do B and we're very clear about okay you know it's ambiguous but we are going to go do a and not be and this is why
and that is another form of touchstone that allows employees to operate independently to that you know sort of loosely coupled kind of model but with a sense of you know how does this ladder up into a higher purpose or how does this ladder up into an aligned position so I think that there's mechanisms that you can actually employ that don't require this sort of tribal knowledge that get
it same goals we need to take another quick break when we're back Greg and I dive into how Netflix plans to apply the principles and its culture to its new advertising push support for this podcast in the following message is brought to you by e-trade from Morgan Stanley take control of your financial future with e-trade no matter what kind of investor you are our tools and resources can help you be ready for what's next now when you open an
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we're back with Netflix cocio Greg Peters to talk about how the company is approaching advertising a i in what's next so this brings me to ads and the culture of the company in the market that you're in ads are a tribe right this is like you are in con you need an ad sales division there are lots of ways to build an ad sales division but that's a different historically at the big tech companies the ad sales division does not look or feel or act like the product division
there's often some tension there how are you bringing in a whole group like that that feels like the future of your revenue without changing the culture of the company you mentioned because we have we have tribes already we had tribes before this right so I mean if you think about engineers versus the creative community in Hollywood versus the creative community in South Korea versus game makers and even like let's let's break it down like
kernel engineers who work on our content delivery network versus mobile UI enters that's a different tribe right they have ways of thinking about the world so you we've always been balancing you know different groups of people that think about things differently and that's why we have these you know memos like the culture memo because and quite frankly an evolution of the culture memo was going from the original deck that you talked about which I would call you know highly anchored in silicon
valley is a libertarian philosophy or ethos I think that was you know you could read in there pretty quickly and probably what we're trying to do over these multiple iterations is tease apart what are the actual outcomes this sort of excellence enabling you know things that we
really want to identify here versus the behaviors and the articulations and trying to make those more general so that whether you know you're two creatives in Amsterdam who might have a very different form of communication when you talk about direct feedback right versus two
engineers in Japan that can show up in a different way but having an honest conversation with each other about sort of what we're good at what we're not we think is an important you know enabling factor that we want to have around the world or around all those tribes that you
mentioned you mentioned ads is being a super distinct thing and I don't think of it as that distinct when it comes down to the kind of things that I've been trying to blend these sort of different base cultures are different expectations and then figure out how do we layer on top of that
a way of working in a set of expectations that allow us to be better together I don't disagree but it feels like the ad the premium advertising the brand advertising world going to up front and meeting with marketers and meeting their demands that just places a different set of
pressures on an engineering organization right you can see it at Google at meta at scale I mean this is what they do that you're competing with now but you're also competing with I know linear TV for for their add dollars yep how do you think about OK
we've got to build a whole bunch of ad tech now the competes with giant incumbents like Google and met a hundred percent but that also takes the brand dollars away from linear television yeah part of this is knowing what role in the ads ecosystem you know can we play should we play
this a strategy might say you know in a different way I think our position is the ability to bring what is amazing about TV advertising city about the creative formats how you were able to position brands next to titles that were you know our case we seek to be culture defining moments essentially which is of course where advertisers you know are excited to be and then also pair that with you know what is great about digital advertising sitting by targeting performance
measurement you know the ability to do that do that sort of it at all levels in the funnel our job is not to be the most amazing gigantic scale digital advertiser because Google and Facebook are going to do a better job at that our job is not to be just a TV advertiser because you know other folks can do that as well so we're trying to bring these two things together in a way that were differentially maybe uniquely suited over you know a five to ten year period to
magnify the impact of both of those worlds create a premium highly creative space you couldn't do these kind of formats on tiktok that doesn't work that way but also bring enough targeting enough brand performance in you know these different kind of measurements to try and give advertisers sense that they're actually getting something for their dollar as well so that's how I think about blending those you mentioned tiktok I'd see a lot of younger people they open Netflix
they just stream whatever in the background and they look at tiktok and that's a real dynamic tiktok Instagram would have you YouTube on the phone they can convert right you see the thing you push the button you go by whatever tiktok wants to sum you a lot of off brand power tool batteries I feel like I'm gonna let my house and fire but that's where they're at right now Netflix you can't convert on the TV right it's
it's much harder is that a challenge for you to say to go to advertisers and say look you can't actually shop but maybe you'll get more take up even other kids are holding their phones yeah I think again it gets to what role we can play and the demand conversion advertising that plays a role in the ecosystem so 100% that that's there but I would say there's a lot of brands that before you get to that moment or maybe that
moment can happen on the phone regardless right if you think you're gonna you know go out and buy a car that's likely that that's not happening there right there's a lot that we can do that basically operates above the funnel in ways that brand advertisers believe is more compelling and obviously and you know increasingly we should be able to measure that performance as well right like how are we doing in terms of brand
affinity awareness how are we thinking about sort of building demand you know at certain levels so our goal would be to operate at that part of the funnel and then think about fulfillment is happening and probably a wide range of channels after that fact you listen to a meta quarterly earnings you just read their statements it feels like they can just turn the knob on ad load and just like make more money and
hit their numbers if they need to like there's a PM it matters like yeah we can just it's fine mark like I got it and they just like there are more ads and Instagram real today even raising prices right even hiking the streaming subscription prices and that seems to be going fine would you ever increase the ad load is that something is that a lever that you have at your disposal I mean it is a lever that's our disposal
I think it's a lever that quite frankly you use at your own peril so I would say my goal is that actually yeah we will change the ad load will decrease it over time if we fulfill on the promise that you know we just talked about we should be able to increasingly provide higher relevance higher value ads that's great for that member you know they have a better experience as a result and it's great for the advertiser quite frankly advertisers
will pay more for that kind of experience because it's more valuable so I think you know we should be able to do that so you can decrease the ad load and say look these slots are more valuable because there's fewer of them we're going to charge higher prices has that played out yet have you seen evidence that that is true we're very early in this process so at this point we're building yeah we're trying to build
an ad server so we can see on the horizon tons of work to go do we have an amazing road map in front of us and again you know back to sort of the culture memo like we're very much comfortable starting from a position of we're at zero and we will learn to be better at this and that's definitely
the process that we're at in terms of building ads is it or any towards that model Do you think that you're at the end of price hikes I have a graph in front of me of Netflix price hikes and it's the verticality of this line for especially for premium no ads is pretty remarkable like it's just gone up and are you sending more people to the ads tier is that the goal of that price increase are we are done with this yet it's definitely not the goal what I would say is you know look
our job is to add more value into the entertainment service that we are offering we've you know see consistently again and again our members want more entertainment right they want a higher diversity shows they want more you know quality shows so that's our job and then if we do that well again we'll go back and ask occasionally members to pay a little bit more to keep that flywheel running and then back to the ads component of this it's really just how we then offer a wide range
and our goal would be to have even wider range over time quite frankly set a price is with the right features so that basically we can attract more members around the world and they can enjoy the incredible stories that we we've got available huge TV nerd I've got a giant at most and vision set up in my house and then all the streaming services ask me to pay extra for 4k and it seems like everyone's defaulted to you're going to be fine with 1080p that's where I'm going to go over to most people
is that because most consumers don't care is it because you can actually set the price higher and people do care so they will pay more how is that playing out well it's in a back to what I said which is that you're we're trying to essentially find a range of prices that have appropriate features connected to them so the people that value those features more you know have an opportunity to to get them and but I guess my question is it is it the people don't value the features of the value
them so much that they will pay extra what's the difference really I mean my theory is that most people don't value the features and so there's a tiny subset of people that will pay but most people don't care where is if everyone cared it would just become the default and everyone price it is probably a fair statement yeah I mean I'm not sure I mean there's clearly a community of folks that care and they're not like a certain minority yeah and they're not they're not a super small
minority and so you know we want to serve them well as well I feel like I have to ask you the question AI before we end here we've talked a lot about personalization about modifying the UI and the more responsive there's a huge talent war for AI that's a huge amount of cost right just to get I'm assuming Nvidia GPUs like that's what everybody wants right like they're very expensive Nvidia seems to be the only company is actually making money
with this stuff yet the talent is expensive what's your approach to this is it will wait for the models to come and be good for us we have to make our own foundation model how are you thinking about it you know we think our one of our competitive managers is to bring two worlds together so it's you know amazing entertainment the creativity required to produce that as well as then the technology component we have a long history using machine learning artificial intelligence
like in our recommender systems we've been doing that for you know 20 some years and again we think that our job is to be proactive about understanding where there's technical innovation how do we use that both to serve creators allow them to tell their stories in more compelling ways and also then to serve our members oftentimes better user experiences I would also say though that we've generally been careful about not getting caught up in the hype cycle that often informs Silicon Valley
like I'm so excited that we didn't spend any energy on NFTs which is like if we go back three or four years ago everybody told me my god Netflix has to have an NFT strategy right and yeah we didn't really need to have an NFT strategy
now I would say generative AI don't that's not an apt comparison in some regards because I do think that there's some interesting things associated with it not just you know smoking mirrors but I would also say you know we have to understand what our role is in that ecosystem
and you know we're not going to build you know frontier models that's not what our job is really our job is to think about okay there's a bunch of you know interesting technologies that are being developed how do we give these to creators in ways that allow them to you know tell their stories in a more compelling fashion and just you know as entertainment has evolved with the you know evolution of new technology you can go back to like cave painting you know to where we are today
you mentioned 4k you know at most whatever creators will figure out a way to leverage the newest tools to tell their stories in a more compelling way and so our job is to enable that at the end of the day when I think what uses you could use for it right now but the let's make different thumbnails for all the shows it seems very obvious right when it takes some creative we're going to plug in some targeting keywords
or personalization keywords and making you poster for the show that is just for me that would terribly I think piss off every single one of your creators like people doing that right now to make movie posters face in our sense of fan and creator backlash this is the tension of the company right you've got the creator side in the tech side and even like obviously interesting ideas like what's improved personalization by making more custom art
which you're already automating in some way like seem very tense how are you balancing out the tension of the creative side what's interesting because we we do that right now so we have a team of people essentially which create a variety of assets that represent the titles so that we can find the biggest audience for that title now we do that with a strong sense of authenticity meaning that that has to be reflective of the title
and so we've been constantly using tools with the human in the loop that understands like is this an authentic representation of that title now if it's authentic in the words it doesn't mis portray the title not only would that capture some creator I or I'm sure it's not good for members either right you don't want to tell them that's a story about something and have it be something else clickbait for example something that we completely reject in that regard
but if it if it is authentic then it serves a purpose which creators love which is it finds a bigger audience for that story and if you talk to creators generally what they want to do is be able to tell their story in a compelling way and find it in a met you know the largest audience possible so we've essentially been navigating that situation already do you think that you'll start using more AI in situations like that the bridge tech and creative
because that that's where some of the opportunity here is if you're just using it for the personalization algorithm I don't think people would be so upset once you start touching on the core creative that's at least where our audience has been the most vocal with us do you think you're going to venture into the more creative side with AI well I think creators have been using tools that in my mind you serve some of the same purposes that the AI that we're seeing
the capabilities that we're seeing today serve right and if you think about you know pixel manipulation or you know VFX or great examples pre-vis right so having a creator be able to have a more efficient way of understanding how you know the script that they've got might show up and be able to manipulate that and then inform shooting schedules a great example of I think how they can use these technologies so you know I think our creators are going
to want to use those tools and whether or not you recognize also that a lot of the creators that we use their independent production companies they decide you know what they what tools they want to use we don't tell them that I want to wrap up just on the TV business as a whole because it is undergoing a lot of change Netflix itself is changing in response to that one of the big trends we see everywhere is just bundles just where we're going
to make a sport new sports company in bundle all of our sports together the cable company the ISP is not a bundle some streamer with you you sign up for Verizon you get some collection of things you just see all this bundling the famous line is there's only two media business models right bundling and unbundling we're obviously in the bundling period how is Netflix participating in that are we are we just headed back towards a cable bundle
but with Netflix at the center I know think so but let's let's just step back I think you know bundling generally it's better for consumers where they have an easy opportunity to buy a package of goods that make sense
together and then they see more value in the assemblage of those than they would you know purchase to screen and to be clear we've done this with a variety of partners for a long time six seven eight years where you know whether it's a pay TV operator an ISP mobile operator in some countries
we do with utilities right so you can literally you know when you buy your energy your power you get Netflix with that as an option so we've done that because it's just a efficient way for consumers to be able to decide to add Netflix it allows us to access then a sort of an audience which maybe is less tech forward or you know we show up in a way which is natural think about like hey I'm watching TV on a set
dot box you know I can see that I can get Netflix as part of that it's a good for consumer model so we've been doing that for quite some time I think some of the bundling behavior that you see today it's not entirely clear to me that it it's actually going to work right that it's pro consumer I think to some degree a little bit we're getting like is just let's throw a bunch of stuff together and sort of see what sticks
so we'll see how that plays out but I do think that you quite frankly a bundling of services a logical thing that's pro consumer so I don't see that going away you ever bundle with a competitor the way that some of your competitors are bundling with each other well you never say never right I mean we've done a bunch of things that you know we probably were too strongly oppositional position for so you know we
want to remain intellectually open and humble about that we're being bundled with our competitors by our bundling partners right now right so you can go out and buy a you know mobile service that includes us and somebody else so you know again we don't think it changes what we do which is we've
got to really provide an incredible entertainment experience for our members and if we do that well then they're going to see value and whether that's by directly from us or in a bundle that will work out the place where most consumers including me would like all these services get bundled is at the device level right where I open my Roku or my Apple TV and I just see a whole bunch of content from a whole bunch of
services and it figures it out what I've paid for and I can go watch and stuff Netflix is historically resisted those integrations right on the Apple TV or not in their app on other devices or not in their sort of unified experiences why is that is that just because you want people to come in
in Netflix and stay there is it the business terms aren't agreeable what's the reason for that yeah and we do those integrations all the time so there's actually I would I would have described it is you know much more balanced in terms of when we do it when we don't and essentially we're investing significantly creating a better user experience for discovering Netflix content within our application and so we want to
make sure that we have a level competitive field if you will on the device for users who want that differentiated experience who want to see that value to be able to get to Netflix in a very easy efficient way and be able to have that and so mostly we're you know the terms that we have around is that a balanced place to do this or not and if it is so then you know we participate in things like an aggregated service you know discovery and where it's not then we typically don't.
Netflix is on basically every platform that you can think of famously are Netflix buttons on our notes it's not negotiable for a lot of TV manufacturers most of those platforms want to take a cut of your revenue either it sign up on the subscription side and then very much so
on the advertising side like you cannot appear on a record device unless you give them a cut of your ad sales are you big enough now that you can negotiate better terms for revenue splits across TV and on mobile relative to your competitors or the terms that these platforms and TV makers
demand pretty flat across the board I don't know what our competitors get so I can't give you a definitive answer that question but I would expect that relative to some other folks who provide different value I think you know we probably bring more of the platform and that probably shows up in some way or shape or form.
The reason I ask that question is because Netflix is one of the companies it's always pushing back against app store rules from Apple and Google and the restrictions they placed around sign-up flows and customer acquisitions and of course revenue splits.
There's been a lot of regulatory activity in that area in recent years are you starting to see the benefits of that regulatory action showing up in acquiring new customers and getting them a sign-up for Netflix and collecting the fees every month. TV is a highly competitive ecosystem right so I would say there's tons of manufacturers out there there's not really a concentration of power and so I say that's a well-functioning market that allows everyone to you know bring their value to it.
On mobile you know I would say we're seeing marginal benefits as a result of some of the more recent changes so we've got slightly better user experiences for our members on those platforms so we can be a little bit more communicative about how they can sign up for Netflix which is you know that's great.
Generally I would say consumers figure this stuff out too as well so it's been amazing you know how many people can actually just they they've just doesn't work so I go to Netflix.com and you know and all you know sort of figures out from there. Yeah the power of Bridgerson marketing the service for you. Okay I have one last question it's a total one of the card. I've been dying to ask at the entire time. Do you keep track of what TVs you're showing up on what kinds of TVs.
Meaning do we know where our members what TVs our members are using? Yeah of course. Okay so I have a theory about the Samsung frame TV which is the most popular TV. Like every interior design in America is like. The reason people like this TV is not because it is a great TV it's because it looks good when it's off. Yeah so I mean there's a range of aesthetic conditions that would inform why. But the actual panel of looking like I'm hoping you have a nice OLED in your house too.
Right like you have a frame TV because it looks good when it's off. But do you see the popularity of the frame TV is any sort of symbol for the future of television viewing? Because I see the TV that looks good when it's off as being a sign of soon there might not be a TV. If you value the off state more than the on state something is happening. I would totally disagree with you. I told you as a crackpot question. Yeah exactly.
Like there's a whole bunch of design considerations that goes into the things that we use and how we interact with them in our daily lives. And some of those design considerations are about functional. Like how does it show up when I'm actually using it but a lot of the design considerations or aesthetic considerations are like. It's an object in my home and I care how it looks even when it's just static and sitting there.
In some cases we obviously choose these things based on no functional goal and just having something that looks amazing and beautiful right. Yeah I'm just saying my radar but I value the off state more than the on state has been spinning for all. I think that's it. Yeah I think you're overreading into that considerably. I mean I'm sitting in front of a frame. There's three of them in this house.
Like don't get me wrong we buy the TVs but I keep I think about them as a cultural object quite often. I figured I got one shot to ask you a question. And you still and you still watch on them right. No we watched the we watched the beautiful. That's okay. Where do we value the on state versus the off state we hang up these TVs. Well so why I can just be like why why are these even here. Well then a key is that you know TV manufacturers going to be able to write you both right.
I think that's what they would that's what they would prefer. Alright Greg you giving me so much time and I'll let you get back to partying in France. Awesome. Thank you. Appreciate it. I'd like to thank Greg Peters for taking the time to join me on decoder. I'd like to thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else about the show. Drop a slide. You can email us at decoderattheverge.com.
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