Leaders Playbook: Inside Netflix 1/14/26

0:00On this episode of Leaders Playbook. Action! Inside Netflix, one of the world's leading entertainment services with over 300 million paid memberships. There's such fandom around these shows. Meet the leaders behind the shows you binge. If we would have said we were trying to make a global sensation, we would have failed at it for sure. See how their business decisions changed what you watch and how you watch it. The decision to make originals, it was actually probably an existential decision. Learn how two of the world's top executives think about taking risks with billions on the line. Don't be afraid.

0:38There's a lot of trial and error in this business. I care so much about how do you surprise the audience. And why they've empowered teams across 50 countries to make critical decisions on their own. Pick the best people, give them the tools to do the best work of their life, and get out of their way. Leaders Playbook, Netflix, starts now. I'm meeting up with Netflix co-CEO Ted Sarandos in a location that might seem surprising for the head of a streaming company, an old school movie theater. Despite the fact that Netflix disrupted the movie industry, Sarandos is a huge fan of the cinema. He led Netflix's effort to buy and renovate the iconic Egyptian theater where Netflix hosts movie premieres.

1:21It must have been so profound for you to buy this theater. Oh, yeah. Over 100 years ago, the very first Hollywood premiere was in this building. I'm here to discover how he's evolved as a leader from his first job as a video store clerk in Arizona into one of the biggest hitmakers on the planet. You created Netflix's current strategy of investing in original content. Netflix will spend$18 billion on original content this year. And this started back in the 2010s when Netflix started losing some key licensing deals with the studios. What were the stakes back then? And why did you decide to take that big leap and invest in originals?

1:57We got into a place where we're trying to get more and more programming license from our, who are now people who are now our competitors, who started to become more and more leery of licensing us their programming. And when I found some very, what should have been easy to close deals, impossible to close, I started to get this sinking feeling that we better get good at this ourselves. We were kind of at an inflection point in the business. It was actually probably an existential decision. And then we took the kind of opportunist leap with House of Cards, because I I viewed it as maybe the most perfect opportunity to start this.

2:29I worried if we started small that we would never really get a good enough read if we made a good choice or not, because it would have such little impact on the business. But a big swing at the time. A big swing financially and in terms of a commitment, a two-season pickup of a show was pretty unheard of. And I thought if we could make House of Cards work on Netflix, we could secure our long-term future. And you said yes at that point without telling your then boss Reed Hastings. Correct. I think Reed set an example and built a culture where that was possible. So how does an executive spend$100 million on a series taking the business in a totally new direction without mentioning it to his boss?

3:09I often say that if not for the culture that Reed Hastings built at Netflix, I couldn't exist. Reed definitely said, I bet on people. and I think the lesson that he's left for me is that you pick the best people, give them the tools to do the best work of their life and get out of their way. I don't know what Reid would have added to that decision at that point and when he asked me, why would you do that? And I said, I said, Reid, it's a simple risk reward for me. If this show fails, we will have dramatically overpaid for a show. We do that all the time. But if it succeeds, we could completely transform the business as we know it.

3:43His decision to make House of Cards was possible because Netflix's co-founder and CEO at the time, Reed Hastings, worked hard to establish a culture of what he called radical freedom and responsibility. That means Hastings empowered his employees to make decisions, even very expensive ones, on their own. And it worked. House of Cards' success helped kick off a period of hyper-growth. In the two years following its release, the show won four Emmys, and the streamer added 21 million subscribers. Over that time period, Netflix's stock nearly tripled in price. To me, what was even more dramatic in terms of your transformation in the media industry, beyond the decision to invest in originals, was the decision to make shows in local markets all around the world.

4:28Netflix now produces in 50 countries. No Hollywood studio has ever successfully done that. What made you even think that was possible? Today, we're the largest exporter of European original television in the world. It seemed illogical that so much of the world content was from the U.S. People's tastes are very, very local. I think what people look for in great movies and television shows is something relatable. See themselves in the characters, recognize the neighborhood sometimes even. So the idea that we could be successful around the world without local programming seemed impossible. So if we wanted to get there at scale, we had to kind of do what we were doing in the U.S.

5:07In 2015, Netflix released Narcos, a crime drama based on the life of cocaine kingpin Pablo Escobar. It's produced and filmed in Colombia in Spanish and became an international hit. Five years later, Sarandos put his faith in Bella Bajaria, giving her radical freedom to oversee all of the streamers' original series globally. Your responsibilities expanded dramatically when you were promoted to oversee all local language series. No one's really done that before. What made you want to take that on? It was such an exciting challenge. I was born in London. I lived in Zambia. I'm Indian. I watched cinema from India growing up.

5:45And so I think this idea of feeling very connected to audiences around the world was personally really exciting for me to do. I still had to learn a ton about each of these countries, hire people in each of those creative ecosystems around the world. Over the next few years, Serrano's and Bajaria learn lessons that will shape them as leaders and impact Netflix's future. Coming up, Netflix has started doing a range of things that Netflix always said it was never going to do. Advertising, live and sports. They're doing all of those things now. What made you change your mind? And with an$18 billion content budget on the line, how do these leaders hire people they trust?

6:24I no longer pick the shows on Netflix. I pick the people who pick the people who pick the people who pick the shows that go on Netflix. After the break.

6:37For Netflix to become one of the world's leading entertainment services, its executives had to make big bets and be willing to experiment. One of those bets, building a 600-foot-long obstacle course and casting more than 100 international contestants. There was a show called Beastmaster, and it was engineered to have stars from all over the world. But from what I understand is that that idea of engineering a truly global show fell short of expectations. What did you learn from that experience? And what were those other experiences that made you realize that you can't engineer something that's global?

7:14You have to lean into what's local. When you try to make something for everyone, in reality, you're making it for no one. No one is going to be that attached to this global thing, because nobody's that global. That was a big learning lesson. Trying to do this from the other side of the world probably didn't make much sense. We'd have to get people on the ground who would have great relationships with local creators, be part of the creative ecosystem in those countries and empower them to make the programming choices themselves. What Sarandos is talking about is decentralizing decision-making. That means giving Netflix's leaders in other countries the power to make major decisions about content and greenlight projects on their own.

7:52When did you realize that this was the way to be able to grow and to make this kind of content at scale? We had an incredible luxury at the beginning of this where we're making a handful of shows. and I could watch every cut and read every draft of every script. It only took about two years before that was impossible, and we had to grow out the team. How do you do this at scale so that you don't just keep, you know, go from number one to number three in any given year? And the idea how you keep continuously making good decisions across multiple genres, across multiple countries, across multiple cultures, and that is by having people in place who know that world inside and out.

8:30So if the key is decentralizing decision making and finding people you can really trust and let them run with it, how do you figure out who to trust? I no longer pick the shows on Netflix. I pick the people who pick the people who pick the people who pick the shows that go on Netflix. So I find a lot of companies, especially in the tech space, have got very complex hiring processes and interview chains and all these different tools of the trade. And what I have found is if you find somebody who knows how to do this job, proven track record to do it, and take a bet on them, that you will find things that you would never would have found out in even the most complicated interview.

9:07And that's exactly why he chose Bella Bajaria to execute his strategy for scaling content production. What is your strategy to delegating among such a dispersed team? I think a strength of me as a leader is I hire really great people and I empower them. It's always been about, am I creating an environment for them so they can create an environment for their teams, who then ultimately create an environment for filmmakers and creators around the world? What is your secret to hiring, developing, and supporting great talent? For me, the importance is still the chemistry of the people. And I think sometimes just the resume doesn't always tell the full story, right?

9:48When Ted had hired me, I had never done licensing or co-licensing or unscripted. He still hired me because a lot of skill set. And for me, I have always trusted my gut. And whether that's making creative decisions, and I think even in hiring people, there's something that you feel or sense or know in the chemistry of when you meet somebody. And I think that's that one extra thing which is hard to totally teach or explain. Bajaria and Sarandos are building a culture of trust within their teams across 50 countries, and their system works. Bajaria is responsible for hits including Bridgerton, The Queen's Gambit, and Lupin.

10:28It's really about creators and filmmakers and having that environment to do the best storytelling. Coming up. There's no data that can tell you sort of the next thing to make, right? You just can't do that. The surprising way Netflix uses data it has about the shows you watch. I think if you start with the data, you might end up in a radically different place than you thought. And later, why Sarandos wants his team to speak up. especially if they disagree with him. People will have some insight into something that we just completely missed. After the break.

11:05Netflix is one of the world's leading entertainment services with over 300 million subscribers in over 190 countries. Its popularity driven in part by the technology Netflix designed to help viewers find what they want in a sea of thousands of titles. Making recommendations is something Sarandos learned how to do as a teenager long before streaming. This brings me to your first job, which was at a video store. Yeah. A video rental store, and you had a reputation for being a great recommender of what movies people were going to like. How did that experience and this idea of understanding there are all these different tastes out there impact the way you think about your job?

11:46Well, it was a surprise for me how much people cared about making that choice in a video store. I would notice that people would walk around the store for sometimes an hour reading every box and really agonizing over this five dollar rental. And I thought, why is this, you know, why do these folks care so much? So I started asking people as they rented, what did you think? Did you like this? Did you like that? And over time I had this strange ability to remember names and faces and if they like this or like that. And it became good enough that even if the store was really busy, people would wait for me and ask me, hey, what do you think?

12:17what's new this week. In a world of choice, the worst thing is a list of a thousand things to choose from. You really wanted people to narrow it down. And one of the biggest beautiful ideas around Netflix from the beginning was, imagine if you had the power of the internet to personalize choice in a world where you have enormous amounts of choice. And the internet had really had the ability to do that better than any video store, any video store clerk who had a good memory. That experience helped Sarandos understand the power of personalized recommendations. And over time, Netflix developed an algorithm to show subscribers content that keeps them coming back for more.

12:55It's fueled by data such as your viewing history, how long you've stuck with a particular title, and what you click on next. And it's constantly evolving. With all that data, Netflix suggests titles that consumers may not have searched for, creating massive hits like Squid Game. Its first season was viewed for more than 1.6 billion hours in just four weeks. Netflix is really a balance of art and science. How do you use data in your decisions about what to greenlight? I always look at these as data-informed hunches. It should start with the hunch, because I think if you start with the data, you might end up in a radically different place than you thought, where the hunch is, hey, you know what's not on TV anymore that I love?

13:36Let's look for what are those and then look at the data to back it up. I heard the pitch for House of Cards. And I said, OK, well, let's look at the data for a minute. David Fincher is a very accomplished director. Kevin Spacey at that time, you look at it and say, OK, what's the worst-performing Kevin Spacey movie of all time? And then what's the best ones? And you put all those things together, and you say, oh, this is not just a show about Washington politics, really. It's much closer to Shakespeare. It's about revenge and sex and power. All things are very, very universal. And this is a great execution of it.

14:06As you get more and more data, do you have to push to make sure the decision making doesn't become too driven by data? Yeah, because I think the underlying thing and all that data that makes it true, those things that were big were great. There isn't a formula to reverse engineer that. It's a creative process. There's no data that can tell you sort of the next thing to make, right? You just can't do that. That would be derivative and audiences would go, okay, well, that's boring and very formulaic. And so we don't use data in that way. Data is always really interesting to understand, you know, different countries and audiences and there's ways to use, obviously, renewal decisions.

14:41All of that can play a part into it, but creativity is just all about God and judgment. Now, you have been described as the most international executive possible. You mentioned this, but your parents were born in India. You grew up some of the time in London and then here in Southern California. When you think about how that's impacted you as a leader, beyond just respecting the tastes of different cultures, how do you think it changes the way you do your job? I was raised in this big extended Indian family and it was very much about community and the village And so I think as a leader That's why I do care a lot about the team and the group and the community and the connection my parents owned car washes and Netflix isn't totally my car wash but kind of and understanding and learning to like what's how to be selfless for the business Are you making choices that are best for the car wash?

15:29Are you making choices that are best for the team and not sort of for yourself? And I think growing up in a family that owned small businesses was also really great training. There's so much of that core learning, right, from different aspects kind of of your life. And for me, culturally, for sure. And then obviously a lot of that informed and helped me do local language original series and film around the world and understanding different cultures and different audiences. Netflix's success is due in part to its leader's willingness to take risks. So much experimentation here. And I think about all the things you've expanded Netflix into.

16:05Original content, then into creating originals for countries all around the world. Consumer products, games, experiences. What is your strategy when it comes to figuring out how and when to try new things? Don't be afraid. There is a lot of trial and error in this business. There's a lot of trial and error in all businesses. This particular one is dependent on the taste and the trends of the public. So if you're not kind of being a little bit flexible about what people are going to like You can find yourself in this habit of just keep doing the same thing until it doesn't work The last iteration the one that didn't work is outrageously expensive So you should be thinking about the new one, you know long before you need it.

16:46Can you buy yourself into a big franchise? Not likely you can be very lucky and pick something that just explodes out of the box But it's very very rare. You can't necessarily predict what's gonna turn out if we would have said we're trying to make squid game we were trying to make a global sensation, we would have failed at it for sure. We found out the recipe is, if you want to make a sensational show around the world, make it great. You've done some amazing and sometimes wild experiments. We did the Tyson-Jake Paul fight. How did you come up with that? We're talking about Jake Paul wanted to come and do, you know, a boxing match with Netflix, and so we had the relationship with him.

17:20And he was trying to figure out, okay, who does he box? And we just thought it had, you know, definitely part sports, part entertainment. He had, you know, talked about Tyson. It just seemed like such a great idea, an exciting idea. It created a lot of conversation. It was really stunty. And what I love about my job is that we can try that. How do you foster a culture that encourages that? I talk about it a lot, actually, with the teams. Are we taking enough chances? We've got to make sure that we're taking risks and also celebrating. Somebody took a risk on this big show or took a swing and it didn't work, but that's okay.

17:53We learned something from it. This enthusiasm for experimentation around new content also carries over to how they think about new revenue streams. Since you've been co-CEO, Netflix has started doing a range of things that Netflix always said it was never going to do. Advertising, live, and sports are the three biggest ones. You're doing all of those things now. What made you change your mind? Things change. Either the conditions change or your insights change. For me, the advertising one, I always looked at it like we were counterpositioning against television by saying no ads. So we attracted all the people who are really irritated by ads.

18:32Everyone is not irritated by ads. And in fact, young people, they'll take a lower price to watch advertising because that's what they grew up on. But when you think about all this within the context of a company that's about innovation, how do you think about using things like Never Say Never as a tool to continue fostering experimentation and innovation. It's you farming for descent, which is part of the original culture that is alive and well at Netflix, meaning you have to create an environment where people can say there are no sacred cows here. And I know how you feel about this, Ted, but how about this?

19:06And people know that that's not a career ender. In fact, it's a great way to position yourself as a curious thinker inside of our business is if you challenge conventional wisdom. Because I think Netflix was built by challenging conventional wisdom on almost everything. It's this unconventional approach that's helped make Netflix a streaming giant, and Sarandos hopes prepared the company to weather any storm. I was curious to hear that you don't read management books, but you read books and you take leadership and management lessons from them. What is the book that you return to that you think is the most powerful lessons for leadership?

19:40So there's a book that I've read multiple times, probably 20 years ago for the first time, which was Joseph Conrad's Typhoon. It doesn't sound like a management book on the surface, but I think it's the most powerful leadership story I've ever read. And I read it over and over again because I find where I'm at in my level of maturity as a leader, I consume it differently. I get something different out of that book every time I read it. My first reading of it was, is this guy was a hot dog and put everyone's life in jeopardy and he's reckless. And then now what I see is that when you go through life and you go through business, you make a lot of decisions that don't turn out the way you thought they would.

20:20And the real leadership test is how do you manage through that? What's it like working for Ted? And what do you think his leadership superpower is? I'd say his superpower is Ted really can see very clearly in the future. He can really look past all of the ways traditional things are happening and doesn't sort of take that noise in and can see really clearly like years out, like this is what we should be doing or this is what we could do. What makes this duo so powerful is the trust they place in their teams, the decision to lean into their instincts and the culture of innovation and experimentation they foster at Netflix.

21:01More valuable insights from some of the top business minds in the country on the next episode of Leaders Playbook.