Assignment #7

Netfli (8):

A ttrat gi '1 ivot ofMytlti .fJrOj)ortion l Adapted byRichard Robinson, J hn III and Ram Subr man 1 Aswe saw inthe Netftix (A)case, bythe end of2011, ReedHastings andthe N'IIII I ecutive teamweretrying desparately tostop thefallout caused bytheir plan 10ntiHl' JlI II and separate Netftixintotwocompanies-a DVD mailer calledQwikster and a S(I'l' 1111 ItI entity stillunder theNetftix name.Inno time, theyhadlost millions ofcust 111 rs lint! It Netftix's sharepricefallfrom $298 to$52.81. Theteam faced extraordinarily tryin I 111111 Eighteen monthslater,inMay 2013, BloombergBusinessWeek correspondent Ashl',V 11111 visited thatsame teamandfiled thisreport ontheir amazing, uprecedentedly su 'l'l'

As prime timewound downonJan. 31,2013, though,therewasanunusual amountof tension atNetflix. Thatwasthenight thecompany premiered HouseofCards, itspolitical thriller setinWashington. Beforemidnight about40engineers gatheredinaconference room atNetflix's headquarters. Theysatbefore acollection ofwall-mounted monitorsthai displayed thestatus ofNetflix's computing systems.Ontheconference table,afew dozen laptops, tablets,smartphones, andother devices hadtheNetflix apploaded andready to stream.

When theclocks hit12a.m., theentire season ofHouse ofCards started appearing on the devices, aswell asinthe recommendation listsofmillions ofcustomers chosenby an algorithm. Theopening scene,adog getting runover byanSUV, cameandwent. At 12: 15a.m., around thetime Kevin Spacey's character says"I'm livid," everything was working fine."That's whenthechampagne comes,"saysYury Izrailevsky, thevice presicl nt in charge ofcloud computing atNetflix, whichhasahistory ofself-inflicted catastrophes.

Izrailevsky stayeduntilthewee hours ofthe morning-just incase-as thousands of customers binge-watched theshow. Themidnight ritualrepeated itselfonApril 19,when Netflix premiered itswerewolf horrorseriesHemlock Grove,andagain onMay 26,when ils revival ofArrested Development wentlive.

2 Netftix hasmore than36million subscribers. Theywatch about4billion hoursofpm grams everyquarter onmore than1,000 different devices.Tomeet thisdemand, th'Olll pany usesspecialized videoservers scattered aroundtheworld. Whenasubscrib r .li 'I, on amovie tostream, Netftixdetermines withinasplit second whichservercontainin ' 111(11 'This Netflix (B)case isbased onthe article byAshlee Vance,"Netflix, ReedHastings SurviveMissteps 10 .10111 Silicon Valley's Elite,"BloombergBusinessWeek, May9,2013. ©2013, BloombergBusinessweek. AllRiIlls Reserved. Maynotbereprinted orused without writtenpermission fromBloomberglsusinesswcck.

2Ashlee Vance,"Netflix, ReedHastings SurviveMissteps 1'0Join Silicon Vally'sIllil '," Bloombergliusinessweek, May9,2013. ©2013, Blooinl. ergi3usillcs.,·wl'I'k. /\ II 1{II1111H l{',~.rvcd, ....---------~~~'"TTTljTllll1T1iTlT1lT"lllTITf""T'" ,- t-~ ••·~~-~ III 1111 I III IIII III 1111Iii ,11111 I NIIIII I 11111 It!

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dill II II lilt ,1111 111111'\1111' ,I i' lIy 1111 1111111, \1111 I Il'lIls 111111 IIlvl 1111 III IIIIWI\' 'om,will Ni'lll , II'K II1II1I11I1IIIy beneficillill or Nophisli\;alcd toolsto nl" mimicked theadvances alld Obama's datafueled reek' I I I with thehelp ofcode bui 11 II While Netflix started UIII something farmore COlIlI'I parent company, Time Willi programming overtheJilil I transition. Thecompan II House ofCards, HernIal ~ Gervais showcalled DI'I Works Animation-to 111 as avehicle forcreatin]' Chief Executive Office I I people's time." 6 About18months a~' to save face. Netflix hll companies-a DVD 111 name-and lostmilliot $52.8l.

7 Afterissuing aflurl backs. House ofCard, enthusiastic about the same period lastyeal the U.S. alone, dispel II back above $200.It', S Hastings doesn't II plopping downatspi to his watchtower, a I get there, youclimb tioning unitsandoth can gethot since it', views ofthe Santa ( 9 Asthe watchtow suede chairs, exudin he talks about Netfl organization;' he s atmo phere." 1 o 1'hrwas much /'/1'1' kil,Jason SlI(I 4 5 ·.

III III IIlIllh 11111IIlIddl'I111'1 Ilidwluu plopll Willi'll111111hiliIIIIIlp{1I1111111 IllId11111 1 11111'\' 1111111 11111111111 wltl:Ihl'\'011(1('11011 01' vldllWll!llI1 wlillwl'PIh('11iWIIIl'ililll" NIIII \ I 1111\' OJ' III\world's bigg'slus 'rs or 'loud xunpuring, whi '11 m'nns running a dill II"1'1111'1' Oilsom oneelse's equipment. Thecompany rentsservrand storage systems II III 1 huur, anditrents allthis computing powerfromAmazon WebServices, thecloud division ofAmazon.com, whichrunsitsown video-streaming servicethatcompetes with Netflix.

4 It'samutually beneficial frenemyrelationship. Overtheyears, Netftix hasbuilt anarray of sophisticated toolstomake itssoftware performwellonAmazon's cloud.Amazon has mimicked theadvances andoffered themtoother business customers. PresidentBarack Obarna's datafueled reelection campaign, forexample, wasrunalmost entirely onAmazon with thehelp ofcode builtbyNetftix engineers.

5 WhileNetftix startedoutasaDVD-by-mail rentalservice, it'snow striving tobecome something farmore complex: anentertainment poweronpar with HBO, ifnot HBO's parent company, TimeWarner. Netftixplanstolead theshift todelivering television-style programming overtheInternet andhasdeveloped sophisticated technologytosupport that transition. Thecompany hasinvested hundreds ofmillions ofdollars inoriginal series- House ofCards, Hemlock Grove,Arrested Development, OrangeIsthe New Black, aRicky Gervais showcalled Derek, andTurbo: F.A.S.T, akids' showco-produced withDream- Works Animation-to becomeamajor player inHollywood. "Wethink ofthe technology as avehicle forcreating abetter, moremodem experience forthe content wehave," says Chief Executive OfficerReedHastings. "Whatwe'rereally competing forquite broadly is people's time." 6 About 18months ago,Netftix andHastings werespending muchoftheir timetrying to save face. Netftix hadawkwardly unveiledplanstoraise prices andseparate intotwo companies-a DVDmailer calledQwikster andastreaming entitystillunder theNetftix name-and lostmillions ofcustomers inthe process. Theshare pricefellfrom $298to $52.81.

7 Afterissuing afturry ofapologies, Netftixhasmounted oneofthe all-time greatcome- backs. House ofCards arrived tomostly spectacular reviews,whileinvestors wereequally enthusiastic aboutthecompany's first-quarter results.Revenue rose18percent fromthe same period lastyear to$1.02 billion, whilethecompany added2million subscribers in the U.S. alone, dispelling widespread fearsthatitsgrowth hadslowed. SharesofNetftix are back above $200.It'sone ofthe best-performing stocksofthe year.

S Hastings doesn'thaveanoffice. Hemoves around headquarters meetingwithpeople and plopping downatspare tables todeal with e-mail. Whenheneeds aquiet place, heheads to his watchtower, aroom-size glasssquare builtonthe roof ofNetftix's mainbuilding. To get there, youclimb astaircase tothe roof andwalk along anarrow walkway pastaircondi- tioning unitsandother machinery. Usuallysomeone turnsonthe AIC inadvance. Theroom can gethot since it'sbasically agreenhouse witharound conference tableandspectacular views ofthe Santa CruzMountains.

9 Asthe watchtower's AICblasts onalate afternoon, Hastings,52,sits inone ofthe suede chairs, exuding calm.He'sgoateed, skinny,andsounds extremely Californian when he talks about Netftix's prospects. "Wearetrying toset this upasacontinuously learning organization," mesays between mouthfuls ofgranola. "Myroleiscreating thatlearning atmosphere." 10 Thcr wa.much learning in20 II, during bheQwikster episod.Tn aSaturday Night UI'I', I lt.

.JIISOIl , lid ikis play d HIISlin S apolo iJ'.in) 10 'OI1SUlI1 rswhil ul the same time 1/111 NI'I/II I'X- 111111/ ,I /lIkes lid II ,llIllIllIing IIIIIII,~ IlIlIl saw , " I'III} /lilies 1\,111111 1 Illce' Iv NI/I'I'I\~Srul IIh" IlIdll,~LLy I'dll) I\I/lPN, 111111 • ,,11,1 Pl'()- 1)111_ II'/\s /II/II III PhotographprovidedthroughWikipedia Commons, http://commons.wikimedia.orglwiki/ File:Netflix headquarters.ipg Hastingssayshenever looked atthe building design.

unveiling increasingly complexbusinesses, culminating withNutqwakflikster-a nut,ill surance, andmovie seller."Weknow youhate us,"thefaux Hastings concludes.

11 Qwikster wasafiasco, butfarless threatening thanadebacle thatpreceded it.In All '1I1>t 2008, Netflix's technology infrastructure melteddown.Thiswaswhen thecompany WII, still known forDVDs-by-mail, andforthree daysitcould notsend discs because acru .iul Oracle database keptmalfunctioning. Reportersandcustomers tooknotice. Netflix tral'\'d the problem toan expensive, third-partystoragesystemthatwent haywire aftera software update. Theincident stillannoys Hastings. Whenthesubject comesupinthe watchtower, Chief Product OfficerNeilHunt, who's alsogathered atthe table, suggests theynotmen tion thestorage-system vendorbyname. Hastings responds, "LetIBM haveit,baby." (All IBM spokesman declinedtocomment.) 12 Hastings andHunt haveworked together onand offfor 25years, meeting whentill' were bothinthe research divisionofSchlumberger, theoilfield-services cont:racLor.Av cording toHastings, Huntisresponsible forNetflix's technology. "It'smostly listnilll' to Neil," hesays. "He's onafirst principles basiswiththisstuff. It'snotlike I saw SCHIll' golden tabletsandthen went forward." Still,engineers atNetflix recallHastings prsidi lip over anumber ofmeetings following the2008 shipping disaster.Hewarned thatasiruilru technical issueonthe streaming sideofthe business wouldbeeven more devastati ng.

!\ lid Hastings begantosee that asthe streaming businessgrew,Netfiix wouldneedever 11101\' computing horsepower. Itcould hireanelite team ofdata-c ntI'engineers an I build itl> own computing centers-a IaGoogle, Microsoft, andAmuzou.corn-e-or itcould J110V• ev cryrhing toth cloud. M N LI THE ENGINEER THEBUYER THECREATIVE THE DATA WHIZ Neil Hunt Adrian Cockcroft TedSarandos BeauWillimon Chief product officer Clouddirector Chiefcontent officer Independent screenwriter Has worked with Runsthesystems Netflix Hastings'spointman HouseofCards Hastings for25years rentsfrom Amazon inHollywood showrunner FROM LEFT:GARETH CATTERMOLE/GETTY IMAGES;STEFANREIMSCHUESSELINETFLIX; JIMI CELESTEIPATRICKMCMULLAN/SIPA USA;ADE VOS/PATRICKMCMULLAN/SIPA USA 13 Netftixbegantoexperiment withcloud services fromAmazon andMicrosoft, where Hastings servedasaboard member. In2009 hebet hiscompany's futureonAmazon. Up to that point, nothing thesize ofNetftix hadplaced somuch ofits crucial technology on Amazon's systems.Hastings sentane-rnail toAmazon CEOJeffBezos, announcing his plans. "Iasked himifhe was comfortable withthatidea," Hastings says."Ifnot, there was no point going forward." Bezosgavethego-ahead.

14 Atany moment, Netfiixdrawsupon10,000 to20,000 servers running inAmazon data centers somewhere. Thecomputers handlecustomer information, videorecommendations, digital rightsmanagement, encodingofvideo filesintodifferent formats,andmonitoring the performance ofthe systems. Whenanew device likeanupgraded XboxoraSamsung smartphone comesalong,Netftix usesthousands ofextra servers toreformat moviefiles and deal with thenew users. Byday, some servers handlethegrunt worktiedtostream- ing video; bynight, they're repurposed toanalyze data.Thecompany hasbeen pushing Amazon WebServices toits limits. "We're usingAmazon moreefficiently thantheretail arm ofAmazon is,"says Adrian Cockcroft, Netflix'scloudarchitect. "We'reprettysure about that." 15 Fewrelationships inthe technology industryareascomplex asNetftix andAmazon's.

Netftix's statusasAmazon's biggestcustomer hasearned itfavorable pricinganddirect lines ofcommunication toAmazon's topengineers. WhenNetftix wantsanew software feature, Amazon isquick todeliver it,and other customers eventually benefitfromthat work. "There's noquestion inmy mind thatourplatform isstronger fromaperformance and functional standpoint becauseofthe collaboration wehave withNetfiix," saysAndy Jassy, whoheads Amazon's cloudbusiness.

16 Netfiixhasbeen forced tobuild fromscratch muchofthe software itneeds tosurvive.

Since itrelies om.Amazon fordata centers, its700 engineers focusoncoming upwith tools for, say, automating theways inwhich thousands ofcloud servers getstarted andconfig- ured. InSilicon Valley,Netftixhasbecome bestknown foritsso-called SimianArmy,a [acetiously namedsetofapplications thattesttheresilience ofits systems. ChaosMonkey, 1'01' insuinc ,simLilates smalloutag ~by ran lomly turning srvio soff, whil haosKOIl) 111111' Idown nil'1IIil" dllill "111'1", Villi I It 111'111 ,Whllllllllilif "d 11111 '111111111' 1'lIlllflll fIll'11111111111'1111'" fillIII 11111 NI'II ~III Willi' 1001~'IIII 'd 1\, ~111'\1. II'.II, ,ll'llI 11111111 ('111\'111 applkillioll 111111Illids II'OIlP,' III'1'1 WI nnd olilliiS III'III with 1111III' SOI'tWIlI" II''d'd 10do a sf)' .iflc job, pcrformin workillI' onds thatwould I' .quir apro irurnrncr hoursordays. "ILI'I us do thin isqui .kcr IIlId11111 decisions fasterbecause youknow youhave thistool inyour pock'I,"says Vanlklll'llI When Hurricane Sandyhittwo weeks before theelection, VanDnPlasshin d mu 'IIIII III Obama infrastructure fromAmazon's EastCoast datacenter toits West oasr syst'Ill,"I don't thinkwewould havebeen abletodo itwithout Asgard," hesays." urop '1'11111111111 efficiency becamethisenormous strategicadvantage." 18 Hastings tendstoexist inone oftwo emotional states:relaxed andattentive, orrclu II and dismissive. Thethings hecares about he'lldiscuss animatedly; witheverything '11'1',II disengages. Architecture? Heclaims henever looked atthe designs forNetflix h'adqlllil tel's, preferring tojust walk inand gettowork when someone saidthefacility wasI''ad ,"II was thesymbolism ofnot having mefocus onthe building," hesays. Butifyou want II)l'llIll about contemporary computersciencetechniques suchasdistributed hashtagdatabus 'S 1111I1 the merits ofkey value stores, then,yes,Hastings doeshaveanopinion.

19 Hisgeeky sidebecame fullyapparent inDecember 2005.Hewas convinced 1111111111 star rating system provided allthe information Netflixneeded topredict accurately wluu people wanttowatch. Others atthe company arguedthatmore indicators-whether p~'IIf1h' started playing something andthen stopped, orsearched foraparticular actor,etc.-wen needed aswell. Hastings spenttwoweeks overhisChristmas vacationpounding awn011 an Excel spreadsheet withmillions ofcustomer ratingstobuild analgorithm thatcould 1l\'1I1 the prediction systemdesigned byhis engineers.

20 Hefailed. Still,theattempt sparked thecreation ofthe Netflix Prize,a$1 million bouut y to the person orgroup thatcould improve itsratings-based algorithmthemost. Itwas 1111' rare meaningful publicitystunt:Thewinning team,acollection ofindependent engin'\'1 from around theworld, builtNetflix abetter prediction engine.Andacompany thutWII famous forred DVD mailers andoutmaneuvering Blockbusterstartedgaining attention1\ a place forcreativity.

21 Netftixcannow hirejust about anyengineer itwants. That'safunction ofthe computet science thecompany doesanditsreputation asthe highest payerinSilicon Valley.Mallup.

ers routinely surveysalarytrends inSilicon Valleyandpaytheir employees 10perc 'litIII 20 percent morethanthegoing rateforagiven skill.Fired employees alsogetultra 1 '11\'1 ous severance packages; theidea isto remove guiltasan obstacle tomanagement IHl'lilll-l ways withsubpar performers.

22 Netftixalsotends toemploy olderpeople thanitspeers. "Wehirefully formed adults," says Cockcroft. "Weletthem dofive years atGoogle beforetakingthemon."Awull, around thecompany's officesbearsthisout. Engineers workinproper cubicles withhil,lI walls thatarevery outoffashion inthe Valley, whichhasembraced openfloorplans.

Till' only realflair: Bathroom doorsaredecorated tolook likeentertainment legend(HOIIII'1 and Marge Simpson, forexample), andthemeeting roomsarenamed afterTVhows 1111(1 movies, withfamous lineswritten onthe glass wal-ls.

23 Oneregular engineering meeting takes" place inthe Office Space room.(Quotation: '" wouldn't sayI've been missing it,Bob.") Tokick things off,everyone talksabout wluu they've beenwatching. Oneguysays hesaw TheHunger Gamesandstarted getting 1"'0111 mendations forBachelorette andTheLongshots.''I'm notsure how these haveanything In do with Hun.ger Games," hesays. "They're allcast aspost-ape .nlypticmovies." III III 111111111111111 1IIIhili11111110111'11 111'1'111111'111111111'1'111.

No IIIh' 1'1111 11,111110111 how101'11111'1 I' II" thll 111111 1IIIIIId piliIIIII Plt.llllllliioll IIIOlil,NOIII 1'001111'11101\'11 III'I'SSqllllllN IIIhnrely ill'lhli II\1 Ii~Ipltl dviu pro] nor,NoII~U tor,'l'h' 'OIlV'I'SUtiOIl 1110VSOil(0till 'Wfeature hll IIlito Iii!' xnupany's biwancustomer servicesystem. Thesoftware interfacehasbeen \'111111 l'd101001 something likeFacebook's NewsFeed,where everycustomer complaint hilS 41trail of"stories" aboutthetissue andwhat people havedone toresolve it.The new system doesn't seemtobe working aswell asthe old one, sothe engineers proposeabat- tery oftests.

25 Netftixisalways testingthings.Itwill select agroup ofcustomers, typicallybythe tens of thousands, andusethem asguinea pigs.Onegroup hasbeen given theability tocreate avatars foreach member oftheir families, whointurn getindividualized recommendations.

Others whowatch Netftix viathe Sony PlayStation havebeen greeted byavoice thatasks what people inthe room wanttowatch.

26 Themost rigorous testingconcerns recommendations. Netftixhasavast catalog ofmov- ies and shows, butmuch ofits content isold and oflimited appeal. Tomake itsservice feel valuable, Netftixtriestomaximize thelikability ofthe titles thatgetdisplayed onsome- one's home page.

27 OneofNetftix's mathematicians isknown aslO-Foot UserInterface Guybecause the average personwatching theservice viaTV sits 10feet away. Hisjob isto arrange thebox art ofvideos inthe most appealing wayonabig screen. There's alsoTwo-Foot Guy,who deals withlaptops, and18-Inch Guyfortablets.

28 Themaster copiesofall the shows andmovies available toNetftix takeup3.14 pet- abytes ofstorage space.(Incomparison, Facebookusesabout 1.5petabytes tostore about 10 billion photos.) Hollywood studiosusedtosend individual filmsandshows toNetftix on a disc orthumb drive;nowtheyuseaNetftix systemcalledBacklot tosend encrypted files via theInternet. Netftixthencompresses thefiles andcreates morethan100different ver- sions, eachtuned forthe varying bandwidth, device,andlanguage needsofits customers.

(An hour ofvideo forthe iPhone wouldbeabout 150megabytes.) Thiscompressed catalog comes toabout 2.75petabytes.

29 Eachnight, Netftix performs ananalysis tosee which shows werethemost popular where. From2a.m. to5a.m. local time, itfills itsservers withtheappropriate programs.If Battlestar Galacticaispopular inHouston onTuesday, thenservers inTexas willbeloaded up with more episodes intime forWednesday night.Themost popular videosgoon high- . speed ftashstorage drives;everything elsegets stored oncheaper, slowerharddisks. "We use this predictive modeltomake surethecontent isthere before theuser asksforit," says Ken Florance, vicepresident forcontent delivery atNetftix.

30 Thebiggest betsNetflix ismaking nowareonitsoriginal shows.Thecompany won't disclose howmuch itpaid fortwo seasons ofHouse ofCards, though theHollywood blog Deadline.com saysitwas about $100million. Ratherthanmake itaweekly show,Netftix released all13episodes atonce. Thatmeant viewers couldwatch thewhole season inone marathon sitting.Italso meant theproducers didn'thavetoalter theplot togive every episode acliffhanger ending."Ifyou give people amore creative format,thentheycantell their stories better," saysTedSarandos, thecompany's BeverlyHills-based contentchief.

He adds thatNetftix's goalis,inpart, tobecome HBObefore HBOcanbecome Netftix.

"They dogreat content thatpeople love.What arethethings wedowell? It'sthedelivery technology, theuser interface stuff,theintegration intocomputing devices,andthe earn- il'SH slream i ng." Iii1111'111 l'II'ltl'1 1,,11', IIIllIk 1'11111\'11 OIlIlI,I!"/,\fill' Nt'II'I//IId. lillNI'IIII.~ lid, Jul,I(oluill d's'Iill" Nctlll IIiPII'IIII'I ('liSIIIwor], withundV'I Ilililds oil, Sill' IIus y '110 'v '11 111' '(Iluslin 's, "ljust h'III' Itis nurn " whi .h,hy lit' way, isu 'I''III '1IIII'IIVIl'1 name," sheRays. "It'saromance novelname," 32 Amazon isintroducing itsown series, too,andHollywood isabuzz withhop'1IllIi Nctlllx and Amazon willspend wildsums ofmoney oneven more shows. Sarandos, Ihou 'h,say, Netfiix isvery calculating inits buys. Thecompany putsactors' namesandthshow Iyp(' through itsalgorithms todetermine thelikely sizeofan audience. "Ican justi i'ythe sp'lid with ourdata anddosowith afar greater degreeofconfidence thanthetelevi .ionn'I works," hesays. Viewers havegiven House ofCards arating of4.5 stars outof fi ve, whi'1\ Sarandos sayssuggests thecompany ison the right track. "It'sdefinitely artand scicn '(' mixing," hesays. Sarandos goesontosay that Netfiix willuseitsdata tohelp pickwhi'1\ actors should beinfuture shows andwho should directthem.

33 BeauWillimon, theshow runner forHouse ofCards, saysthestory andactors wereall decided beforeNetfiix bought theseries. "Every singlecasting andstory choice wasmade from thecreative side,"hesays. Even though Netfiixhasarich trove ofdata about 11ll' House ofCards audience, Willimon hastried toavoid hearing aboutanyviewership statis tics. "That sortofdata isadangerous thing,"hesays. "Ifyou puttoomuch thought intothnt stuff, youruntherisk oftrying topander topeople." 34 Despiteitsstash ofdata, Netfiix refuses torelease anyviewership numbers.Unlikethe networks, itdoesn't havetoprove thesize ofits audience toadvertisers. "Thenetworl s have tospend tensofmillions ofdollars topromote must-see eventsandcreate anaudi ence," saysSarandos. "Whenwebuy ads, it'sjust tolet people inthe industry knowthai something differentishappening." KohansaysNetfiix hasgotten underthenetworks' skill, "They've pissedalot ofpeople off,"shesays. "There israge because theywon't reveal th.ir data. ButIthink they're beingbrilliant because everyone istalking aboutthem." 35 Netfiix's criticsarguethatthecompany hassacrificed toomuch control overitsteh nology inits effort toget ahead ofrivals. "Theproblem withNetflix isthat they areinx- tricably boundintoAmazon foralleternity," saysPaul Maritz, acomputing infrastructur ' veteran andCEO ofthe cloud computing startupPivotal. "Ifthey want togo somewh rc else, itwill behard." Hastings andhisstaff characterize suchcriticism assour grapes.

36 Anotherconcernisthat thestudios willstop licensing contentnowthatNetfiix isin rh' originals business. Hollywood isright toremain waryofletting anysingle entitygettoo pow- erful. AsNetflix expands overseas, itintends tostrike worldwide licensingdealsinstead of hammering themoutcountry-by-country. Fromastudio perspective, thatcould giveNetllix the ability tocome upwith lucrative termsthatnoregional competitor couldmatch.

, 37 Overthepast fiveyears ,'.l chart ofNetflix's sharepricehasshifted fromasmooth, upward curve tomore ofascribble. Hastings seemsunperturbed. Theexperimentation isagoal in itself, whether it'sbig things likecorporate missionsorlittle things likethepersonal technol ogy heuses. Forone month, he'llonlyuseproducts madebyApple, andthenext he'sonto phones, tablets,andlaptops running Windows. MayisGoogle month,andHastings hasone of the company's touchscreen Chromebook Pixellaptops. "Ijust keep itrotating," hesays.

38 Thestock, which hasbeen trading inthe low 200s ataprice-earnings ratioof300, isjust another sideeffect oflearning, andHastings doesn'tconsider theride allthat rocky. "Th'Il' was theBlockbuster battleandthere wereourown mistakes onQwikster," hesays, li'kin!

off agreatly abbreviated listofhis company's melodramas andn.ar-d athexpcri 'n 'l's, "Other thanthat, it'snot that volatile." IIIIIIVI'II IIWIII'lllllil, 11111111111011'101111 opllWilldilll INI IlIlx 1IIIIVll'illllllili 111011111101 1111111 1IIIIId III nil dllWlI'l1 I1111 IlI1111 rnltrilifl IIIN lell Alii IIII.

har ofdownstream NorthAmerican Webtraffic bytime ofday 10 p.m.

2 p.m.

Every day,American J households transmit and receive around 100 million gigabytes of data through the Internet Gaming Online marketplaces (e.g., iTunes) Just how bigisthis thing?

= 182 years of HD streaming video 3.14 petabytes of video in Netflix's master catalog = 35TH largest nation in the world, larger than Canada $67 billion earned if they were working atthe u.s.

median hourlywage 36 million members worldwide 4 billion hours watched worldwide in 012013 = GRAPHIC BYBLOOMBERG BUSINESSWEEK. DATA:SANDVINE NETWORKS, BUREAUOFLABOR STATISTICS