McCarthy was livid, said the sources, and he went to Hastings to discuss his salary. Sarandos had the Hollywood relationships, and his solid gold Rolodex was very valuable to Netflix. Where once Netflix could obtain discs from a plethora of wholesalers and retailers - even when Hollywood refused to supply the company with DVDs - there were few ways around the studios when it came to streaming rights. The company was headed to a streaming-video future, and obtaining Web rights for movies and TV shows is tricky. The large pay raise for Sarandos was indicative of how Netflix was evolving. According to The Los Angeles Times, Sarandos' compensation more than doubled from $2.4 million in 2010 to $4.9 million in 2011. For a while, McCarthy, who is now an executive adviser at venture capital firm Technology Crossover Ventures, chafed that Hastings refused to expand his responsibilities, sources said.Īdding to the tension, McCarthy learned that Hastings had given him a far smaller annual pay increase than Ted Sarandos, Netflix's chief of content acquisition. Smart, experienced and aggressive, they were the people who could challenge Hastings' ideas.īut in December 2010, after nearly 12 years at Netflix, McCarthy left the company following a conflict about his role and his compensation. A 30-year veteran in finance, McCarthy decided to stay and joked with coworkers that "you don't walk out on friends in the middle of a knife fight."Īfter Hastings, the two most influential voices at the company were McCarthy and Leslie Kilgore, at the time Netflix's chief marketing officer. In 2004, when the battle against industry heavyweight Blockbuster was at its fiercest, former CFO Barry McCarthy almost left. The competition and long odds united them. Hastings co-founded Netflix in 1997 and eventually assembled a seasoned management team that he kept largely intact for a decade at the Los Gatos, Calif., company. What's more, few of the people who could persuade Hastings or tell him he was making a mistake were around anymore. As Netflix's business blossomed and as he was personally applauded in the press, Hastings had grown much more confident in his own decision making, less receptive to taking advice from his senior management team. Some of those people included Allison Hopkins, Netflix's vice president of human resources, Liz Coddington, vice president of financial planning and John Robison, vice president of DVD product development.įew people who had worked for Netflix for any length of time were surprised that there wasn't more discussion about the plan. stopped attending Netflix management meetings. Those Netflix executives who moved to DVD Co. Netflix's leaders stopped discussing DVDs. was moved out of Netflix's offices to a space a few blocks away. Some employees were stunned by how quickly and unemotionally DVD operations, the backbone of the business for a decade, was split off from the company. Netflix rapidly began executing the plan. Hastings, it appeared, wasn't looking for debate. Within about 72 hours, some of the group learned that Hastings had already offered the new company's CEO position to Andy Rendich, Netflix's respected chief service and operations officer. and later Qwikster, left the meeting thinking Hastings was only considering the idea. Some of the execs who heard Hastings talk about spinning off Netflix's DVD operations into a new company, referred to internally as DVD Co. Around March 2011, he took his plan to his executive team and then to the company's vice presidents. While few people disagree with that assessment, some within Netflix doubted Hastings' assessment of how quickly Netflix needed to shift to streaming.īut Hastings pressed ahead. He didn't want that to happen to Netflix. He argued that in times of technological advancement companies that had succeeded at one business often clung too tightly to tradition and to what had made them successful. Hastings has an unwavering belief that streaming video represented the future of home entertainment. Netflix stock plummets nearly 37 percent. Netflix reports 23.8 million total subscribers, down 600,000 from the 2nd quarter. Netflix reverses itself and kills the Qwikster plan. Hastings apologizes for how the price hike was communicated but says Netflix will spin off DVD operations.
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