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Netflix Rebounds From 2011 Stumbles By Listening To Audience


We have a few more numbers for you now from a superstar tech company that stumbled painfully and publicly back in 2011 but appears to be on solid footing again. I'm talking about Netflix. Now, remember when the company changed its prices and divided its DVD rental and streaming services, and then quickly reversed course when customers howled?

Well, yesterday, Netflix released its third-quarter earnings. In just the past year, the company's stock price has more than tripled. For the first time in the U.S., its streaming service has reached and passed the 30 million subscriber mark. And it earned 14 Emmy nominations for its original programs, including "House of Cards" starring Kevin Spacey.


CORNISH: For more on the rise and fall and rise again of Netflix, I'm joined by Brian Stelter of the New York Times. Hey there, Brian.


CORNISH: So, I'm going to start in the middle back in 2011. What did Netflix and its then embattled CEO, Reed Hastings, do to get the company back on track after what were, you know, basically an embarrassing and damaging couple of months?

STELTER: I think the answer might be embedded in your introduction, when you were talking about how Netflix reversed course once it heard from its customers. Netflix listened to its customers and has continued to listen to its customers ever since. And that might be part of the secret to its success.

CORNISH: And he didn't just listen, he apologized, right? I remember that.

STELTER: That's right. A rather unusual public apology from a chief executive of a big company. Sometimes that's rather refreshing for people to see. But Netflix is quite good at knowing what its customers want and quite good at pleasing its customers by giving them more of what they want. Lately, its original programming strategy is evidence of this. By having original shows like "House of Cards" and "Orange is the New Black," Netflix is giving customers a reason to come back. And that sort of customer-centered strategy is probably partly the answer to what got them back on track.

CORNISH: Now, Brian, you write about an interesting challenge for Netflix, one that they're still trying to overcome. You call it the TV two-step. What is that and what are they doing about it?

STELTER: You know, it's every time you go from watching cable to watching something on Netflix. You have to pick up the remote control, change the input on your television, hope that the other box you've hooked up to your TV actually works. That's the two-step that many people know how to do, but many people don't know how to do. And what Netflix would like someday is to have a button on your normal remote control that pulls up Netflix automatically.

It'd like to be accessible through the cable set top box experience that most people are used to. It'll be nice for Netflix to show up on the on-screen guide right next to NBC and Fox News. Now, that's probably a long ways off, but Netflix is now talking to cable operators about making that happen, and it'll probably happen someday.

CORNISH: We've learned it's dangerous, frankly, to predict the future of a company like Netflix. I mean, a lot of people wrote them off two years ago. Do you see any warning signs now that this resurgence itself is fragile?

STELTER: The more bearish analysts that cover Netflix say that the concern for the company going forward is that it is spending an enormous amount of money on programming, mostly by licensing shows that have already been on television elsewhere. For example, "New Girl" and "Breaking Bad," you know, these sort of catch-up shows that are on Netflix. But it's also spending a lot on original programming like "House of Cards" and "Orange is the New Black." And these more bearish analysts say that Netflix is going to have to walk a tight wire of sorts to make sure it can afford all of the promises it's made basically to pay for this programming while it continues to gain subscribers. They say it's going to be a challenge for Netflix to keep its balance sheet in a comfortable place.

CORNISH: That's Brian Stelter, a reporter for the New York Times. Brian, thank you so much.

STELTER: Thank you. Transcript provided by NPR, Copyright NPR.

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