Netflix CEO Reed Hastings is standing in line at a bustling Toronto coffee shop, summing up a speech he's set to deliver later in the day on the future of television, when he spies an example of his vision that's so perfect it almost seems planted by his PR team.
Smiling, he points to a young couple oblivious to their surroundings in the crowded, noisy cafe. They're snuggled together behind a laptop, sharing a pair of earbud headphones, and engrossed in a video they're streaming via the in-house WiFi.
"People look to Netflix when they have some time to relax, some time to kill and want some stimulation, and that's not limited to the living room at 8 p.m.," Hastings later says in an interview.
"What's great about an Internet service, whether it's YouTube or Netflix, is you can (use) it on many different platforms -- that's really where TV is going."
Netflix recently published an 11-page letter to shareholders entitled "Netflix Long Term View," outlining how the company believes it will thrive in the years ahead at the expense of conventional broadcast TV.
"People don't love the linear TV experience where channels present programs at particular times on non-portable screens with complicated remote controls," the letter reads.
"Finding good things to watch isn't easy or enjoyable. While hugely popular, the linear TV channel model is ripe for replacement."
Hastings sat down with The Canadian Press to talk about how the company is doing in Canada, its plans to disrupt the television industry, and the development of original content, which Netflix hopes will soon win some awards. The company confirmed it has submitted its star-studded political drama "House of Cards" for Emmy award consideration, and "Arrested Development" will also be eligible for nominations.
CP: "Arrested Development" fans have May 26 circled on their calendars and many will likely try to watch all 15 new episodes in the same day. Does it matter to you how quickly fans get through the new episodes?
Hastings: It does. We do a lot of research on what people are watching, what they're enjoying, how quickly. So take the first three seasons of "Arrested Development," there's a difference between people watching them very rapidly, which shows they're really into the content, versus they watch it once a month. And a lot of them never finish the series -- that's a mark of not really enjoying it. "Arrested Development" seasons 1, 2 and 3 had an incredible passion index, once (viewers) get into it they're like, "More and more and more!" and loving it, so that helps us really zero in on the content people love as opposed to merely like. And so that's when we knew season 4 had the potential to be a great success."
CP: Cast members have expressed interest in continuing on with the series beyond the new episodes hitting Netflix soon. What's your involvement in a next step for "Arrested Development"?
Hastings: We certainly hope they choose us, if they're willing to do more. That would be very, very exciting, we'd certainly back them in doing more. But I think it's up to them where do they want to take it after this. I imagine they'll let the dust settle, get this season out, and then brainstorm.
CP: Is Netflix interested in reviving other cancelled cult-favourite shows?
Hastings: "Unfortunately, it's probably not very repeatable for Netflix ... It's hard to get all the talent back. No one wants it to come back and be lousy, so it's got to come back and be great, and that's tricky. The characters have aged, they've gone on in their careers, various other things have happened, so it's pretty unusual to be able to pull it off."
CP: The last time you publicly updated your Canadian subscriber count was in the summer of 2011 after you hit the 1-million mark. Why no updates since then?
Hastings: We don't give out for competitive reasons specific subscriber numbers, we've just said we're continuing to grow in all our markets and as we grow we get to add more content ... I think we're probably done (releasing subscriber numbers), we'll say we're more than a million."
CP: What's the biggest challenge for Netflix in Canada?
Hastings: The biggest challenge is there's a lot of new competition. Videotron has just formed a service, French-language oriented, Rogers is talking about launching a service, we'll see if the Bell-Astral merger goes ... In each nation people are adopting internet television, we'll win part of the viewing and part of the affection, not the whole thing. The only thing we can really control is what we do, so we're focused on how do we make the service a little bit better, how do we get the content a little bit better, how do we get the marketing a little bit better? We've been in this unusual phase where we're the new kid on the block and the only one of our type and of course that's going to change now."
CP: YouTube recently unveiled a series of pay-per-view channels. To what extent is that competition for Netflix?
Hastings: Their ad-supported content is hugely viewed and so they're a competitor for time -- we break people up into competitors as competitors for time and competitors for content. We don't compete with them for content, they don't bid against us for the type of content we have. But when a person wants to relax, sometimes they'll watch some YouTube and sometimes they'll watch some Netflix, and in that sense we compete for how people relax.
CP: You've been quoted as saying that you're always trying out a new smartphone or tablet to keep up on new technology. Have you tried one of the new BlackBerry 10 devices yet?
Hastings: No. Like many people I was a BlackBerry addict from 1997 or 1998 through to the iPhone but I haven't tried it. We don't currently support streaming on the BlackBerry, it's a unique operating system you have to target, and unfortunately there's just not enough volume for entertainment (apps). It's a great device for getting work done but people don't interact with it as an entertainment device the same way they do with say an iPhone or Android phone.
CP: How are you seeing mobile behaviours change among Netflix users?
Hastings: One of the biggest growth categories we have is tablet-based viewing and phone-based viewing. On a year-over-year basis it's up quite a lot, as more and more tablets are sold and people experience the convenience and the satisfaction of it. But big-screen viewing is still the majority."
CP: What do you watch on Netflix?
Hastings: I'm exotic so I watch mostly documentaries, I don't watch much of the big, popular stuff. I just watched a Steve Jobs interview called "The Lost Interview" that's incredibly prescient. It was incredible to see him talk in 1995, and of course he's young and healthy then, about what he saw in the future and so much of it has come true. Another one is "Something Ventured," which is about the roots of the venture capital industry and how this huge industry today 40 years ago was this tiny little group of people that were kind of crazy and I'll watch "House of Cards."
Speaking in Canada, the Netflix CEO says his biggest challenge there is competition from the likes of Videotron, Rogers and perhaps the combination of Bell and Astral should that merger happen. Netflix recently published an 11-page letter to shareholders entitled "Netflix Long Term View," outlining how the company believes it will thrive in the years ahead at the expense of conventional broadcast TV.