Reed Hastings, General Sarnoff





Dear Reed,

Like many of your loyal subscribers, I was disappointed to see that you fell short of your subscriber projections in 1Q22, and anticipate even greater underages as the year goes on.  According to reports, you seem to point to geopolitical limitations in maximizing your potential in Russia and China, as well as the frustration of some U.S. subscribers that they are unable to access an optimal viewing experience due to limitations of the capacity of their current televisions as well as the bandwidth of the wireless services necessary to provide casting to these older sets from the devices where your service is being accessed.

Since you seem committed to cracking down on password sharing that will require more access points to be part of your ecosystem, there would seem to be an incentive for you to make Netflix as optimally available as possible on these additional devices.  The Affordable Connectivity Program that is aggressively being rolled out by the Biden administration will help address the bandwidth issues, to be sure.  But one of the largest companies that will be rolling out such service will be Comcast, which just happens to own a competitor of yours.  Wanna bet what’s more like to get promoted more aggressively, Bel Air or Bridgerton?

No, Reed, you need to go back to a playbook initially deployed by a former owner of NBC, RCA.  Nearly three-quarters of a century ago, RCA used the carrot of software, the fledgling NBC television network and its hit TEXACO STAR THEATRE to sell an awful lot of television sets. A decade later, when color television was being deployed, NBC was the most aggressive in spending the extra bucks to make more shows in color than its competition.  NBC’s ratings may not have equaled CBS’, but RCA made out just fine by selling more hardware to make up for its software shortfall.

So here’s an unsolicited suggestion.  Align yourself with a company that is in the hardware business–one that is looking for increased market share–and make them available to more of your desired subscribers so they can circumvent some of the bandwidth issues with your service pre-loaded and optimized, particularly for 4K and beyond?

Why not start first with Sony?

Sure, Sony’s resisted acquisition previously.  And we’re not talking about buying them–your stock’s not that great now, anyway.  But you already have several strategic alliances with them already in place.  They sell you COBRA KAI and SEINFELD, among other shows.  They are in need of a significant platform for their product and library to be distributed on.  You’re losing many of the series that got you to the top of the heap last decade to clawback.  Sony wants to sell more TVs and Playstation units.

So go text Ken Yoshida today.  Having worked there, I’m aware enough to know of Japanese culture that businessmen don’t want to end their battle while they’re losing.  They had a pretty good first quarter buoyed by a billion dollar global box office for SPIDER-MAN: NO WAY HOME.  If there was ever a day to catch Yoshida-san in a good mood, today might be ideal.

Here’s the deal.  Strike an alliance where you make available to Netflix subscribers new Sony 4K TVs, with Netflix pre-loaded and in primary position on remotes, on a leasing basis, with a substantial savings over going out and buying one.  Anyone who subscribes to the Sony hardware will receive Netflix’s ad-supported service for free for a period of time, and then at a discount over whatever you set the AVOD rate card at.  If they want to upgrade to ad-free, they also receive a discount from the current $17.95 rate.

Since you’ll be adding (you hope) millions of incremental new subscribers who will need access, why not incentivize them to take advantage of your draconian decree by upgrading their experience?  It might offset the fact that they’re not finding a lot of new shows they like, or that you’re ending wonderful series like GRACE AND FRANKIE.

Now, I’m not saying this would be an easy deal to do.  But think about it–if you DON’T do it, you’re essentially admitting that you’re giving up the ghost.  And I know that’s not neither you nor Ted’s style.  And let’s face it–even if you don’t want to pay homage to General Sarnoff, pay homage to your own track record.  You know how to get people to subscribe to physical things and ship them to people.  Remember those DVDs?  You can certainly use that infrastructure to get TVs in lots of households.  I have a hunch you can incentivize UPS to help you there.  You’re both competitors to Amazon.

And consider this: if you DON’T do it, there just may be a competitor of yours that has a service they want to increase adoption of, that already has some award-winning shows and may soon have NFL Sunday Ticket, that already has the ability to sell devices and can easily go out and buy an existing TV manufacturer, or perhaps make their own, and offer a similar deal to the one being proposed herein?

Any ideas who THAT might be?

Think it over, Reed.  You don’t need to worry about my subscription, so long as I have an income.  And if you think there’s a shred of validity to this, perhaps you could help me get a larger one?

Respectfully submitted.

Steve Leblang

Until next time…


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