Reed Hastings sure knows how to bring down the mood in a room. The Netflix founder and CEO was a guest Wednesday at the Magazine Publishers of America's Innovation Summit, but he couldn't bring himself to tell his hosts what they surely wanted to hear.
During a keynote interview, Hastings confessed that, over the past five years, he has gone from subscribing to five magazines -- Fortune, BusinessWeek, Harvard Business Review, The Economist and The Atlantic -- to subscribing to none. He canceled all his subscriptions, he said, after discovering he's able to read all the articles he wants online for free.
"I love the content. I still get the content," he told his interviewer, John Byrne, the executive editor of BusinessWeek (or should that be Bloomberg BusinessWeek?). "I just don't pay for it anymore."
Hastings' comment elicited audible groans, perhaps because many in the magazine industry regard Netflix as a sort of kindred spirit: a company that sells content via subscriptions and delivers its products via the Postal Service. The biggest magazine publisher, Time Inc., is even experimenting with a service called Maghound that has been described as "the Netflix of magazines." Hastings underscored the parallel when asked about the gradual shift of the movie-rental business from physical DVDs to streamed video. "Our profits come from mailing things out," he said. "We're as afraid of the streaming, broadband future as you are."
He wasn't totally without encouraging words for his audience, however. Asked whether he thinks there's any hope of getting people like him to pay for magazine content online, he said, "People will pay for differentiated content. They're just not going to pay for commoditized content. If you can figure out how to sell bottled water, you can figure out how to differentiate editorial content."
That said, he added that the advantage will always belong to whoever comes up with a cost structure that allows them to deliver content to consumers for free. "If something can be ad supported, that is absolutely the most powerful model." Chris Anderson, take a bow.
Netflix founder: I won't pay for magazines anymore