Netflix (NFLX) reported third-quarter earnings last week, and analysts are conflicted about what will happen next. The company beat analysts' forecasts by every measure: Netflix stock is up 50% this year and is trading at an all-time high ($768.45 as of today). But there are reports that a subscription price hike is on the horizon, which could, in turn, affect the share price.
Netflix added more than 5 million customers in the third quarter. Still, revenue is expected to grow 14% year-over-year (YOY) and earnings are expected to grow 38% YOY.
In 2025, Netflix expects revenue of $43 billion to $44 billion, up 11% to 13% from its 2024 full-year guidance of $38.9 billion.
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At the beginning of Netflix's 2024 run, Reed Hastings, co-founder and chairman of Netflix, sat down for a "View from the Top" interview with Katie Davis at his alma mater, Stanford. The hour-long conversation touched on everything from his philosophy about rewarding "adequate" employees with severance packages to building a championship team.
Related: Analysts revise Netflix stock price targets ahead of earnings
Build a team, not a family
Hastings says his organization is built around the principal idea that "Everyone has to fight for their job every year, like it is in professional sports. And in professional sports, if you're going to win the Stanley Cup, it's because you've assembled the most amazing group of hockey players that have ever been together. Our task [is to build] organizations like a championship team."
Most managers are not aggressive enough, he adds, but says he does not come at this practice from an ethical or judgment standard. The goal is to be "honest, not hurtful," Hastings says. "We're a professional team...we are trying to get away from saying 'you suck.'"
On the way to building his own championship team, Hastings cultivated what he calls "the keeper test."
Managers are asked to think through whether or not they would fight to keep someone who is thinking of leaving. If the person in question doesn't pass the keeper test, Hastings advises offering a severance package right away.
Netflix's severance packages, by the way, are very generous. "Typically like nine months of compensation," Hastings says. "And it's kind of like a professional sports team, where it really sucks to get cut from the team, but it's not an ethical judgment or moral judgment or judgment of you as a person."
Related: Netflix hints at when subscriber rates may rise
Hastings has found that a generous severance package helps managers do the unpleasant task of letting people go.
It "is a bribe to the manager to get the job done because managers, almost by definition, like people," he says. "They're 'good people people,' so they really don't like firing people. But if there is a generous severance package, it's not so bad."
Ernesto S. Ruscio/Getty Images/Netflix
Focus on the qualities that make great team members
During the Stanford interview, Hastings also talked a lot about love. "(With) great teams, the players love each other and are warm and embracing," he said.
Hastings especially appreciates "big-hearted champions, (the kinds of people) who pick up the trash." Netflix wants people who are generous in spirit and who do all kinds of things for people all the time. "A champion is someone who is going to do the discipline to become great in their field and demands excellence; someone who doesn't just want to pass through life," Hastings says.
"We want to be in a workplace where you feel a strong sense of responsibility," he says. "So narrowly you pick up a piece of trash, but more broadly, you do the right thing even when no one's looking."
If you can build a team that aspires to that, Hastings says, "you'll be able to build a very strong and resilient organization."
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