Netflix CEO Explains The Conversion Rate Of US Dollars To Joy

Netflix CEO Explains The Conversion Rate Of US Dollars To Joy

Reed Hastings, the CEO of Netflix, just sat down with the Wall Street Journal and talked about everything from the AT&T-Time Warner merger (he’s more or less neutral) to global reach (Netflix wants a large international customer base like Facebook’s). But it’s his perspective on how much money it costs to produce joy that’s particularly interesting.

Netflix CEO Reed Hastings at CES 2016 (Photo by Ethan Miller/Getty Images)

Hastings explains that the highest end TV shows cost about $US10 million ($13 million) an episode. And he expects a return on that, naturally. But he doesn’t talk about the return in dollars and cents so much as a conversion into “joy”.

From the Wall Street Journal:

MR. BERMAN: Take us through the economics of greenlighting a show.

MR. HASTINGS: We’ll collect this year about $8 billion [$AU10.5 billion] of customers’ money. We say that money’s in trust to create joy. We have to turn that into the most joy possible. We look and we say, for every show, if a show cost $100 million, how much joy, how much viewing did it create? If it costs $50 million or $200 million, of course you want different amounts of joy. So we look at it as how much joy can we create of your money. And if we turn it into joy effectively, then you’re happy and you tell your friends and we grow.

It’s an interesting way to look at things, for sure. Especially when the conventional wisdom of the past decade has been that producing content for less money is the best way to go. Why do we have so many reality TV shows? Because they’re cheap as crap to produce. Scripted dramas like House of Cards and Orange Is the New Black cost real money.

Has Hastings figured out the conversion rate of the US dollar to joy? If he has, it’s an interesting way to look at the future, considering the trends in media. Everyone is supposed to be producing more joy with less money. But Hastings seems to be acknowledging that high-end content is worth paying for, provided it brings enough “joy”.