Netflix Has Reached a P.R. Inflection Point

Reed Hastings
Photo By Justin Sullivan/Getty Images
Matthew Belloni
October 17, 2021

Netflix co-C.E.O. Ted Sarandos has taken most of the heat for Dave Chappelle’s anti-L.G.B.T.Q.+ special, The Closer. But an underrated aspect of this communications and employee relations disaster actually takes its root in the business philosophy of the company’s other co-C.E.O., Reed Hastings.

From the beginning, Hastings has operated Netflix like his employees are part of a small family in a quiet Silicon Valley utopia. It’s all in his management advice book from last year: Everyone’s an adult here, he says. Direct and brutal honesty is rewarded. “Sunshine” your problems so everyone knows about them … and can learn. Give employees access to their colleagues’ salary information and strategy documents, just tell them not to get jealous or competitive. And company communications—even on controversial topics or with sensitive information—should be delivered directly to staff with the expectation that they not be shared outside the company. We trust you, so you trust us.     

That’s nice, especially for a company that also uses data as a sledgehammer and fires people so often it’s become an internal joke. But it doesn’t appear that Hastings’ comms strategy is tenable any longer. Or at least there will be consequences for clinging to it, as Netflix saw last week with the Chappelle flap. A media darling suddenly found its employee uprising on the front page of The New York Times, with a digital walkout forthcoming. And who knows what’s next?

Netflix now has more than 12,000 employees in dozens of countries, and many of its decisions are bound to be unpopular with vast swaths of them. It has grown so large, and become so siloed and faceless in every other aspect of its operation—especially during the pandemic, when everyone’s solo at home—that it sort of needs to grow up, itself, and, in my opinion, start treating its employees like, well, employees.  

That happened to its Valley peers, too, as early employees at Google and Facebook have said. I’m no business school professor, but it seems like a naïve pipe dream for a massive organization to expect its angry employees to refrain from acting out in response to something like the ham-fisted defense of Chappelle. And this is why so many in Hollywood were laughing when the whole thing blew up. Netflix was operating like this was an internal issue; everyone else knew this was both internal and external, and it was playing horribly in both arenas.  

Most large media and entertainment companies, when they communicate with employees on controversial subjects that are being covered in the press, usually also send the correspondence to journalists. After all, the emails or town hall presentations likely will leak anyway, so you might as well control the timing of the messaging and get ahead of any potential backlash, right?

Netflix doesn’t do that; it’s just not the Hastings way. And for much of its existence, that strategy helped build a culture of trust: to the point where correspondence on past controversies, like the 13 Reasons Why copycat suicides and the uproar over racy images of children used to promote the documentary Cuties, never leaked.

But now Netflix’s internal memos do leak, as did a financial breakdown of Chappelle’s show, for which the alleged leaker was fired. The company is past that inflection point. The strategy made a bad situation worse. Sarandos’ first memo, sent on a Thursday to higher-level employees, stated his general belief that hateful content doesn’t inspire real-world violence. He then followed up on Monday with a second memo to all employees, which was designed to respond to specific questions and articulate a more detailed defense of the special by comparing it—bizarrely—to violent, first-person video games which, he said, have proliferated despite lower crime rates in some countries.

A clumsily worded statement internally was made markedly worse externally when that second memo leaked to the press days after it was sent; it played as Sarandos “doubling down” on an objectionable rationale, rather than simply explaining to a larger group of employees what he was thinking, as was intended. The same thing happened when three employees were suspended for attending a managers’ meeting without permission. Of course that leaked, and it looked like retaliation for criticism, rather than a separate policy violation. (Those employees were soon reinstated.) The bottom line: Netflix could have controlled this situation a lot better if it realized it wasn’t just communicating internally, but externally too, as befitting a $280 billion company. 

This extends to Netflix’s P.R. strategy in general. Its global communications chief, Rachel Whetstone, who I’m told played a large role in the Chappelle comms strategy, is known for rarely talking to journalists, and almost never on the record. (Whetstone came to Netflix after stints at Facebook, Google, and Uber; she replaced Jonathan Friedland, who, if you remember, resigned in 2018 after he used the N-word in a meeting.) The company is currently without a U.S. comms leader after Richard Siklos stepped down last month.    

Netflix prefers to let talent speak for themselves when it comes to the content on the service, but in this situation, Chappelle probably wasn’t the best advocate for himself, as he proved when he told a crowd at the Hollywood Bowl that he was “loving” being canceled. The rest of the response seemed like it came from a company so used to a fawning news media that it dramatically underestimated how this would all play out.  

I’m certainly not telling Reed Hastings how to run his company. He’s done pretty well disrupting the entire entertainment industry on his own. But the inflection point has been reached, and the Netflix backlash will likely be worse next time it faces something controversial—which it will, of course, and probably soon. Whatever it is will likely become another major scandal if handled the same way.