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Hollywood’s Innovator’s Dilemma

Public Letter to Reed Hastings

Mr. Hastings

I am writing this publicly not as a critique, but as a call to action from an engaged retail investor who deeply respects your legacy of exceptional foresight, conviction and execution. You founded Netflix in 1997, and after leading its transformation from DVD mailer to global streaming pioneer, you stepped back from day-to-day operations in 2023, and handed the reign to your co-CEOs, Ted Sarandos and Greg Peters. Since then, you have remained with title of “Founder and Executive Chairman” – a distant Godfather voice, but no longer the visionary operator who once navigated Netflix’s every existential turn.

At Netflix, you were the Architect. You saw the future of entertainment where others only saw rentals. You built a content and technology engine and entertainment platform that now serves 300 million people globally. Your company’s cultural imprint, its economic impact, and its radical transformation of the storied Hollywood industry exist because you willed these changes into existence.

But a Founder’s responsibility does not end with succession. The transition from operator to board member should not become a retreat into silence – especially now, when the industry faces a disruption far more profound than the shift from a scarcity-and-windowing approach to one based on streaming. From your X/Twitter activity, it appears you have checked out for a few years now – having spent time not only to write your book on Netflix culture, but opining much more on non-streaming related matters.

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Your Q3 earnings call presented a surface of strength: record TV time share, ad revenue on track to double, record hits like KPop Demon Hunters (which is the most popular film of all time on Netflix). And just last week, you announced your plans to acquire storied Warner Bros in a record $83B deal – a transaction, which if it clears the FTC antitrust barrier, will be monumental for the TV and film industry.

Yet beneath this immaculate outward appearance, your latest financials paint a subtler, bleak story – one of plateauing momentum.

Revenue for Q3 2025 came in at $11.51 billion, missing consensus by a hair, but more critically, normalized EPS was $5.87 – a 16% miss, and a significant sequential drop from the $7.19 posted in Q2. Your CFO, Spencer Neumann, noted that operating income would have exceeded forecasts absent a one-time Brazilian tax expense of $619 million. But that explanation masks a harder truth: growth is becoming harder to mine from the old playbook.

Engagement is high, but it is being sustained by an ever-increasing content budget and expansion into non-core areas like live events and gaming. Advertising is growing fast, but from a small base. And while Netflix explores AI tools for advertising, productivity, and improving its recommendation engine, it has yet to articulate a vision for how AI will reshape the very core of its business: content creation.

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This is where your voice is missing.

I am not a film industry expert, but as someone who have studied technological disruptions, I see what’s coming:

1. In 10–15 years, 80% of films could be AI-generated, not human-made.

If Netflix remains in its current trajectory of continuing to adopt the old model – continuing to acquire studios (like Warner Bros for a heft premium) is distraction for what should be part of Netflix’s AI capex – I expect your company to become a monopoly of a legacy 20% market.

2. The economics of producing “real” movies at scale will become unsustainable.

Actors – aside from global icons like Tom Cruise or Taylor Swift – will become training data, paid a nominal hourly rate, not extravagantly per film or music video.

Authentic, human-made stories will persist, but as a niche – the “indie section” on Netflix.

3. Actors / actresses, singers, and other digital-only entertainers will become side actors in a broader play.

Their likeness (whether that’s appearance, voice, or personality) will be used as training data for AI models who will become indistinguishable from the real-life models, and don’t cost $1-10M per production.

This is not speculation. It is the logical endpoint of the generative AI tools Netflix is already quietly deploying. Your Co-CEO, Ted Sarandos, has repeatedly echoed that “AI won’t replace creativity” – as if this idea of “creativity” is somehow unique and confined to humans. It is a defensive stance – not a visionary one – where Ted is speaking the canonical language of the incumbent in the Innovator’s Dilemma.

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Respectively, you did not build Netflix to be a fast follower or grow into a legacy model. You built it to see around corners. And right now, the corner is AI.

The market is giving Netflix credit for past wins, but it is not pricing in the coming reinvention of content economics. Your current leadership (Ted and Greg) have been excellent at execution – but this moment requires re-foundation. It requires the Founder’s voice – your visionary voice – to re-engage, not as “Executive Chairman,” but as the “Steve Jobs” when he returned to Apple, which catalyzed its stratospheric rise over the next two decades.

The market is urgently asking you to:

1. Articulate how Netflix will lead the AI content revolution without losing its soul;
2. Share Netflix’s plan on how it will be shifting its capex for AI-generated content;
3. Hire leadership / talent who are trained in this new artform of AI video production;
4. Promote this new model to the general public – not from a dismissive “AI lacks creativity” mentality, but one focused more on an open dialogue on perhaps how “storying telling transcends the actors or actresses who performs” (I am not film or theater expert, so this could be pure nonsense).

Respectively, Mr. Hastings, you need to take a much more active role both at Netflix and publicly to ensure your legacy does not become a passive casualty of the very disruption you once pioneered. How ironic would that be.

Shareholders, creators, and the market need to hear from you soon. If they do not see renewed visionary engagement from you next year and how Netflix will be adopting to this new era of AI-generated content, although Netflix may insulate itself from market forces for the next few quarters, it will inevitably risk losing its lead role in this epic play.

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