Andy: Tell me what stage you’re at in your cloud evolution.
Reed: Well, we started about four years ago in 2008 and we recognized that with the advent of streaming that Netflix computational resources was going to grow rapidly. We didn’t really appreciate how rapidly, but very rapidly. So we started to figure out how to build out our data centers and about that time someone sent me Nicholas Carr’s book, The Big Switch.
And, I have to tell you for me it was like a Damascus Road experience. When reading that book and he pointed out that companies, like Netflix used to have a VP of electricity. That was a real role, that was an important role, because you generated your own electricity. You know, that’s so absurd by our modern standards. It hit me that, wow, this is really happening and that’s when we started working with AWS.
We got our first stuff up in late 2009, 2010 and now about 95% of our computation and storage is in AWS. We’ve got some remaining low volume systems that we haven’t yet converted, but we hope by the end of next year to be the largest business in the world that’s 100% on AWS outside of Amazon Retail.
Andy: What gave you the confidence in 2009 to move to the Cloud? You were ahead of your time.
Reed: You know, we were ahead of our time, but we were facing some extraordinary growth. So, I’m streaming at that point in 2008 was about a million hours a month and now it’s over a billion hours a month. So, we’ve this thousand fold ramp up in computational resources necessary over just four years with the add — basically broadband networks and streaming. So, we had to take some risks, doing that kind of build out with your own data centers was going to be challenging.
And, it’s worked out great for us and the key is that now we’re on a cost curve of an architecture. As all of this room does more with AWS, we benefit by that collective effect that gets you to scale and brings the prices down.
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Andy: What do you see as the biggest benefits for you? Where do you want to see it continue to evolve?
Reed: Well, the biggest benefits are the scale that you can operate at, which is basically the pool of everybody together. That gives us both agility being able to spin up a thousand instances and down and it allows us to participate in a cost curve that we couldn’t as an individual customer drive. So, those are fundamental.
Andy: Amazon the retailer competes aggressively with Netflix in the video space. What gave you the confidence to move your infrastructure to AWS?
Reed: Well, I think both Jeff and you have been very clear that AWS is a great business and should be run independently and frankly the more that AWS Retail competes with us, then the better symbol we are of– it’s safe to be on AWS. So, the more that we continue to invest in AWS; it becomes symbolic for the rest of your customers of well if Netflix can be on AWS I guess it’s safe for everyone else.
Andy: Where do you see the biggest tech trends? This group knows that you’re a real visionary, what do you see as the big tech trends coming up in the next number of years?
Reed: There are a couple, you know both on the client side and the server side. You know, as fundamentally fantastic as AWS is, we’re really still in the very primitive first assembly language kind of phase of cloud computing. And, when you have to pick individual instance types, M1, M2, M3, you know something’s wrong, right. You as a developer shouldn’t have to be picking individual instance types.
It reminds me a lot when I first started at computing and register allocation was the big deal and how you allocated registers made a huge difference in performance and when you loaded and unloaded them. Then, this magical thing, compilers came along and the compilers did an awfully good job at register allocation. Then only on occasion would you have to drop into a sampling code and do your own register allocation.
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And so, we’re kind of at that stage before the compiler, you know and in over the next five or ten years things will happen to make cloud computing much easier where you don’t have to do things like pick instance types. In particular, the core underlying next step in the technology is being able to move running, live instances. Once you can move running, live instances at the virtualization level, then Amazon automatically can move your jobs around and VMware does this today with VMotion and has done this for many years.
So, it is technically possible, but it’s extremely demanding to be able to do that at scale and so think of that as the next stage on virtualization for all the cloud providers. Then, the benefits it brings is you can just say compute and Amazon will automatically search and find the best type of instance relative to your cost profile. It will also compact instances so that the bisectional bandwidth will be much higher.
It allows tremendous efficiency gains, but when you think about what’s required to move a running instance seamlessly, it’s an enormous technical challenge. So we wish you great work on that and hope for that next wave, which will hopefully come in the next couple of years. It’s already today, even without that, yeah, we have to pick instance types, but it’s a fantastic system. So, that’s what’s happening on the cloud side.
On the client side, it’s really the rise of touch, these handheld devices whether they’re tablets, whether they’re glasses, wearable computing, the level of personal computing that we’re going to have is incredible and then it’s all cloud assisted. So, Siri is a great example, you talk a little bit, a DSV processing sends it up and you know it’s a big cloud application that tries to get match what you’re thinking of doing.
And as you can see, we need more Cloud resources, that will make Siri better. If we can go 10X in the cloud resources for voice processing, we can at least double the effective knowledge that’s felt in things like that. That’s only one scenario, there’s going to be so many scenarios that are basically personal computing cloud assisted that will be very transformative over the next five or ten years. The work that you do to bring down the cost and to make things scale is incredibly powerful for application developers envisioning these new scenarios for end users.
Andy: You’ve been one of the most successful CEOs of our era, what advice would you give them?
Reed: You know, I always just go for what’s exciting and I’ve never been someone who set out to go to business school, I was in engineering school and then it was exciting to build the product. Fortunately, those products have been very successful, but for me I think different people succeed in different ways, depending on your particular background.
For me, it’s just always been this passion for doing great product and then you build a business around it so you can keep going. The passion is when you watch something great that — it’s just amazing and I think one that you will like a lot on Netflix coming is House of Cards with Kevin Spacey. It’s coming up February 1, debuting on Netflix, so that will be my content recommendation for you.