Article first published in Forbes Monaco July/August 2021 issue.
His life reads like a movie script. “I talked a guy named Funky Sam, who ran a poster shop out of Sausalito, California, into making me his European salesman in Germany. I had just dropped out of senior year and it was my first job,” a low-key Mitch Lowe tells me over drinks at the Monaco rowing club. The former co-founding executive of Netflix is in town for the first Monaco Streaming Film Festival, among other investment events.
The Omaha, Nebraska, teenager had managed to negotiate a move to Munich in the early Seventies where his aeronautic engineer father, newly divorced, was working as a consultant. “I hopped on an Icelandair flight with rolls of blacklight rock posters and an order form.”
With a 20% sales commission, he was earning 100,000 Deutsche Marks ($60,000 in today’s value) selling fluorescent posters—some with Disney characters in lewd positions, the seven dwarfs looking under Snow White’s dress kind of thing—to chains of bookstores in Munich and Frankfurt. After six months, Disney sued over copyright infringement and the company went bust.
Lowe was unfazed. He bummed around Europe on his BMW motorcycle, had a stint as a DJ in Postino, learned French in Paris and lived in Ibiza for six months before heading to Greece with his girlfriend. A waylay in Eastern Europe gave him a plan. “With the farms and costumes in Romania, it was like entering the 1800s. I bought an embroidered outfit—a fox fur trimmed dowry vest with beads—for five dollars. When I arrived in Greece, someone offered me a couple of hundred dollars for it.”
He decided to purchase a diesel Mercedes in Heidelberg and drive it to Vienna to buy Romanian lei for pennies on the dollar. “In the days of Ceaus,escu there was no official exchange rate. We would stuff the bills in our big hiking boots thinking it was the last place customs would look.” Once in Romania, Lowe would go up to the Transylvanian mountains bordering Russia and buy beaded belts, vests and blouses that he would then drive to Greece from where he would ship it all to California. “I sold the stuff at Jax on Rodeo Drive for 400 or 500 dollars. I got 200 and paid less than five for any of it.”
He got caught twice, not with money but blouses. “You should have seen the look of disappointment from the customs officers who thought I was trafficking drugs or arms.” His passport was stamped persona non grata.
The back and forth of the lifestyle wore thin and Lowe headed to Roquebrune-Cap-Martin in France where his father was then living. He scored a two bedroom ground floor apartment in a Monaco villa on avenue de Citronniers for $160 a month. “The house had a garden overlooking the Mirabeau turn so I had lots of friends during the Grand Prix.”
He describes how a chance encounter at the Hotel de Paris led him to meet Baroness Tamara de Lempicka, the Polish Art Deco painter, who introduced the 21-year old “to some people”—Andy Warhol, his manager Fred Hughes and Bob Colacello, former editor of Interview magazine. “They were looking for someone to help them raise money for a musical they were making. We spent six months travelling the Riviera. Andy would take a Polaroid and we would project it onto the canvas that he would then paint. We sold one painting for $25,000 or two for $35,000. Everyone wanted to be Andy’s friend yet he was oblivious to all the interest around him.”
Lowe admits he was “not rich” and his newfound social life with kids of wealthy Italian families was at times “uncomfortable.” “We would all go to lunch and one friend would pick up the tab one day, another the next. When it was my turn to pay, it was everything I had. As the token hippy of Monaco, though, I was invited to every party. It was a great time,” the 69-year-old reflects. But it was time to go home.
Back in the U.S., Lowe “got serious.” He had learned that he loved doing business, working with people and negotiating, so he started in import-export, dabbled in early computer graphics and then eventually opened a video store. “Half of the good things in my life happened because I am open to everyone and any idea, and Netflix may not have happened if I had not talked to this bearded, sandal-wearing backpacker, Marc Randolph.” (Randolph, who co-founded the streaming service with Reed Hastings in 1997, has stated, “Mitch joined us before we were Netflix, he was part of the founding team at Netflix, and a vital part of our successes.”)
Netflix tried to solve two “pain points” in the ecosystem of watching movies—late fees and lack of selection at a typical video store. “Blockbuster was making more than $5 billion in revenue but was one of the top ten most hated brands because of late fees. We knew the ideal way forward was to deliver movies digitally but in 1998 there was no video online. We needed to take a step-by-step approach.”
The idea was to build “a big loyal base of customers” so that when the time came, they could migrate to digital delivery. A 4-gigabyte DVD could be mailed with a 32-cent first class postage stamp. “When we launched DVDs by mail, paying for one title at a time did not go over well so, in February 2000 we switched to a $19.95 monthly subscription to mail unlimited movies to a customer’s home and it took off.”
He adds, “When Netflix launched its streaming service in 2008 it was free. Nobody wanted to pay for it. You got it free if you were getting DVD rentals. It was not until 2010 when people paid $9.95 a month for the streaming service on its own.”
The analytics department team used to ask the team how big they thought Netflix would get. “In 2003, 1.7 million was our nirvana number,” says Lowe, whose favorite film is Lawrence of Arabia. Today Netflix has 205 million subscribers worldwide, including 70 million in the U.S. and Canada. (As the average Netflix account has three to four users, the number is probably closer to 250 million.) “Typically the average U.S. consumer watches 35 hours of TV a week, up to three times more than Europe. This number was 20% to 50% more during Covid. Hopefully people are going to back to real life.”
In the early 2000s, the average Netflix customer watched six DVDs a month sent from the warehouse.
First quarter figures in 2021 showed that Netflix’s net income rose 140%, from $709 million to almost $1.71 billion, over the same period last year while revenue increased 24% to $7.16 billion.
The entertainment industry’s perception of the steaming giant three years ago was, Lowe describes, “You are cannibalizing the entertainment business” but he says, “Now it is seen as a tonic for a slow and small investment cycle. The interesting thing is that Disney, Warner, Universal and Fox all started regretting their long-term license deals and now that Netflix is a studio, they made their biggest competitor by giving all the original content. Netflix is spending $18 billion a year on new content, which has forced Disney and Fox and everybody else to do the same thing. There is an absolute renaissance of demand now for filmmakers, writers, actors, cinematographers, editors … there is so much need for more and more content and people are now seeing this as positive.”
For the president of the DVD kiosk Redbox, “entertainment has become commoditized,” a time filler on a phone or iPad. “It is okay to watch sitcoms on a mobile device but a beautifully created movie is much better on the big screen. We are not seeing that balance, though, in the movie theaters, where owners are only playing big hits and an individual has to decide if the movie is worth a certain amount of money. They want to try it and, if they don’t like it, switch to another content so it depresses demand.”
Since leaving Netflix, Lowe (who is worth an estimated $15 million and lives in Mexico) has been investing time and money in technology for privacy and security in communications. “Entertainment companies are mining enormous amounts of data that reveal everything about you and are selling it to marketing companies. Netflix does not sell it but almost everybody else does,” he reveals. In Monaco, the entrepreneur attended a private lunch at the Yacht Club for the launch of UserCrypt, a messenger app that, unlike Whatsapp, is secured with end-to-end encryption with all cryptographic operations made on the user’s device. “It aims to give control back to the individual because it achieves data through patented independent encryption which cannot be accessed or extracted.”
UserCrypt’s tentative roll out in September will be an all-in-one service package—Zoom, Dropbox and WhatsApp—for a monthly subscription. “It will be a value proposition, about a 70% discount from what you would pay for these unlimited services individually.” Users will also be given a crypto token each month to pay for the next month, which Lowe points out is an “interesting way to introduce people to cryptocurrency, something that is clearly on an upward trend.”
Mitch Lowe with cofounders of UseCrypt. Paweł Makowski (Left) and Jakub Kokoszka (Right).
The former CEO of MoviePass travels around the world giving talks about innovation, entrepreneurship, company culture and the $2 trillion entertainment industry to a range of audiences, from universities in Costa Rica to 5,000 insurance sales people in Sydney, Australia. “For both the startup and big company, you must continually improve the way you do things. Simplify the product—remove the friction of a customer understanding, consuming and paying for your product.”
He says big businesses also need to help keep employees from trying to hide their mistakes. He cites the culture at Netflix. “When you made a mistake, you publicly described what you thought you could do and what messed up, which ended up teaching people you have to take some risk.”
As a public speaker, young people, he admits, are the hardest to reach. “They have heard it all before from teachers and parents—persevere and become an expert. I say, ‘Just start.’ The only way you’ll know what you want to do in life and what makes you happy is by trying something. If you don’t like it, try something different.”
On being ambitious, Lowe relates, “A part of me used to feel that I had to prove myself because I did not graduate from high school and another part was driven by the fact that my father, in my view, never gave me credit. But I learned you can do anything you set your mind on as long as you do not over think it.” THE END.