Barry McCarthy on Netflix, Spotify and Leading Peloton’s Turnaround

In this December 2022 interview, Peloton CEO Barry McCarthy talks with Harry Stebbings about his experience at Netflix and Spotify, leading a turnaround and the economics of subscription businesses. His assessments of Peloton reflect his role at the company and the information available at the time.

McCarthy began in venture investing in the 1980s, made mistakes and realized he wanted an operating role. He joined Netflix in 1999 when it was small. Later, after retiring, he became interested in Peloton as a user and thought his experience might help address its challenges.

He says he wanted to work on another consequential challenge with a team and believed Peloton’s mission resonated with his interest in fitness. He sought the CEO role after assessing the turnaround, rather than relying on a COO role without final authority. His motivation and the company’s prospects are his own account.

At Netflix, he recalls Reed Hastings returning to an active leadership role, bringing in Patty McCord and rebuilding the team. McCarthy says Netflix found stronger product-market fit with subscriptions than with its original à-la-carte offering and then grew rapidly. The growth figures are his recollection, not a separately verified financial series.

Asked what drives him, McCarthy says he is escaping boredom and enjoys the collective achievement of working on a team. He compares the difference between an individual and a company to the difference between a solo performance and an orchestra.

He moved from California to Stockholm to join Spotify because of music, the opportunity and his trust in Daniel Ek. McCarthy says their skills were complementary: Ek brought product and engineering expertise while McCarthy focused on financial and business-model questions. He describes the move as personally enriching for him and his wife.

For Spotify’s direct listing, he says the company already had substantial cash and did not need to dilute existing shareholders to raise more. The structure offered a way to become publicly traded without a conventional primary offering. He cautions that a direct listing is not appropriate for every company or market.

He expected difficult surprises in his first CEO role but says the emotional resilience required in a turnaround was greater than anticipated. Problems reach the CEO continuously, and the leader must solve them while maintaining the energy to motivate others.

McCarthy says high performance begins with a business model capable of sustaining competitive advantages, followed by recruiting, developing and retaining strong talent. He identifies Peloton’s brand and user experience as strengths and says pandemic-era adoption brought scale. These are the CEO’s assessments, not independent evidence of future performance.

Harry asks whether pandemic growth also created expectations the business could not sustain. McCarthy says the Peloton team did not sufficiently anticipate a post-pandemic shift, while acknowledging the difficulty of the decisions at the time. He contrasts that with leaders he believes can update strategy rapidly as information changes.

He describes a company as a professional sports team rather than a family: management should recruit talented people, give them a chance to perform and replace a player when the role is not working. He says he accepted that possibility during his own years at Netflix. This is his management philosophy, not a claim that the approach suits everyone.

When faced with a problem, he first asks whether he has the relevant expertise and whether the underlying data actually supports the stated diagnosis. He tries to trace the issue to its root cause rather than accept an unexamined solution.

He uses the one-way versus two-way door framework: reversible decisions can move faster, while irreversible choices deserve more investigation. Peloton’s experiments selling through Amazon and Dick’s Sporting Goods are, in his view, decisions that could be revisited if they fail.

Before starting an experiment, he says leaders should define what success looks like. For distribution through Amazon, his example is reaching incremental customers at an acceptable margin. Merely shifting someone who would have bought directly at a better margin would not necessarily create value.

McCarthy acknowledges that he can become frustrated when surprised by bad news or presented with reasoning he considers unsupported. He knows that visible frustration can demotivate a team. He wants to give people a chance to be heard and explain disagreements calmly, while admitting he can improve.

Discussing disagreement and commitment, he contrasts the time Spotify sometimes took to build organizational consensus with faster decisions in a Silicon Valley setting. He says one benefit of a more inclusive process can be stronger commitment after a decision, though the pace and culture vary.

He argues that decision ownership should be explicit: others can provide input, but the owner is accountable for the result. He recalls a Netflix debate over film content in which Reed Hastings pushed an idea and Ted Sarandos ultimately approved it; McCarthy says the investment performed poorly and the episode illustrated why experts need authority to resist a leader’s preferred choice.

For boards, McCarthy distinguishes management’s responsibility to run a company from directors’ role in offering context, questions and occasional functional expertise. A director never has the same visibility as the management team, he says, so the CEO must share enough information to make board advice useful.

He says founder-led boards can differ from boards led by professional managers: a founder’s stature and choice of directors may make challenge harder. He wants CEOs to build relationships, seek help proactively and give directors enough context, while recognizing that board dynamics differ by company.

On delivering hard feedback, he suggests adapting the message to the person receiving it and setting aside ego. A board member’s purpose should be to help the CEO see an issue clearly, not merely to demonstrate intelligence or win a confrontation.

McCarthy explains demand creation through Netflix’s DVD-by-mail era. He says Blockbuster’s physical stores emphasized new releases, while Netflix could make a much larger catalog discoverable through recommendations. He cites a 90% versus 30% new-release mix in the two models; the interview does not independently establish those historical figures.

His economic argument is that a distributor that understands preferences can recommend a lower-cost title that still satisfies a customer, potentially improving its margin. He applies the idea to music discovery at Spotify. The effect depends on customer satisfaction, supplier agreements and actual behavior; it is his model, not proof of specific outcomes.

Harry asks whether suppliers will leave if demand is shifted away from their content. McCarthy says direct-to-consumer distribution requires investment and that many suppliers have tried alternatives before licensing. He treats Disney as an example of a brand with a strong enough consumer relationship to support a subscription service, in his view.

In the quick-fire round he says the turnaround left him little time for books and identifies pattern matching as a strength and interpersonal skills as an area he wants to improve. He avoids claiming a formula for other CEOs, but returns to the importance of a sound business model and talented people.

He credits investor Jay Hoag with supporting Netflix through a difficult financing period and helping bring him to Peloton. McCarthy says his own financial resources help him focus on work and marriage, while acknowledging that friendships can suffer. These are personal reflections and an interested account of his relationships.

Looking forward from December 2022, McCarthy says he hopes to complete Peloton’s turnaround and reach cash-flow break-even, then solve for growth and succession. These are his goals and expectations at that moment, not a verified later result. The interview ends with mutual thanks.