THR's 2011 Biggest Rule Breakers: Kim Kardashian, Netflix's Reed Hastings, Chuck Lorre and Ashton Kutcher

 Brigitte Sire

The Rebels: Reed Hastings and Ted Sarandos
Photographed by Robyn Twomey on Nov. 28 at Netflix headquarters in Los Gatos, Calif.

When a Wall Street banker told Hastings in December that just a year ago Netflix had been viewed with a mix of fear, envy and mystique, the 51-year-old CEO quipped: "Now it's just pity."

At least he is keeping his sense of humor. The company's stock was decimated in 2011, slashing about $313 million from Hastings' personal wealth. But don't let the stock price fool you, because Netflix made dramatic strides in 2011 and has cemented its place as a major player in Hollywood.

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Among its accomplishments: It plunged into original content by partnering with producers Kevin Spacey and David Fincher on the big-budget "TV" show House of Cards that will debut in 2012 (with Spacey set to star); it resurrected Fox's cult favorite Arrested Development with new episodes coming exclusively to Netflix in 2013; its presence as a bidder has increased the value of library TV and film content several-fold; and it expanded its streaming service so that it is now in 45 countries.

Netflix has 23.8 million subscribers in the U.S., and a Knowledge Networks study indicates that 35 percent of all Americans ages 13 to 54 use its service at least once a month.

The company also has been driving viewership of independent films, like Take Me Home Tonight, a 2011 release from Relativity that earned just $6.9 million worldwide in theaters but is a hit on Netflix.

"We bet a long time ago that independents would have a bigger impact in future years, and that's playing out very nicely," says Sarandos, Netflix chief content officer.

Hastings and Sarandos, 47, primarily focused on Netflix's streaming business in 2011, and even tried to separate it completely from its DVD service, which it planned to spin off into something called Qwikster, though the effort was quickly abandoned after a backlash from users.

Nevertheless, Hastings predicts that in 10 years, half of all TV watching will be done via the Internet, and those who doubt that Netflix will thrive in that environment should remember that in 2005, when Netflix was a small company pioneering a new business, it successfully stared down giant retailer Walmart, which abandoned its effort to compete.

Streaming is such a big part of Netflix already that "some reports put the Netflix traffic on a Sunday night at one-third of the total backbone of the Internet," boasts Sarandos. "And we're in just 1 percent of global households, so there's plenty of room for growth." -- Paul Bond

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