Did Amazon's Earnings Signal End of Netflix?

NEW YORK (TheStreet) -- Investors in Netflix (NFLX) have a real problem on their hands. Management currently doesn't believe it's important to fully monetize its subscriber base. The mentality of Netflix management is akin to Nike producing one style of shoe. Instead of only selling one swoosh to each customer, Nike knows what Netflix's management hasn't figure out yet. Offering many kinds of styles and colors is a key to maximizing revenue and profits.

There have to be limits of course, but is it really appropriate for investors to have to sit idly by while the management team sets its goal for styles and colors at a grand total of one? Netflix's CEO Reed Hastings can do better than that for investors.

There is no question about the brilliance and business intellect of Hastings, as demonstrated by Netflix's crushing of Blockbuster. While highly impressive, we also see the same sort of thing happen with smaller family-run businesses from time to time. The owners and or management guide a company from zero to hero very quickly and then find they can't manage the growth anymore. Basically the company outgrows the management.

This is the key moment when management must decide if they are able to navigate in new waters and environment or not. If they can, everyone wins, but if they are not up to the task, we end up with is another flash in the pan "here today gone tomorrow" type of business.

I like Netflix as a service too. I watch mostly documentaries and some movies when I watch TV. Netflix streaming almost always performs well without any issues. Netflix has done a great job delivering what they do have in content.

Remember Palm, or how about Crocs, AOL and First Solar? These companies made big splashes for a short while, but their management teams where not up to the task of navigating through the vastly changed landscape.

It doesn't take too many tripped landmines before shareholder equity gets blown to pieces. Price increases, ease of use, programming and monetizing current customers instead of focusing on trying to gain more low-income producing customers - these are all landmines Netflix better not step on or step on again.

1 2 Next › Last »