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Wall Street Has No Clue on Netflix Stock

Hastings masterfully took control of the conversation on yesterday's call. He altered its course. He provided analysts and investors with a different lens with which to view Netflix's future. At one point, Hastings said: "We have enormous challenges ahead, and no doubt will have further ups and downs as we pioneer Internet television."

"As we pioneer Internet television."

Whether it was the case or not, for most of 2011, Hastings made it sound like Netflix's cash was going into a black hole of content acquisition. And in some respects, it was. On yesterday's call, Hastings repositioned Netflix as a company with a clearly defined purpose.

Wiser Content Investments

Netflix will continue to invest in content that offers its subscribers excellent value and provides the company the most bang for the buck. And, as it expands and achieves profitability in a new market, Netflix will take those profits and reinvest them in further expansion. It seems very Amazon-like to me.

When you're a pioneer, it's perfectly fine to sacrifice the short-term in the name of setting yourself up to seize long-term opportunity.

Finally, Hastings is saying the types of things that should excite long-term investors. He's talking like Netflix is a startup.

While Hastings, in response to a question I sent in, claimed Netflix is "not reigning in content costs" and has undertaken "no shift" in its content-acquisition strategy, the numbers tells us otherwise. We'll get the official count when Netflix releases its 10-Q in a couple of days.

But on the call, CFO David Wells noted that off-balance sheet content liabilities are sequentially flat at about $3.8 billion. That marks the second quarter in a row when that number has not increased considerably.

Time will tell, but it does appear that Netflix is signing smarter, more specialized and more focused deals. As it noted in its Q2 letter to shareholders, it is signing more exclusive deals for TV shows (e.g., Mad Men and Breaking Bad) as well as movies (e.g., a deal with the Weinstein Co. that gives Netflix a window of exclusivity once the initial Pay TV period expires). Fewer and farther between are agreements that provide Netflix with loads of random rerun sitcoms that networks can no longer monetize.
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