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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV