What the media fails to mention -- and Hastings would never bring up, assuming, again, he's even conscious to the reality -- is that the 2011 split/price hike was actually Hastings' best decision ever as Netflix CEO. That is, of course, if your goal for Netflix is long-term shareholder value creation, not the momentum-fueled magic carpet ride Hastings implicated as one reason for his stock's run.
By not seriously considering revenue outside of subscription dollars, Hastings, over the long run, does investors a disservice. And you can make the case he could ultimately hurt Netflix end users.
From an investment perspective, Hastings is not maximizing Netflix's potential. He will tell you, presumably, that by focusing on $8/month all-you-can-eat and not doing adverting, on-demand and/or e-commerce, he preserves the sanctity of the Netflix service. That's a line of crap.
Hastings has no plan beyond the hope Netflix can achieve the aforementioned scale. Other companies -- ranging from Twitter (TWTR) to LinkedIn (LNKD) and Facebook (FB) -- manage the need to stay true to a wholesome mission with the necessity of running a business that will not catch fat and happy investors with their collective pants down. You can't simply look at the run from $65 to $350 and say nothing else matters. That's a beyond dangerous proposition. It's reckless and irresponsible.Either Hastings is the great visionary he makes himself out to be or not. Advertising does not have to come in the form we see on Hulu or traditional television. It doesn't have to be 15-, 30- or 60-second commercial spots. It doesn't even have to be a "brought to you by" type of thing. I'm not the genius here. Reed is. Certainly, he could find an innovative and exciting way to make advertising un-intrusive. Maybe even as asset. Heck, Hastings and his chipped-tooth line mate Ted Sarandos like to chirp about how, on the heels of their alleged original programming success, Netflix might like to reinvent movies. So why can't they reinvent advertising? Make it something people actually look forward to seeing; not a plague they avoid at all costs. For goodness sake, I look forward to watching Canadian hockey telecasts because commercials out of Canada are so damn good, relative to what we get in the States. It doesn't take much. But, Reed is all about "much." The guy's ahead of our collective time; surely he could crack the code here. There's nothing stopping the one-two punch of Hastings-Sarandos and, out of the bullpen, the great bean counter, Netflix CFO David Wells! Isn't Hastings-Sarandos-Wells' job to create value? To find a way to maximize profit and revenue while not degrading the user experience? They're not doing it right now; instead they're busy playing the role of Hollywood celebrities, fat check writers and snazzy press release approvers. But I digress ... If you're a subscriber, you might root for Netflix to find some other way to make money. IMNSHO, the company will have a difficult time maintaining its average to slightly-above average content selection on the backs of an $8/month subscriber base that could, at a moment's notice, relatively speaking, hit the proverbial wall. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif.
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