Bewkes has made it quite clear that he's happy to use Netflix as a syndication outlet for stuff he's already gotten maximum value from. If Reed Hastings thinks he can make money with Bewkes's leftovers, he is happy to sell them.Kafka outlines the drill well. Focus your eyes on my second most recent take. Here's where we're headed with Netflix, particularly if the company reports a not-so-bad to strongish quarter next Wednesday. Even though it pulled back Wednesday, it will likely regain the $100 level. From there -- even with an earnings hit -- we're headed deeper into the triple digits. Like retouch the stock's all-time high triple digits. That was $304-and-some-change at the height of 2011's absurdity. According to its Q3 Letter to Shareholders, Netflix expects Q4 global net income to come in between ($13M) and $2M. That's a wide range. And, unless Netflix turns a profit and surprises, expect Reed Hastings to fire up the smoke and mirrors. He'll find something to divert attention from his company's longstanding structural problems -- an unaffordable content acquisition and international expansion strategy. Hastings will focus on subscriber growth -- if it's good or he can spin it =- and/or the number of hours Netflix customers streamed content. If it wasn't for their competition in the streaming space, Hastings would probably compare Netflix to Amazon.com ( AMZN): We're spending now to seize this massive opportunity upon and ahead of us. Of course, he will not discuss the point Kafka and others bring up: Netflix does not operate from a position of strength. Not even close. Amazon's opportunity lies in e-commerce. It's the clear and relatively comfortable leader there. It dictates the pace of the space. While Netflix leads online streaming, it has a shaky hold on the title. It operates at the mercy of people like Jeff Bewkes. Netflix will get fleeced by Bewkes much more frequently than it will land sweet first-run major motion picture agreements with giants such as Disney ( DIS).
- What do you do with the DVD division? Hastings should have sold it a long time ago. As fewer people use DVDs -- and all that's left are the heavy users -- it becomes an expensive business to run.
- Will original programming at Netflix be even a quarter as successful as it is at HBO and Showtime? That's the wild card, but producing one wildly popular original series is tough enough, let alone doing it once or twice a season.
- Whether No. 1 or No. 2 turn out all right or not, Netflix will ultimately have to revisit raising prices or changing its pricing structure. You're not duplicating the Disney deal when you give away all of your content for $8 a month. However, if you don't add premium content like mad, you put subscriber growth at risk. To buy this content, you need a war chest of cash. Netflix doesn't have one. Hastings used to call it a "virtuous cycle." Close, but Reed, it's vicious. Damn vicious.
- BONUS!! Don't be shocked to see Netflix hit Wall Street up for some cash this year like it did in late 2011.