I couldn't come up with anything to contradict my long-standing stance on NFLX the stock (been calling it a buy since summer 2012) or Netflix the company (been calling smoke and mirrors since early 2011). But something did occur to me again that I queried Netflix CEO Reed Hastings on:
Of course, Reed never got back to me. Probably never will. According to sources, it's Netflix policy to ignore members of the media who don't toe the line. Where I come from that's a red flag. And, no, unlike George and Jerry, Hastings and I don't come from the same place.
As an aside -- and speaking of Seinfeld -- I was "binge viewing" that show on video cassette tapes like 15 years ago, but dear Netflix-loving media don't let facts get in the way of allowing Hastings to perpetuate the myth that Netflix "invented" binge viewing.
Serenity now. Happy Festivus. And I digress ...
Netflix absolutely leaves millions, probably hundreds of millions, on the table. And I can't find a good reason why. If there's a company that needs cash -- now -- it's Netflix.
You know the drill: $6.5 billion in off-balance sheet obligations; plans to double original content spending in 2014. Yada, yada, yada.
Sure the stock's been on fire, but that doesn't excuse Hastings' propensity for shareholder dilution by going to market for cash rather than opening new lines of revenue to fund his wide-eyed ambitions.
- Advertising. Why doesn't Netflix open the platform up to advertisers? They don't have to dilute the sanctity of their $8-a-month rerun generator with traditional 15-, 30- or 60-second spots. Surely, Netflix could devise creative and non-invasive ways to place brands as part of the service. Hastings, the future-seeing genius he is, ought to be able to come up with the equivalent of having your logo front and center on the Roku remote control.
- E-commerce. This could get a little dicier, but, again, Hastings, according to lore, is one of the most out-of-the-box thinkers and influencers in Silicon Valley. Undoubtedly, he could loop in several colleagues, circle back with them after a couple of weeks and, poof, introduce the world to the reinvention of in-entertainment e-commerce.
- On-demand, a la carte programming. Earlier this year, I outlined a Netflix dynamic nobody else in the media talks about. Not because it doesn't mean anything, but because it would poke holes in the rose-colored Netflix narrative. For some reason, the media prefers to play Reed Hastings' PR slave, not critical purveyor of beyond a surface-scratch journalism. Anyhow, read the above-linked piece. It outlines a problem Netflix faces at $8/month, all you can eat. It also illustrates how much money the company leaves on the table by not budging, even a little, from this core premise.
Three ideas. Quite obvious ones and, with the exception of the third, not very expensive ones. I'm uncertain as to why Hastings refuses to implement any of them. Even a little. I can only assume it's because he views Netflix like old-timers view the game of baseball. As purists. A we can't mess with the integrity of the game type of thing.
I call bull. With Netflix, Hastings doesn't have what he thinks he has. He has a company consumers love because it's cheap, but an unsustainable business that ran into a dead end licensing third-party content. As such, Netflix finds itself in the middle of an international expansion and original programming push that is much more desperate than they make it out to be.
Maybe, just maybe, Netflix can't afford to license fresh content for on-demand delivery because it costs too much. And the last thing Netflix needs is another cost. However, one would think the return on such an investment is pretty good when you can sell on-demand access to TV show episodes at $1.99 a pop and entire seasons in the $19.99 to $29.99 range.
I would love answers to these queries. Or, better yet, deep and informative dialogue. But it's difficult to make that happen, given the reality that Hastings tends to talk to media that isn't inclined, doesn't think or simply doesn't want to go there. If you go there with Reed Hastings, chances are he'll ignore you. If you ever get a hold of him, please ask him, on my behalf, if he considers Netflix beyond reproach.
--Written by Rocco Pendola in Santa Monica, Calif.