Tuesday's Wall Street Journal features an interesting interview with Netflix, Inc. (NASDAQ:NFLX) CEO Reed Hastings. Mr. Hastings was amazingly candid in discussing the impending obsolescence of the company's business model:
We're sure that we're going to be buying cars in 25 years, whereas renting DVDs through the mail in 25 years? For sure that's not going to exist. That's what creates the overhang -- there's a known obsolescence. Now we can argue about whether that's 10 years or 25 years [away]. Some people probably think it's five. I think they're wrong. It's probably more like 20...If one thinks of Netflix as a DVD rental business, one is right to be scared. If one thinks of Netflix as an online movie service with multiple different delivery models, then one's a lot less scared. We're only now starting to deliver the proof points behind that second vision.
He discussed ways that the company is preparing -- investing $40 million in online delivery of movies. Hasting's realization and desire to adapt to changes in the industry may save it from the fate of titans of the brick-and-mortar rental industry like Hollywood Video, who have seen their businesses lose most of their value in recent years.
If I were a NetFlix investor, this interview would make me even more bullish on the stock.
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Reader Comments (Page 1 of 1)
3-28-2007 @ 10:20AM
Rick Hanley said...
Reed Hastings joining the board at Microsoft has to do with what Reed Hastings brings to the table and it certainly has nothing to do with Microsoft needing Netflix. The main reason that I say that is that the companies are so dramatically different. Just look at the goofball operational setup at Netflix. How would that fold in to Microsoft? Managers are gods and workers are near slaves at Netflix. Yea, that will blend.
Next, Netflix is very low tech whereas Microsoft is very high tech. How is it that anyone thinks that Microsoft would need Netflix? For what? So Microsoft can let Netflix download movies on the XBox? Would that be like a welcome to the neighborhood gift from Microsoft to Netflix? While Bill Gates is doing some truly amazing and honorable things regarding charity, Microsoft, the company, is strictly business.
Microsoft is picking up Hastings to get fresh blood in the board room. Someone who is young and in touch with what the youth is thinking/doing today. The other board members are old trophy turds. Why would Microsoft go backwards by getting into the physical DVD rental business?
By the way, buried in my comments above and in the additional comments below, are the reasons that Reed Hastings will leave Netflix.
1. Leave when you're up, baby, leave when you're up.
2. Hastings only has 5% of Netflix at this time. Board members own almost 20%. Does Hastings seem like the type to hang around a place where it is not crystal clear that he is in charge?
3. I'll put it to you another way: would you rather be on the board at Microsoft (about the biggest company in the world) or be a manager at Netflix?
4. Remember that Hastings did sell the first company that he had. Proves that he is willing to leave and it made him filthy rich (he has hundreds of millions of dollars).
5. Would you keep futzing around with Netflix if you had hundreds of millions of dollars and you just got a seat on the board at Microsoft?
3-28-2007 @ 12:29PM
Rick Hanley said...
Again, Microsoft needs nothing from Netflix. Microsoft uses download to sell software and hardware (e.g. XBox) and is able to get content on their own. Netflix has almost no rights other than physical DVD rental. But look at what Microsoft is doing:
Multichannel News
New Line in play for Xbox
Mini-major joins video download service
By BEN FRITZ
A&E shows including ‘Dog the Bounty Hunter’ will be available for download via Xbox Live.
New Line is the latest studio to join Microsoft’s Xbox Live video download service, while existing partner Paramount is going high-def.
Mini-major will provide new-release and library titles for digital rental via the service, which allows gamers with an Xbox 360 console to download movies and watch them on their TVs. Par movies, which have been available in standard def since the Xbox Live Video Marketplace launched in November, will be offered in high definition for the first time.
Xbox Live is the only digital movie store that offers HD downloads. That has helped it hit No. 2 in the space behind iTunes…
http://www.variety.com/article/VR1117961940.html?categoryid=13&cs=1