In a case of perfect timing, Netflix (Nasdaq: NFLX ) CFO Barry McCarthy joined CEO Reed Hastings at the Barclays Capital 2010 Global Technology Conference yesterday.
The stock had taken a hit earlier in the day after McCarthy's resignation was announced, and here he had the perfect opportunity to defend his decision.
"I'd like the opportunity to run my own business," he explained.
In other words, he's not running away from some accounting scandal that's about to blow up. It's not as if he sees the company's model peaking. Despite selling a ton of stock lately -- something he justifies as a way to strike out on his own without having any financial concerns -- he still owns more stock than he has sold.
He has been talking to Hastings since 2004 about his desire to run his own company, and the timing seemed right.
"The opportunity to go out on top while the business is killing it is rare," he says, before setting investors at ease. "There's nothing that I know -- that you don't know -- that would cause you to be sleepless about your position in the stock."
He also let out a nugget that's been making the rounds.
"I'm not sure you'd want to short this quarter," he warned.
Going out with a blowout
Netflix has been historically conservative in its guidance. It had beaten Wall Street profit targets for nine consecutive quarters before coming up short in its latest report.
Had analysts finally caught on to Netflix's fiscal performance? Was Netflix's stance to grow subscribers and ink costly streaming deals -- while tactfully savvy -- about to turn low-balling analysts into Wall Street clairvoyants?
If it wasn't just lip service on McCarthy's part, his comments can be interpreted as either a big win on the bottom line or Netflix barreling past its guidance of closing out the year with as many as 19.7 million subscribers.
Can Netflix actually top 20 million couch potatoes by year's end?
Other juicy tidbits
Hastings and McCarthy also tackled a few questions that provide some interesting insight into the company.
Netflix feels that average revenue per user will continue to trend lower, despite next month's price hike. He sees consumers continue to gravitate to its $7.99 streaming-only plan.
This doesn't mean customers have kissed optical discs goodbye. Hastings still sees a record number of DVD shipments this quarter, though that is largely the result of Netflix's fast-growing audience base.
Netflix also addressed next year's pending renewal of its deal with Liberty Starz (Nasdaq: LSTZA ) . The original deal was inked in 2008, when streaming was just a novelty. Now that more than 11 million of Netflix's 16.9 million subscribers are streaming -- through a growing range of devices -- Starz is likely to demand a headier payout.
If studios think they're going to bully Netflix around to strike content licensing deals at top dollar, they may be in for a rude awakening.
"There is no one piece of content that we have to have," Hastings claims.
Netflix also discussed net neutrality, especially as Comcast (Nasdaq: CMCSA ) and Level 3 Communications (Nasdaq: LVLT ) are locked in a war of words over peering arrangements.
Netflix isn't concerned, as long as there's public support for open access. After all, if any broadband provider ever cuts off access to Netflix's content-delivery partners, folks unable to stream their Netflix videos will be complaining to their local politicians.
It's also not overly concerned about tiered broadband pricing. If stateside access providers begin metering bandwidth -- something that AT&T (NYSE: T ) is already doing with its smartphone data plans -- Netflix still feels that consumers will be drawn to the value proposition of streaming video. Its early success in Canada, where Netflix expects to be profitable within a year of the streaming service's launch, helps validate that position given Canada's tiered Internet pricing plans.
Yes, streaming is what consumes Hastings these days. He admitted to spending 98% of his time working on streaming and just 2% on the DVD aspect of his business. Every studio has different expectations and concessions to ponder.
Most studios have warmed to the 28-day waiting period for Netflix on new DVD releases to win pricing and content concessions elsewhere, though Disney (NYSE: DIS ) and Viacom's (NYSE: VIA ) Paramount remain the two major studios that are holdouts on that end. Then again, Disney just broke in a 15-day waiting period on television shows before Netflix can begin streaming them, so maybe Disney will be next to be won over by the four-week freeze on new DVDs of theatrical releases.
Yes, Netflix will miss McCarthy, but the company appears to be in the best shape of its life.
Will Netflix be higher or lower a year from now? Share your thoughts in the comment box below.