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An Open Letter to Reed Hastings

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Dear Mr. Hastings,

You, sir, are a brilliant businessman.

As a customer, I have used and loved your Netflix (Nasdaq: NFLX  ) service for years. As an investor, I have bought and profited from your shares beyond what I could have ever hoped for. I have every intention of continuing to use your service, and to hold your shares.

Now that we've established that I'm on your side, I was hoping we could have a difficult conversation -- because this is what friends do for each other.

Customer delight
Though I wasn't there for the company's birth, the story of Netflix's conception is well known. You returned a movie late to Blockbuster, paid a ridiculous late fee, and thought to yourself, "There has to be a better way."

You knew that we, as customers, appreciated convenience, entertainment, and honesty. We loved the DVD-rental service -- it's even better than Coinstar's (Nasdaq: CSTR  ) Redbox. And we were wowed by your prescience in beating the likes of Apple (Nasdaq: AAPL  ) , Google, and (Nasdaq: AMZN  ) to the amazing convenience of streaming.

You even went so far as to send me a personal email letting me know that you were crediting my account because of an unexpected outage in your service.

That's impressive stuff, and it doesn't go unnoticed. This year, your company was named No. 1 in consumer loyalty by the Brand Keys Customer Loyalty Engagement Index, dethroning Apple on the way.

Personal confusion mixed with business savvy
You have to know, Reed, how important customer satisfaction is to your continued success. So it was with confusion that I read about your recent rate increase. I'm one of those customers who got one DVD at a time, plus streaming -- one of the people who are "feeling the pinch." Your letter to me (signed "The Netflix Team") was cold and impersonal.

I thought we were friends, Reed!

I don't mind paying up another 60%, because I love your service. But at least explain yourself to me. Tell me how the licensing deals are going to start costing more and more. Tell me why, in order to provide me with great content, I need to start paying about $0.53 per day, instead of $0.26.

For my own dignity, just put it in terms that'll make me feel as if I'm still getting a deal, not like some powerless customer you're kind of embarrassed to serve.

I think you're setting yourself up well, Reed. As a customer, I think you still have the best value proposition out there to meet my viewing needs. As an investor, I think this additional revenue will go a long way toward providing quality content as you move abroad.

I just wish you didn't make me feel so used in the process.

Brian Stoffel

Fool contributor Brian Stoffel doesn't have any illusions of actually hearing back from Reed Hastings. He owns shares of Apple,, Google and Netflix. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Coinstar, Netflix, Google, Apple, and, buying puts in Netflix, and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 17, 2011, at 6:13 PM, pk22901 wrote:

    Great insight and sentiments!

    I think 90%+ of Reed's customers feel the same. I do for sure.

    Also, I literally feel used and abused.

  • Report this Comment On July 17, 2011, at 8:00 PM, albeitagain wrote:

    I agree completely,I'm both a user and investor and I think a 60% increase is outragous percentage wise not so much dollar wise. An explanation of the costs by Reed would have spoken volumes for the understanding of the subs.

  • Report this Comment On July 18, 2011, at 1:36 AM, gwheebs wrote:

    Nicely a user, not sure if the streaming is actually worth $10/month when Hulu has more recent online media. And all the network channels you can get shows for free. So, NFLX needs to cut a deal with networks to receive shows, and keep them for longer periods. Then $10/month for only streaming might be worth it in order to have all media aggregated in one location, but not for the majority of current non-new material. From the investor side, how much longer can they keep incrementally increasing quarterly subscriptions? I've made money so I hope Hastings keeps performing. I think the price increase was partly to keep up the quarterly financial numbers even as subscriptions begin to slow, even with international expansions. Wall St will knock either so could be a buying opportunity. Either way, explanations help.

  • Report this Comment On July 18, 2011, at 5:59 PM, Borbality wrote:

    have to agree. My beef with the price increase is the PR. Some baloney about how wonderful they're making it for people who like to get DVDs in the mail.

    I would much rather have read how the price increase will ensure great service and even better content, totally eliminating the need for cable, etc. and that it's just a reality of renewing much more expensive licensing agreements.

  • Report this Comment On July 19, 2011, at 1:00 PM, SFBob100 wrote:

    This is just dumb. There are more than 3000 stocks listed on American exchanges alone. If you own a stock and don't like the way it is being managed, sell it and buy into another company. Whining does no one any good.

  • Report this Comment On July 20, 2011, at 2:22 AM, TMFCADeb wrote:

    Reed, this will blow over......Wait for it... About now.Let talk about 43 new countries.

  • Report this Comment On July 22, 2011, at 1:55 PM, amphoras0 wrote:

    well stated! My sentiments exactly.

  • Report this Comment On August 01, 2011, at 4:33 PM, ZonaBob wrote:

    I totally agree with *CADeb and *amphoras0.

    The recent teen-aged bickering of un-learned fans on the INet and fast-buck WS day-traders will eventually blow over. As a small-time $10k stock investor and LIVE STREAMING ONLY customer, I gave up the hastle and $700 mil annual over-burden with disc-mailing. I'm in this for the long-haul with NFLX. When all the options are considered, I BELIEVE this company will bounce back, big-time. Main reason? In a global non-economy, what are home-bound (right?) people of all nations going to do when they can't afford anything else for film entertainment? (you think the US is the only non-economy nation? South America and Europe - you Go Girls!). Watch terrible broadcast tv movies with a zillion commercials? Watch films on a tiny I-pod or cell-fone screen? (is your girl-friend huddled over your shoulder with bad eyesight?). What? drive 10 miles @ $3.70/gal, spend $50 for popcorn, a small Pepsi and a bad movie for a non-refundable refund from Follywood when you can 'choose' between 100k films in your recliner with a beer (more beer?? well, hell, to the 'fridge we go!) - and replay, or pause/frwd/bkwd it for a potty run? Gimme a break! That's a viewers dream! Nobody does this as well as NFLX for the going price. DUMP dvds, Reed, and build up that live-streaming library! Then re-invent yourself as the visionary you started out as. The one we all know and love. And, STOP selling stock in your heart's desire. Your guts are broken (you need a colonoscopy) and your broker's a cretin. Believe in your vast base of (and increasing number) of LOYAL CUSTOMERS. Get it?

  • Report this Comment On August 06, 2011, at 6:36 PM, ZonaBob wrote:


    I 'sold' 08-04, via my broker to more than doubling my initial investment at $131/share, I look forward to the next bottom of NFLX in the current 'panic venue' where I can re-populate when your moron investors begin to realize the infectious value Netflix ultimately has. Yeah, you'll rebound, no doubt. Once the morons realize Red Hat, etc, and live-streaming other providers aren't eventually worth their effort and hard-spent dollars, the underground troglodites will surface and eventually come crawling back to NFLX. That's the way it always is in a currently down economy, and that's where we make the bucks, right?

    See you somewhere near the IPO value in the next futures - now I've got twice as much to invest. And, thanks for the heads-up with your 5k sales!

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