This past Sunday, I penned an open letter to Reed Hastings, CEO of Netflix (Nasdaq: NFLX ) . Writing with my tongue somewhat in cheek, I intended to capture the frustration some people felt, while keeping an even-tempered perspective on what this means for long-term subscribers and investors. But I never actually expected I'd get a reply.
A surprise response
Just before I went to bed Sunday night, an email arrived from Hastings himself, categorically addressing my concerns.
Taken on a larger level -- as a message to all of the subscribers who have been irked by the rate hike -- I think its contents are worth sharing here:
- Hastings started with an apology: I'm sorry you felt jammed by our message.
- He then responded to my plea to have the rate hike explained: We will take the increased revenue and mostly spend it on more streaming content ... we want to be able to have stronger and stronger streaming.
- And he concluded by making a fair assessment of what Netflix has to offer right now: It is a big increase, I know, but we feel each of the $7.99 programs are a great deal on their own.
What this means
If you read my previous article, you know that I wasn't suggesting selling my shares or cancelling my subscription. Basically, I just felt a little cold, based on how the rate hike was carried out. This response pretty well addresses my concerns.
In some ways, we've been spoiled with an $8.99 plan that sent us DVDs and allowed us unlimited streaming. That model probably isn't sustainable.
Moving forward, I'm fairly certain that Netflix would eventually be willing to sacrifice its DVD business to the likes of Coinstar's (Nasdaq: CSTR ) Redbox. I don't doubt that most of us will be using streaming to watch our movies 10 years from now.
If Netflix still wants to be atop the entertainment mountain by then, it'll have to beat out the likes of Apple (Nasdaq: AAPL ) , Google (Nasdaq: GOOG ) , and Amazon.com (Nasdaq: AMZN ) . In addition, it'll have to make smart deals with content providers such as Liberty Starz (Nasdaq: LSTZA ) , Disney (NYSE: DIS ) , and even much-maligned News Corp.'s 20th Century Fox division.
I don't know how that will all play out. Anyone who tells you they do is probably leading you on. But I'm happy camping my investment dollars where they've always been, and betting that Reed Hastings knows what he's doing.
If you're looking to stay up-to-date on all things Netflix, add the company to our free My Watchlist service today:
- Add Netflix to My Watchlist.