We're a week away from Netflix's (Nasdaq: NFLX) showdown with investors.
Don't hold out for fireworks. Netflix has conducted its past couple of quarterly conference calls without live questions. The Qwikster killer asks analysts to submit any questions in writing ahead of time, and it then sifts through the emails during the call. This doesn't mean that the company is defensive, though one can argue that this is a neat way to avoid certain questions or problematic follow-up queries; it was doing this while it was still popular earlier this year.
However, this is going to put even more weight on the prepared Netflix comments and the contents of CEO Reed Hastings' quarterly letter to shareholders.
As a longtime (but now concerned) shareholder, there are a few things that I would love to hear him say.
"Time and content will win back subscribers."
No matter how many times Hastings watches Superman II, he can't fly around the world a few times to go back in time. Consumers are still angry about the summertime rate increase for subscribers on dual plans, and regaining trust won't be easy after the Qwikster flip-flop.
The only way for Netflix to keep streaming subscribers happy -- and around -- will be by continuing to broker content deals, and ideally exclusive ones along the lines of its recent multiyear contract with The CW.
The loss of Liberty Starz (Nasdaq: LSTZA) early next year will also require more movie deals to fill a giant void in Netflix's streaming bench. I get the emphasis on television shows. Getting subscribers hooked on a string of episodes from a series will improve churn by keeping them close. It's not a few new retail releases that will be expensive to acquire and can be streamed quickly.
However, Netflix can't afford to let its service become a retro version of Hulu. Even the naysayers who are venting now will have no choice but to return to Netflix if its streaming library continues to improve with magnetic titles.
"International growth is accelerating."
Now that Canada is up to a million subscribers -- and Netflix launched in 43 different Latin American and Caribbean nations last month -- having some upbeat news abroad would be a great way to play down the distractions closer to home.
The rate of net additions in Canada has been shrinking since its first full quarter in the country at the end of last year. It's obviously too early to see if that trend will play out the same way down south, but better performance out of Canada will be encouraging in modeling Netflix's global push.
Netflix has already warned investors to expect a sequential decline of 0.6 million domestic subscribers for the current quarter. International muscle has to kick in at this point.
"Games are still coming."
One of the only good things -- if not the only good thing -- to come out of the three-week Qwikster fiasco was the company's commitment to begin offering video games by mail. This is something that DISH Network's (Nasdaq: DISH) Blockbuster and gaming specialist Gamefly already do. Even Coinstar's (Nasdaq: CSTR) Redbox is now offering game discs alongside DVDs and Blu-rays.
The only positive Qwikster comments in the Netflix blog were applauding the decision to begin stocking games. Sure, console games cost more than flicks. They also have shorter shelf lives. However, given how postage is such a major component of Netflix's mail-order business, a gamer will spend countless hours delving into a rented title as opposed to 90 minutes to play a movie, resulting in slower turnover.
A Netflix rep did point out that Netflix is "still considering" games in light of last week's Qwikster nixing, but that doesn't sound very convincing. There is a fair deal of overlap between couch potatoes and die-hard gamers. Why do you think that Netflix has made it possible to stream through all three console platforms?
Say the right things, Hastings. It matters now more than ever.
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