Sometimes you have bad years, and then you have a colossal implosion on the level that Netflix's
Even some of the video buffet operator's biggest critics had a hard time saying something bad about Hastings earlier this year. The bearish argument on Netflix revolved largely on valuation. Long-term concerns about the model's viability and the way that the company accounts for its content licensing liabilities were other naysayer knocks. But knocking Hastings? Never!
Things started out well for Netflix. The stock had nearly doubled in 2009, going on to more than triple in 2010. Netflix had proven its recession-resistant mettle by drawing a horde of new subscribers, kicking off 2011 by topping 20 million members.
The warning signs that investors missed
Even though Netflix's stock would go on to nearly double again by the summer of 2011, there were already signs that things were starting to come undone.
A month later, AT&T
March was also when CBS's
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In retrospect, the market misinterpreted Netflix's biggest blunder. The day after Netflix alienated its customer base by announcing that it would raise prices on some of its plans by as much as 60% -- essentially turning the streaming service that was available at no additional cost to customers on unlimited disc plans into a premium offering -- the stock went on to hit its all-time high of $304.79.
Yes, Hastings' biggest blunder is one that was initially applauded by many analysts and investors. Go figure.
International expansion plans became aggressive. Canada's launch in late 2010 inspired Netflix to establish a streaming-only service in 43 different countries through Latin America and the Caribbean this September. By the time that Netflix announced plans to enter Ireland and the U.K. in early 2012 -- and that the move would lead to an initial overall deficit -- investors began to realize that there was a price to pay for Netflix's globe-trotting ways.
Also lost in the excitement -- when Canada hit a million subs in its first year up north -- was the fact that net additions were decelerating after its first complete quarter in Canada.
Subscribers were miffed. Expansion wasn't cheap. Starz was starting to pack up its copies of Toy Story 3 and Sling Blade for an early 2012 exit.
However, Hastings' biggest truly boneheaded move was yet to come.
How could Netflix distance itself further from its already alienated user base? By telling its biggest customers -- the ones on dual plans who were the only ones hit with the summertime rate increase -- to take a hike.
The proposed plan to split Netflix into two distinct sites, forcing DVD and Blu-ray renters to manage independent queues at both Netflix.com and Qwikster, was a disaster. It was a call that Hastings thankfully reversed a few weeks later, but not before it was broadly lampooned.
Netflix's already tarnished reputation met a wrecking ball.
Could things get any worse? You know the answer. Customer defections proved to be worse than Netflix had originally feared in its latest quarter, and now Netflix sees red ink for all of 2012.
The moat that began the year as impenetrable finds a Netflix that is truly vulnerable. Coinstar's
If 2011 was a dream, then it surely was a bad one. The stock that seemed as if it would pull off another market-thumping performance this year has shed 60% of its value, and we still don't know when the situation will stabilize.
Good luck in 2012, Hastings. You're going to need it.
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