The following video is part of our "Motley Fool Conversations" series, in which Eric Bleeker, senior technology editor, discusses topics around the investing world.
In this edition, Eric continues his review of how major tech companies performed in 2011. When it comes to tech companies that didn't perform up to expectations, Netflix heads up most lists. Netflix CEO Reed Hastings wasn't wrong in his belief that Netflix needed to cannibalize itself to move forward. As Eric points out, the iPhone was a reaction to Apple's purposefully cannibalizing the iPod before other mobile phones did. Great companies know they must create products that kill off their existing lines, because if they don't another competitor will.
However, the error in Hastings' way was the execution and messaging of Netflix's price raise and subsequent Qwikster spin-off. It's important to note that after becoming a media pariah, Netflix still has a large customer base and a leading place in the future of distributing video media; all hope isn't lost. If you're looking to become a Netflix investor in 2012, whether it outperforms in the coming years is largely based on the company's ability to dust the errors of 2011 and executing better on its goal of making itself a global powerhouse in delivering movies and television. The key is now focus: ignore distractions like a spin-off and the impeccable brand perception the company once enjoyed.