It's that time of the year again, folks! It's time to dust off the cyber awards and crown five CEOs with the prestigious honor of being the best of the best in 2013.
Unlike last year when we held several rounds of public voting after I picked eight of the best and worst CEOs, I wanted to do something different this year. So instead of picking who I thought should be in each category for 2013, I reached out to as many of my Motley Fool colleagues as possible and aggregated their answers into one list. The result is a considerably more balanced list representing a wider swath of views, and likely a more accurate portrayal of the best CEOs of the year than I could have come up with by myself.
Over the previous four weeks we've chronicled a number of CEOs who would certainly be very deserving of the CEO of the year title. They are:
- Alan Mulally, CEO of Ford (NYSE:F), our No. 5 best CEO of the year.
- Howard Schultz, CEO of Starbucks (NASDAQ:SBUX), our No. 4 best CEO of the year.
- Mark Zuckerberg, CEO of Facebook (NASDAQ:FB), our No. 3 best CEO of the year.
- Elon Musk, CEO of Tesla Motors (NASDAQ:TSLA), our No. 2 best CEO of the year.
Today, though, we're crowning the creme de la creme -- our best CEO of the year. After aggregating the votes of my fellow coworkers, that title belongs to none other than Reed Hastings, CEO of streaming content provider Netflix (NASDAQ:NFLX).
Why Reed Hastings?
Thank goodness investors have an incredibly short-term memory span because just two years ago Hastings was practically the goat of all goats. In 2011, he delivered a trio of gaffes that included trying to boost user prices by 60% without adding any addition value to the services offered, attempting to split its DVD business from its streaming business (a.k.a. the Qwikster debacle), and the issuance of nearly 3 million new shares of Netflix common stock after repurchasing 900,000 shares during the course of the year. In other words, it wasn't a banner year for Hastings.
The good news is that every January 1 the calendar clicks over and gives everyone a fresh chance, including America's most important CEOs.
If anything defined Reed Hastings' tenure over the trailing year, it was his penchant for striking game-changing content deals for Netflix. Many, such as myself, had written off Netflix's ability to compete with Amazon.com (NASDAQ:AMZN) in terms of striking new content deals because it was at a serious cash-on-hand disadvantage relative to the e-tailing giant. Somehow, though, Netflix was able to leverage its growing subscriber network and cash to curry favor with some very in-demand networks.
In December 2012, Netflix hit the jackpot by striking a multiyear content deal with Disney (NYSE:DIS), which allowed it instant access to Disney's library of movies and will make it the exclusive distributor of animated content beginning in 2016. This move pushes Netflix into the family setting and makes it a very affordable entertainment option for a good chunk of American households.
In addition to Disney, Netflix has struck content deals with (breathes deeply...) DreamWorks Animation, the Cartoon Network, Sony, Weinstein & Co., NBC Universal Television in Canada, Virgin Media, Nokia, and Time Warner just in the past 12 months! That alone is worthy of "CEO of the year" nomination!
Netflix has also been a pioneer in focusing its efforts almost entirely on content streaming, especially overseas in an effort to keep ahead of Amazon.com, which has begun pushing into Europe with its streaming business. In 2011, everyone gave the company heat for putting its DVD business on the back burner and crushing its margin potential in favor of putting most of its energy and investments behind its streaming content operations. That strategy is now paying amazing dividends with more than 40 million members now in the streaming network, of which 38 million are paying. International growth has really been the source of Netflix's most recent surge, with revenue exploding from $78 million in the third quarter of 2012 to a forecast calling for $217 million in its upcoming fourth-quarter results. Total membership has also increased from 4.3 million to a projected 10.5 million in just five quarters.
On the other side of the coin, we have Outerwall (NASDAQ:OUTR), which is clinging to the DVD business like it's a gold mine when in reality it may be nothing more than fool's gold. For years, the owner of RedBox rental kiosks has been adding kiosks and saturating the domestic market that Netflix is fairly content to have left behind. Not surprisingly, despite these new kiosks, Outerwall has struggled to grow its top line as DVD sales slip in favor of convenient and equally cheap monthly streaming options offered by Netflix. Outerwall struck a deal with Verizon (NYSE:VZ) to offer its own monthly streaming content service, but I'd say that deal might be a little too late to make a significant impact.
Finally, Netflix simply outperformed every single S&P 500 stock in 2013 -- period! Year to date, Netflix shares are up 284% compared to 265% for Micron Technology and Best Buy up 257%. Since the end of September 2012, shareholders have been rewarded with a 553% gain, or an average monthly gain of 13.3%. This proved more than enough to persuade me and fellow Fools Selena Maranjian and Jeremy Bowman to select Hastings as our top CEO of the year.