The Motley Fool: Reed, as we wrap up here, I want to kind of play the role of skeptic and spot you up with kind of a few raps about Netflix
Reed Hastings: Sure.
The Motley Fool: Rap number one: Netflix is basically a commodity service where low-price competitors will force you to operate on smaller and smaller margins going forward.
Reed Hastings: There is a degree of commodity in every business, so it is not black and white. We are a retailer, and we thrive on giving consumers great value, and we do that with our $17.99 pricing and our very strong service with our 30 warehouses providing overnight delivery to 90% of the country with a movie recommendation system that we offer. We see that that is a compelling offering for consumers, which is why our customer satisfaction rate is so high. Over 95% of our subscribers say they recommend Netflix to a friend. So it doesn't feel like a commodity to us.
The Motley Fool: OK. Rap number two: the churn factor. People love Netflix, but they don't really stick around for very long.
Reed Hastings: At 4.4%, the average lifetime, with 4.4% was our churn in Q4. The theoretic average lifetime, if that were constant over that time period and all subscribers were churning at the same rate, would be about two years. So that is a pretty long time.
The Motley Fool: OK. Rap number three: Video-on-demand will be the end of Netflix.
Reed Hastings: We believe video-on-demand will be confined to older movies because of the DVD-exclusive window of the studios and that Internet video-on-demand will be a market that we will lead in as it grows slowly over the next 10 years and that we will emerge to be worthy of our name, Netflix.
The Motley Fool: OK. And finally, Reed, rap number four here: Netflix is the Howard Dean of Wall Street. It has got a passionate and loyal following, but it doesn't have the numbers to win the race.
Reed Hastings: I would say that Netflix is more like, let me think of the right politician for you.
The Motley Fool: (Laughs.) Someone who wins, I take it?
Reed Hastings: Yeah. Netflix is more like the Ronald Reagan of politics, which is some people love him, some people hate him, but ultimately tremendously effective at broadening freedom in the world. Or in our case, movie enjoyment.
The Motley Fool: And it is still morning in America for Netflix.
Reed Hastings: There you go.
The Motley Fool: Reed, final question here. Any predictions for Best Picture? Our toughest question yet.
Reed Hastings: You know, my favorite is Ray, so I am going to go with that. It only got three or four nominations, I think. I like Aviator, but I will go with Ray.
The Motley Fool: Interesting. I am an Aviator fan. I notice you left out Sideways, so I have to ask you, A. Did you see it, and B., If so, do you think it may be a bit overrated here?
Reed Hastings: I am not drinking the merlot. Yeah, I saw it. I found it cute, not fantastic. Ray, I thought, was fantastic. And Aviator, I like a lot.
The Motley Fool: Excellent. Well, Reed, we really, really appreciate you taking time.
Reed Hastings: Thank you so much.
The Motley Fool: Thank you, Reed.
Mac Greer is radio producer for the Motley Fool Radio Team. Rick Munarriz is a member of David Gardner's Rule Breakers analytical team, seeking out the next great growth stock early in its stage of defiance.
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