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Reed Hastings: Last Year "Felt Bad"

As the Netflix CEO launched in the UK and Ireland, he said last year's pricing backlash put the focus back on consumers.
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How does it feel to go from Wall Street darling to the object of scorn?

"It felt bad, that's what you would expect," Netflix CEO Reed Hastings told paidContent as he launched the company in the UK and Ireland. "That hurt us in the U.S. market." 

Last year Netflix fell from a share-price high of almost $304.79 to a low of $62.37 after a string of blunders, according to MarketWatch. Among them: A third quarter DVD price hike that led to a loss of 805,000 subscribers, plus since-aborted plans to split the DVD rental arm from the streaming business and call it Qwikster. 

"We're mostly over that transition because of the separation. I mean, it was painful, but now DVD and streaming are really separate services and they run pretty independently in Netflix. Streaming is the majority of subscribers now; DVD is shrinking."

The company has been gaining subscribers in the fourth quarter, but, as he warned investors in his third quarter earnings letter, is unlikely to be profitable in 2011 because of the cost of international expansion. (It could take at least two years to become profitable in the UK market.) It will be the first time that Netflix has suffered an annual loss in a decade.

Asked by Reuters if Netflix would be profitable in 2012, he said: "I can't comment...We're really focused on this global expansion and it is expensive."

In the UK and Ireland, Netflix is going for the low cost model, offering customers unlimited streaming access to Netflix's films and TV across a range of gadgets for just £5.99 ($9.25) per month. Its closest competitor in the UK market: Amazon-owned LoveFilm. Netflix will also take to Facebook to offer interested UK customers a free trial for 30 days.

Hastings said Netflix, which raised $400 million in November, would not raise more capital in 2012.

"No. We're doing great," he said.

Did his bumpy ride last year cause him to worry about the market impact of strategy decisions?

"The stock price is the outcome of consumers," he told paidContent. "Mostly we focus on consumers."

He added: "If we can have consumers be excited about our service and grow, the stock price will do fine. When we angered the consumers, as we did with the DVD price increase, then the stock price doesn’t do well. But it’s an output, we don’t really focus on it per se. But we don’t ignore it."

Netflix has more than 20 million subscribers in 47 countries. Last week it reported that its members streamed two billion hours in the fourth quarter of 2011.

Last updated: Jan 10, 2012

COURTNEY RUBIN

Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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