Netflix Can Rise From the Dead, But Is It a Buy?
Second, even with a healthy DVD business, there was no way Netflix could sustain the pace of overpaying for content programmers could no longer monetize via advertising. Up against companies with huge cash hoards and massive revenue streams., Netflix stood no chance whatsoever of competing. Never did. Doesn't. Never will.
I am not sure when he discovered it, but I am convinced Hastings came to realize he was charting an impossible course. Over the last several weeks and months, he has stopped talking strategy very much in public. As confident as he sometimes sounds when doing so, he can come off equally as confused.
I mean there'll be a lot of competitors out there, but HBO and Netflix both spend between $1 billion and $2 billion a year on content. And if you want to compete with HBO or Netflix, you better commit to multi-year spending of between $1 billion and $2 billion and then your competitor with us. And at this point, none of those guys have chosen to do that.
That's cringe-worthy stuff, particularly if you're long Netflix.
The days of misguided bravado might be over. If they are, I am not about to bet against a smarter and more refined Reed Hastings.
As I noted Thursday on TheStreet when I called NFLX a turnaround play to consider, the company appears to be setting out on what should be a relatively more conservative, sustainable and ultimately profitable strategy.
I see that strategy splitting into three soon-to-be distinct parts.