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Humbled Netflix CEO still thinking, talking big
Question of the Day
To ensure it will have enough money to finance its ambitions, Netflix recently raised $400 million by issuing convertible debt to one of its major stockholders and selling 2.86 million discounted shares. That stock sale further irritated investors because Netflix spent nearly $200 million buying back 900,000 shares of its stock at an average price of $218 during the first nine months of the year.
Hastings said Netflix probably could have gotten by without the extra money, but he decided to raise the extra cash to avoid a “crisis of confidence” among the company’s suppliers, including movie and TV studios that license their video and sell their DVDs to the company.
Increasing competition is another major concern hanging over Netflix. Amazon.com Inc., Wal-Mart Stores Inc., Dish Network Corp. are already offering subscription packages that include Internet video. Verizon Communication Inc. declined to comment on reports it may also enter the market.
Hastings said he doubted Verizon will make much of a dent unless it is prepared to pay between $1 billion and $2 billion annually to obtain the rights to professionally produced video. Right now, Hasting said, only Netflix and Time Warner Inc.’s HBO pay channel have made that kind of commitment.
“If they are not willing to invest at those levels, it pretty hard to compete with us or HBO,” Hastings said. He went a step further, branding HBO as Netflix’s biggest rival now that the channel as expanded beyond cable TV with an on-the-go application for Apple Inc.’s iPhone and iPad, as well as devices running on Google Inc.’s Android software. The app is free, but viewing content on the devices still requires an HBO cable subscription.
“It will be a little bit of an arms race with us,” Hastings said of HBO. “Hopefully, we will end up both creating amazing consumer experiences and end up pushing the bar in a positive way for each other.”
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