Pointing towards a line graph
Markets

The Anatomy of a Slow-Motion Train Wreck

Just like the perfect feel-good movie featured on the larger-than-life big screen, the setting was in place and storybook circumstances seemed to be on the upswing for Netflix ( NFLX ) to waltz toward continued prosperity during the past year and into the future.

Enter stage left protagonist Reed Hastings, founder and chief executive officer of the globe's biggest service for DVDs and streaming movies. Cast him opposite fawning co-stars, loyal subscribers who love renting movies and cherish the fun, inexpensive service that is reliable, convenient and easy to enjoy.

Why not prepare some hot, buttery popcorn while you're at it?

Throw in a strong business model that sees one of the widest selections of movies available and successes that allow the service to expand internationally and continue enjoying prosperity while keeping abreast of the ever-changing digital and communications landscape. In five years of operation, the market value of the Los Gatos, California-based company increased roughly 1,000 percent at its peak in July 2011.

But then have that main protagonist suddenly attempt to fix what very clearly was not broken.

And just like that, the well-respected central character has become the antagonist - in more than one way.

CNN reports Hastings will see his 2012 stock options slashed by 50 percent after he committed several missteps. The corporate darling's stock prices dropped from this year's high of more than $300 per share to roughly $70 at present, according to CNET.

In mid July, Netflix customers received notice that service plans were splitting between physical discs that were mailed and videos that were available by Internet - and membership fees were mushrooming by 60 percent. The third quarter saw membership cancellations to the tune of 800,000.

Then, in September, Netflix disclosed plans to rebrand the DVD service as Qwikster, but that idea was met with such fierce resistance that the company cancelled it within weeks.

"I messed up. I owe everyone an explanation," states a Netflix blog posting by Hastings on September 18. "It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology."

The feature has turned into a drama as Hastings has publicly acknowledged his errors, according to The Los Angeles Times. The Associated Press reports Hastings' stock options losses will total $1.5 million next year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.