In Praise of Netflix CEO Reed Hastings: Greenberg
For most of its public life, I’ve given Netflix a hard time.
Although I have become persona non grata at Netflix, it has never been personal. It has always been about the stock relative to the metrics or the quality of metrics —never about the personality of the guy running the company.
I’ve never met CEO Reed Hastings personally, but in the company’s pre-public days of the late 1990s, when I was a columnist for the San Francisco Chronicle, we corresponded a few times. He had this fascinating new business model—to deliver DVDs by mail—and I was raising red flags over Blockbuster.
He had a passion and drive and not-so-subtle confidence about a concept that was still largely under-the-radar. (Net-what?)
At the time we both believed Blockbuster was vulnerable, but for different reasons. I had believed the vulnerability was more at the hands of cable and movies on demand; he was one step ahead of me, during a decade-long period of transition, with DVD by mail. I never bought into the DVD by mail concept because a) I had small kids and we always went to the Blockbuster store—roaming the aisles looking for something to rent; and b) I can’t predict when and what I’m going to watch on any given day, let alone days in advance. (With me, it’s when the mood strikes.)
But as Hastings and Netflix proved, I was in the minority—and the business took off, becoming one of the great Silicon Valley success stories and iconic brands.
Doing what I do for a living (picking apart companies) you get to respect the challenge and difficulty and complexity of building one.
Even as I was raising red flags over Netflix’s stock, I would often toss in a compliment about the execution of the strategy.
Which gets to my praise of Hastings: Away from the stock price, he did what most can’t do: He built a heck of a business.
Then he fell into the classic trap of believing his own press clippings. Hastings admitted as much in September when he told subscribers, "I slid into arrogance based upon past success." Not only had he become star in Silicon Valley and an unlikely and from-out-of-nowhere powerhouse in Hollywood, but Hastings had become a hero on Wall Street. His rocketing stock became the ultimate scorecard, and it’s my guess that like so many other executives, Hastings confused the stock with the company.
Hastings has since apologized multiple times for recent missteps, but the reality is this: No matter what Netflix did, it was bound to stumble. All good businesses do; it’s part of risk-taking and risk-taking is required for businesses to grow.
But Netflix’s success was based on the brilliant disruption of an existing, entrenched model with something consumers didn’t realize they needed.
Now Netflix is just another company trying to win in the increasingly competitive, costly world of streaming. That Hastings has stumbled multiple times shows how nobody quite knows what will work or who will win.
It’s just the natural evolution of a rapidly changing industry. Hastings, at this point, is just trying to figure it out like everybody else. The good news for him: With his stock pummeled, he has one less thing to worry about.
Questions? Comments? Write to HerbOnTheStreet@cnbc.com