Here’s Why Netflix’s CEO is Losing Sleep

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Netflix delivers to its subscribers and shareholders.After 5 1/2 years on Microsoft’s (NASDAQ:MSFT) board of directors, Netflix (NASDAQ:NFLX) Chief Executive Officer Reed Hastings announced Tuesday he would be leaving Microsoft in order to focus on the challenges facing his video subscription service.

Hastings’s position on the board of the world’s largest software maker proved beneficial for Netflix. When Microsoft’s Xbox 360 game console was first released, it was one of the first Internet-connected devices that could be plugged into a television set. With that function, selections from its library of movies and old TV series could be streamed into subscribers’ households.

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Analysts give credit to Microsoft’s Xbox, and other similar video game consoles, for helping Netflix attract millions more subscribers during its first four years of existence.

“Reed has been a terrific board member, and his insights and experience have really helped guide us through a critical period of transformation for both Microsoft and the industry,” said Microsoft CEO Steve Ballmer in a statement.

Hastings, who serves as the lead independent director on the Microsoft board, will continue to hold his position until the annual meeting of shareholders on November 28.

According to documents filed Tuesday, as director, Microsoft paid Hastings $265,000 in cash and stock during the company’s past fiscal year. Hasting also owns 226,000 shares in the company, worth $6.6 million.

Hastings’s decision to not seek reelection seems to be driven by his desire to improve Netflix’s standing with Wall Street. The video company’s stock closed on Tuesday at $65.53, more than 75 percent below its peak of nearly $305 more than a year ago.

Following, Hastings’s decision last summer to begin charging separately for the company’s DVD-by-mail service and video streaming, hordes of subscribers complained at the 60 percent price increase. The mass cancellations that resulted alarmed investors, and while the furor has subsided, investors remain worried about the company’s dwindling profits as costs for online video licensing fees increase and competition intensifies.

“I’m thrilled to have served on the board at such a pivotal time for Microsoft, including the development of Windows 8, Windows RT and Microsoft Surface, which will bring exciting new opportunities for customers and the industry as a whole,” said Hastings, who joined the Microsoft board in March 2007. “I’ve decided to reduce the number of boards I serve on, so that I can focus on Netflix and on my education work.”

Hastings will remain on the boards of both Netflix and Facebook (NASDAQ:FB), which he joined last year.

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