Is Reed Hastings Too Confident?
Netflix (NASDAQ:NFLX) Chief Executive Officer Reed Hastings expressed a great deal of confidence in his company on Friday.
According to the online publication AllThingsD, Hastings told Dow Jones editors in a recent interview that Amazon (NASDAQ:AMZN) will one day provide competition for Netflix, but that day has not yet come. In his opinion, Amazon’s chief executive Jeff Bezos will have to spend quite a bit of money first. He estimated that Amazon spends between $500 million and $1 million each year acquiring streaming video content. In comparison, Netflix said in a third-quarter letter to investors that the company will spend $2.1 billion on content in the next 12 months.
But contrary to what his comments seem to suggest, Hastings does take Amazon seriously, saying “Amazon is the best competitor we’ve ever faced.”
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Netflix appears be a significant competition for the online retailer as well. Data released by broadband service company Sandvine shows that Netflix dominates online video streaming in North America, drawing 33 percent of Internet traffic compared to Amazon’s 1.8 percent. Last week, Amazon attempted to change its Prime Service pricing by testing a $7.99 per month option in addition to its usual $79 per year. However, that pricing option was removed from the company’s website without explanation. Instead, the retailer’s homepage is filled by a letter from Bezos detailing the benefits of the service. “Despite all of these changes, one thing remains the same – Prime is still just $79 a year,” he said. “We think this makes Prime the best bargain in the history of shopping.”
Netflix’s streaming video service is priced at $7.99 per month.
Hasting’s optimism and his boast to Amazon are in direct contrast to the position advocated by Netflix’s new investor, Carl Icahn. He believes that the company should sell itself, but Hastings has repeatedly said that Netflix will remain independent. In an interview with The Wall Street Journal, he argued that the company does not “need an owner with deeper pockets,” although he did admit that the ten year-old company was at “middle stage.”
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