Netflix Explodes As Epic Display of Hubris Fades Away

How can a company that exploded over 140 percent in four months have more interesting stories to tell? For Netflix (NASDAQ:NFLX), the tale includes an embarrassing tumble to the brink of destruction — the result of an owner’s hubris and the company’s poor strategy. Yet Netflix continues to climb in its triumphant return, even flirting with its all-time high after catapulting 40 percent in the past month alone.

The dark days of October 2011 are gone but not forgotten. After stockpiling a massive subscriber base and blowing Blockbuster out of the water in the movie rental business, Netflix decided that the status quo couldn’t continue and changed its pricing policy while splitting its streaming service from its mail delivery wing. CEO Reed Hastings was blasted in nearly every report concerning him, which described the man who was once considered a visionary as a bumbling, arrogant fool with disdain for his customers, and who shrugged off the need to schmooze with the film and TV industry.

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Ironically, that abrupt shift into a focus on streaming content turned out to be exactly what Netflix needed to recover. Many faulted the delivery as well as the careless manner with which the company treated investors. It wasn’t just a passing fit of bad news. Netflix lost some 800,000 subscribers in a period of three months, and the stock plummeted from $295 on July 8, 2011 to $66 on December 2 that year. Now that it hovers back around $240, it’s safe to say the commitment to streaming worked, as well as the investment in original series and long-term studio deals.

In the original series department, “House of Cards” has been huge for Netflix, which managed to deliver an HBO-caliber winner starring Kevin Spacey that had the creative touch of David Fincher. Subscribers were happy to come back to Netflix, and over 2 million did, as “House of Cards” could only be seen streaming through subscribers’ devices. Now that the buzz has faded on that series, Netflix is packing another wallop with “Arrested Development.” The greatest comedy series ever cancelled has legions of fans waiting to download the entire new season on Memorial Day Weekend.

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Can anyone top this level of performance in the exclusive content department? Netflix is showing that it does care about its customers in 2013, even when some believe the company cannot sustain its investments in high-profile material. To get such quality productions exclusively for its subscribers is a terrifically winning formula, and a far cry from the hubristic lapses of 2011. Investors hope this way of doing business becomes routine for Netflix.

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