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October 10, 2012

Microsoft News - Netflix CEO Reed Hastings Departs Microsoft Board after Almost Six Years

By Steve Anderson, Contributing TMCnet Writer

Netflix's CEO, Reed Hastings, has been busy the last five and a half years; Netflix has been steadily growing into one of the most popular sources for online entertainment on Earth, and has also been coming under fire in recent days thanks to a variety of issues related to that growth. But Hastings has also been a member of Microsoft's (News - Alert) board of directors, a position he now no longer holds. Hastings stepped down from his five and a half year tenure as a director with Microsoft to focus instead on the problems facing Netflix.

Hastings' connection to Microsoft provided significant opportunity for both firms, as Microsoft brought Netflix on board the Xbox 360 in a bid to give Microsoft a chance at seizing living rooms on multiple fronts, and giving Netflix lots more exposure thanks to Sony and Nintendo--as well as the various mobile platforms--moving to follow suit. Plenty of new subscribers have been brought into play as a result, and that's given Netflix a lot of extra boost in the market as well.

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But recent events have left Netflix in a worse position than it was in its prime. Content providers are demanding exorbitant sums for streaming access, mindful of protecting their current business models. Missteps with the public--including the Qwikster incident--have left Netflix weak with its market and left many subscribers cutting subscriptions or unsubscribing outright.

Perhaps worst of all, Netflix stock is down considerably from its all-time highs, reached only a little over a year ago, from $305 per share to $65.53 at the end of the Tuesday trading day. Increasing competition from Amazon Instant Video and Hulu (News - Alert) Plus, among others, is also making things hot for Netflix, and an international expansion is bringing in its own issues as it takes on entrenched competitors and often confusing licensing agreements.

Hastings acknowledge in a statement that he wanted to focus on Netflix, as well as his efforts to improve the quality of public education in California, so he left his seat on Microsoft's board, where he was paid in a combination of cash and stock valued at $265,000 during the previous fiscal year. Hastings, however, remains on the board of directors at Facebook (News - Alert).

Some question Hastings' ability to lead Netflix, given the state of the last few years, but it's a safe bet that the multiple boards he sat on may have contributed to the decline of Netflix by placing too many demands on his time. Burning the candle at both ends is not a new phenomenon, especially not in the business community. The question of whether or not Netflix's decline was owed to a distracted CEO, however, remains open, and will likely be solved effectively when Hastings' plan to put more time into Netflix launches in earnest soon.

Netflix has a lot of competitors. Any company who can get its share price to over $300 a share at any point, especially in the kind of economy we're facing, must be doing something right. Yes, Netflix's price drop is equally pronounced, and speaks to several key failings in the market, but the key take-away here is that the market is prime for the kind of services Netflix offers. Changes in broadband billing and development may prove the fix for the issue of insufficient bandwidth, and even content may come around in time. The concept of home entertainment is taking on new life, and may well prove to be the dominant form of distribution in the future.

Edited by Brooke Neuman

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