Netflix CEO gets $1.5 million pay cut, stocks remain low

By on December 26, 2011, 3:30 PM

Netflix CEO, Reed Hastings, got a lump of coal this Christmas as the company's board chose to halve his stock options. Hastings has been at the helm while mismanagement of the company is widely attributed to the exodus of both subscribers and stock holders. Despite losing roughly $1.5 million from the decision, he will maintain his $500,000 base salary. 

Although it had a strong start in 2011, Netflix's stock price plummeted this summer and continued to fall for the course of several months. Once soaring to its peak of about $300 per share, stocks began to dive after a series of missteps left the company slack-jawed and investors disappointed.

A price hike set the stage for Netflix's decline earlier this year, creating unintentional animosity between the company and its less forgiving subscribers. The increase was purportedly aimed at helping Netflix cover the costs of producing its own original content, a la HBO, and maintain deals with content companies. Customers began leaving.

Shortly afterward, Hastings announced that he had listened to numerous customer complaints. Netflix attempted to deftly maneuver its subscriber's heartstrings as the CEO offered both a sincere apology and a solution to the problem. In order to give subscribers lower rates, he reasoned, the company needed to keep its costs down. Netflix decided it would be spinning off its costly, by-mail movie rental service into a separate enterprise named Qwikster. This puzzling brand name became the butt of jokes for every late night comedy show. The bold move was pitched as an earnest one, though.

Customers were less than thrilled about being forced to maintain two subscriptions with two separate companies if they wanted to enjoy both streaming and by-mail options. This time, investors spoke up and stock prices began to fall rapidly. 

After about a month of generating ill-will toward Netflix, Qwikster was scrapped and more apologies were made. Fast forward a bit and subscribers find that Netflix lost its deal with Starz (and Showtime), a major source of its newest, mainstream movie content. Netflix announced a deal with Dreamworks right before the Qwikster fiasco but the deal will not bear fruit until 2013.

This seems to be a particularly scary time for Netflix. HBO Go is picking up steam, Starz has announced plans to stream its own content and stock holders have definitely lost confidence in Netflix's direction and leadership. Despite the circumstances though, Hastings announced he intends to repair the image of the company "brick by brick" and suggests we'll see a stronger Netflix in 2012.

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