Reed Hastings’ FUD Tactics on Digital Downloading

This is very typical of the sly fox called Reed Hastings…creating FUD in the digital market, just when it is beginning to take off. And I have talked about it at least three times in the last three quarters, and will keep pointing out his spin as long as he keeps doing it.
Anyway, to specifics: in its Q2 earnings call today, Netflix CEO Hastings talked again about his company’s non-existent (or at least they started on it, then stopped and looks like will start again early next year) digital downloading plans, and then talks about why they are non-existent. He goes for the oldest trick in the book: blame the market.
From the earnings call transcript, by SeekingAlpha: Hastings: “It seems that every day there are new announcements and stories about downloading. It would be all too easy to conclude that movie downloading was exploding in growth. The reality is the current Internet movie delivery services continue to show no growth in traffic. Nada..the whole industry is held back by the exclusive Windows…
Think about the music business for a minute. This year, eight years after Napster, five years after the iPod, over 90% of music industry revenues are plain old CDs. Nevertheless, we continue our efforts in technology development and content rights acquisition, and we’ll provide a full update on our Internet delivery plans on our Q4 call in January.
So we really don’t face any material risks in terms of digital downloading in the near term, in the next three to five years…it’s because the rights for movies are mostly tied up in long-term contracts, and that the Internet doesn’t get to the TV in most homes in America. So those will be two long-term problems that take five to 15 years to fix, and that’s when you’ll see the market really start to evolve in digital.
And then, on the other hand, his CFO explains the $100 million raise it did in April as “building cash reserves to help us compete in a world with Internet delivery of movies against substantially larger companies with much stronger balance sheets.” The two don’t reconcile, Reed. Come clean.
Couple of smart-alecky-type one liners from me
— Don’t assume the world will wait around for Netflix to enter the movie downloads market.
— Don’t assume the online downloads market will only be movies…there are countless substitutes, now and emerging.
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