Did Netflix's CEO Go Too Far?


The market liked the message last week, but it's not happy with the messenger or the media.

Shares of Netflix (NAS: NFLX) soared last week after CEO Reed Hastings revealed that his company served up more than a billion hours of streaming video last month.

The problem, according to some, is that Hastings didn't make this encouraging revelation during a company conference call, a filing with the SEC, or in a press release. Netflix's founder and CEO chose to simply push it out as a status update on Facebook (NAS: FB) .

Congrats to Ted Sarandos, and his amazing content licensing team. Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we'll blow these records away. Keep going, Ted, we need even more!

Hastings has been criticized for making the comment on Facebook, but it's not as if he was making the remark in some walled garden. His page is public, and there are more than 200,000 active Facebook subscribers to Hastings' status updates. Even non-subscribers and non-Facebook users can read the post.

However, this is still a gray area. Does this amount to selective disclosure? Is the suggestion that his company will "blow these records away" in the coming months hype?

It's now been exactly a week since the post, yet some people aren't ready to let it die. Just this afternoon on CNBC, a bullish analyst was asked whether he approved of the way that Hastings made the announcement.

Social media is still a new thing, and companies can react in different ways to chatty executives. Francesca's Holdings (NAS: FRAN) dismissed its CFO earlier this year after he used a Twitter posting a week before the company's actual report to hint at a strong quarter.

The popularity of social media calls for clear corporate standards. Should all revelations with fiscal implications be limited to official corporate filings and presentations? The answers aren't clear, and that's why some people are simply cheering Netflix on the news, while others are fuming about the way it was served up.

Stream on
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At the time thisarticle was published The Motley Fool owns shares of Facebook and Netflix.Motley Fool newsletter serviceshave recommended buying shares of Netflix. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizhas been a Netflix subscriber and shareholder since 2002. He owns no other shares of stocks in this story and is part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has adisclosure policy.

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