Is This Why Netflix's CEO Left Microsoft?


When Netflix CEO Reed Hastings left Microsoft's board of directors less than four months ago, it seemed awfully suspicious.

Why would Hastings leave the prestigious board of the world's largest software company? He wasn't coughing up any of his other board assignments. Why leave Mr. Softy?

There was plenty of speculation at the time. Was Microsoft about to make a play to buy Netflix's depressed shares? Was Netflix about to warm up to a Microsoft rival? Another possibility that I posed at the time was that Netflix and Microsoft were about to become more competitive with each other.

Well, that seems to be the winning ticket.

Thinking outside of the Xbox
Microsoft announced yesterday that Redbox Instant by Verizon -- a new video service bankrolled by Coinstar and Verizon -- will soon be available on Xbox 360 for Xbox LIVE Gold subscribers.

Redbox Instant was supposed to roll out last year, but delays have pushed its commercial release to early this year. A limited beta is currently taking place.

The service doesn't seem overly promising. Redbox Instant matches Netflix's $8-a-month price point, but has a much leaner library of movies that's typically also available on Netflix. Yes, Redbox Instant offers customers credits for four nights of DVD rentals a month, but running out to a kiosk to pick up a more current movie isn't as tantalizing a proposition as it used to be. Yes, Redbox Instant also allows customers a pay-per-stream option for newer releases. Netflix isn't doing that, but it's just about the only player in this niche that hasn't hopped on that bandwagon.

The deal between Microsoft and Redbox Instant is exclusive, bringing back memories of when Netflix struck a deal with Microsoft to make its streams available for Xbox owners a year before the Wii and PS3 came around.

Hastings was sleeping with the enemy
One can always argue that it was Netflix that drew first blood.

Hastings was present at early iPad media events, and Netflix's app was the top third-party download when the original iPad hit the market. Some can argue that if it wasn't for Netflix supporting the iPad, the appeal of Apple's tablet may not have been apparent right away.

Where would Microsoft be today if it wasn't for the iPad's success? One thing for sure is that PC sales would actually be growing instead of trending negative the way they have for the past few quarters.

This doesn't mean that Microsoft and Netflix are no longer on speaking terms. Netflix actually has a Windows Phone app on the market, which Redbox Instant surprisingly does not. That may change, naturally, in light of yesterday's development.

However, just as Eric Schmidt left Apple's board when it seemed as if Android and iOS were about to lock into battle, Hastings probably left so he wouldn't have to be around as Microsoft's popular Xbox LIVE platform would embrace rival video services.

There are no more long-lasting partnerships in tech. Everyone's a serial monogamist.

Stream on
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Longtime Fool contributor Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool recommends Apple and Netflix. The Motley Fool owns shares of Apple, Microsoft, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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