Netflix Still ‘on Probation’ With Customers, Hastings Says

Photograph by Aidan Crawley/Bloomberg

Netflix CEO Reed Hastings still hasn’t recovered from a series of past mistakes that he attributed to “arrogance.”

More than a year after triggering a cyber-revolt among his subscribers, Netflix Chief Executive Officer Reed Hastings said he’s only halfway to redemption.

“You might say we’re on probation at this point, so we’re out of jail,” Hastings said during the company’s earnings call today. “We still have a year and a half of probation.”

Netflix shares jumped as much as 35 percent in extended trading after reporting an increase of 2.05 million new U.S. digital subscribers and an unexpected profit. Based on its after-market price of $139.99, the stock jumped more than 150 percent since September.

The company’s shares had been on a long slide that started when Netflix raised prices in July 2011, and picked up steam two months later when Hastings announced and then withdrew an unpopular plan to separate the DVD rental service from the streaming plan.

Hastings, the Netflix co-founder who had for years been lauded as a Silicon Valley visionary, was forced to apologize in a blog post for what he called “arrogance based upon past success.”

“There’s still an echo and a bruise, so we still are extremely thoughtful and careful about what we’re trying to do,” Hastings said today. “It wouldn’t take much to have that issue flare up again or for us to lose trust.”

Investors still have ground to make up as well. While they’ve been rewarded recently, the stock is worth less than half of its mid-2011 value. And fourth-quarter net income of $7.9 million was down 81 percent from two years earlier.

Netflix can’t remove its ankle bracelet soon enough.

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