Chapter 317: Reed Hastings

Early morning, New York, Long Island, East Hampton.

Charles watched as Megan Fox left and glanced at his watch. He had an appointment today with Reed Hastings, the chairman and CEO of Netflix.

Not long after, Dona Williams brought Donna Langley, the CEO of Capet Pictures, and Annie Depp, the CFO, into the room.

"Reed will be here in a bit. Why don't we have some coffee first?" Charles smiled, inviting the two to sit on the second-floor balcony. They chatted while enjoying the beautiful view of the Atlantic Ocean.

"Charles, if Capet Group acquires Netflix now, we can go public through a backdoor listing. Are you interested?" Annie Depp inquired.

"A backdoor listing?" Charles shook his head. "Capet Entertainment is a quality asset right now. Besides, everyone understands the economic situation over the next few years. There's no rush to go public. We'll definitely do it once this economic crisis blows over."

Charles was not opposed to going public, but doing it now was unwise. Capet Entertainment was not short on money at the moment.

Annie Depp nodded. Capet Entertainment was entirely Charles' property, and his decisions dictated its future.

"And Netflix? Their stock is only $15 now, with a total of just over 63 million shares, valuing them at less than $1 billion. We already own a certain percentage of Netflix's shares," Charles smiled. "It looks like their transition has caused the market to lose a lot of confidence!

So, direct cash purchase of Netflix, and Reed still doesn't agree?"

Donna Langley shook her head. "He seems quite confident in Netflix's move to streaming. However, we've signed tender offers with many shareholders."

"Eventually, we'll own over 40% of Netflix's shares, but Reed Hastings still controls the company."

Some shareholders' stocks lacked complete voting rights, whereas Reed Hastings, with almost 30% of shares, controlled over 67% of the voting rights.

"What about a stock swap? Is he willing?" Charles asked again.

"Of course. Netflix is undervalued right now. Joining us is a good choice," Annie Depp explained.

"Alright, given the current situation, giving up some of our shares isn't a big deal," Charles didn't care. He could dilute others' shares anytime by injecting more capital.

Capet Group had three major independent entertainment divisions. The primary one was Capet Pictures, which comprised Capet Film Company, Capet TV Company, Marvel Studios, and other production and distribution companies.

Next was Capet Investment Company, now termed Capet Holdings Entertainment. It owned Pacific Theaters, Capet International Cinemas, a percentage of Netflix, Dolby, IMAX, the New York Observer, the Huffington Post, among others.

Lastly, there was Capet Music Entertainment Company, with Capet Records, Big Machine Records, and Japan's King Records.

The acquisition of Netflix was undertaken by Capet Pictures, which could give up part of its shares and later dilute others' shares by further investment from Charles.

"Boss, Reed Hastings is here!" reported Dona Williams shortly after.

"Great!"

Reed Hastings, as the founder of Netflix, was certainly capable. The company's shift to streaming was mainly influenced by YouTube.

"Charles, I want to..." Reed Hastings began but was gently interrupted by Charles. "Hold on, let me start."

"Reed, I also believe in the growth potential of streaming. Faster internet speeds and higher video quality will eventually be available on mobile devices. Apple's new phone just proves that smartphones are the future. So, streaming will inevitably eat into the DVD market. I support Netflix's shift to online streaming!"

Reed Hastings nodded, "I think so too."

"However, while Netflix has its recommendation algorithm for content, all its content is externally licensed," Charles continued. "Currently, those of us who create content mainly select TV networks because the sale prices are much higher."

"Netflix's subscriber base cannot compare to that of cable TV networks, so we can only aim to collaborate with more companies, gaining in quantity," Reed Hastings acknowledged Netflix's weaknesses. New movies or popular ones always hit pay and cable TV before streaming platforms.

"Netflix needs more subscribers, that's undeniable. Capet Films and Netflix have done well with online DVD rentals these past few years," Charles said to Reed Hastings.

"Join us, and in the future, I'll make sure Netflix has its exclusive, original series. Imagine if Prison Break and Big Bang Theory were only available on Netflix. What would that look like?"

Reed Hastings' eyes lit up but then dimmed. "Netflix subscribers are limited, and there's no ad revenue. Which series would premiere on Netflix first?"

Netflix currently had around 15 million subscribers. Bringing more users and converting them into paying streaming subscribers was challenging.

"Of course, it will take time. The internet develops very quickly. Someday, everyone will watch movies on their smartphones just like they listen to music on iPods," Charles smiled. "At the very least, by joining Capet, our movies and TV shows can prioritize cooperation with Netflix or be exclusively online through Netflix!"

"Exclusive streaming?" Reed Hastings was surprised. Movie companies usually preferred multiple licenses because many were pay-per-view and authorized to many platforms.

"I get it," Reed Hastings was tempted. Joining forces with a large company had its benefits.

"However, I don't want all cash. I want part of Capet Pictures' shares in a swap," Reed Hastings proposed.

"No problem! Capet Pictures will also help Netflix negotiate online streaming agreements with other movie rights companies!"

With the current low cost of online streaming, Charles wanted to secure streaming contracts with movie libraries ahead of time.

Securing the subscriber bonus before others noticed, Netflix had thrived as the first to seize opportunities in the past!

With Capet Entertainment's support, Netflix's growth was bound to be smoother.

*****

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