It's me, Reed Hastings. I know that you're busy this time of year, but I wanted to take some time to thank you for all that you've brought me in the past couple of years before moving on to the stuff I would really like this Christmas.
I'll be honest. After blowing me away last year -- Netflix was the biggest gainer in the S&P 500 in 2013 -- this year has been a bit of a bummer. The stock has shed nearly 10% of its value, even though Netflix is bigger and better than ever.
We're on pace to close out the year by topping 57 million streaming subscribers worldwide -- 29% more than we were serving a year earlier -- and that's apparently not enough. Even with a springtime pricing increasefor new subscribers, we were able to grow quickly. Wall Street can be a rough crowd.
I can also argue, Santa, that the market doesn't value our scalable model. I mean, our operating income has more than doubled through the first nine months of the year, and we're on record as saying that our stateside contribution margin should increase by 200 basis points a year. We're at nearly 30% now, but we should be at 40% in five years. This should've been a "drop mic" moment for my stock and me, but instead I'm hearing crickets chirping. Is it too late to put Mr. Market on the "naughty" list?
Then again, maybe last year's big run in our shares was more than the fundamentals warranted. Netflix investors got greedy in 2013 as we were all richly rewarded. It's hard to argue about a stock that has more than tripled over the past two years. I better stop complaining about the slide in 2014 before I join Mr. Market on your nix list.
I am grateful for the things that you've already brought me this holiday season. Outerwall deciding to jack up Redbox rental prices by 25% last month was brilliant. It will either be a shot in the arm for our fading DVD rentals or expedite the digital migration that sends movie and TV show fans to our virtual storefront.
Now let's talk about this Christmas. Santa, could you please make folks as interested in martial arts as they are about superhero flicks? We spent a lot money on Marco Polo this month, and it doesn't seem to be gaining the same kind of traction as House of Cards and Orange is the New Black. Viewer ratings aren't as high, and the subject matter may not be the Game of Thrones response that we were hoping for. This wish is important because we're betting plenty on presenting the sequel to Crouching Tiger, Hidden Dragon next summer.
Another item on my list, Santa, is that Time Warner's HBO is successful -- but not too successful -- with theover-the-top streaming service it expects to roll out in 2015. Let it work well enough to get folks to ditch their pay TV plans, but not enough to find them canceling out service. Let the future of TV entertainment be folks subscribing to several premium streaming services where we think we'll do just fine again the HBOs and Hulus of the world.
Is that too much to ask for, Santa? We've been good. We put up with a down year, and we've never had back-to-back years of declining stock prices in our 12-year history as a public company. Keep that streak going in 2015. Thanks. We left milk and online cookies.
The article Netflix Inc. CEO Reed Hastings' Letter to Santa originally appeared on Fool.com.
Rick Munarriz owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of 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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