Netflix, Inc. (NFLX) filed a Form 8-K with the SEC on Friday, Dec. 28, 2012, announcing salaries for its top executives. Included in the filing was the following compensation schedule.
| NAME AND POSITION | ANNUAL SALARY | ANNUAL STOCK OPTION ALLOWANCE | MONTHLY STOCK OPTION ALLOWANCE | |||
| Reed Hastings, Chief Executive Officer and Chairman of the Board | 2,000,000 | 2,000,000 | 166,667 | |||
| David Wells, Chief Financial Officer | 770,000 | 330,000 | 27,500 | |||
| Ted Sarandos, Chief Content Officer | 2,200,000 | 1,800,000 | 150,000 | |||
| Neil Hunt, Chief Product Officer | 1,750,000 | 1,250,000 | 104,167 | |||
| David Hyman, General Counsel | 848,000 | 552,000 | 46,000 | |||
Source: SEC.gov.
The above payment table for 2013 indicates significant increases in total compensation from 2012 for its Named Executive Officers. Below is the table from the 8-K filed Dec. 22, 2011.
| NAME AND POSITION | ANNUAL | MONTHLY | ||
| STOCK | STOCK | |||
| ANNUAL | OPTION | OPTION | ||
| SALARY | ALLOWANCE | ALLOWANCE | ||
| Reed Hastings, Chief Executive Officer and Chairman of the Board | 500,000 | 1,500,000 | 1,500,000 | |
| David Wells, Chief Financial Officer | 490,000 | 510,000 | 510,000 | |
| Leslie Kilgore, Chief Marketing Officer | 575,000 | 1,325,000 | 1,325,000 | |
| Neil Hunt, Chief Product Officer | 1,000,000 | 1,500,000 | 1,500,000 | |
| Ted Sarandos, Chief Content Officer | 1,000,000 | 1,800,000 | 1,800,000 | |
Source: SEC.gov.
As shown by comparing the two filings, CEO Reed Hastings will earn a total compensation of $4 million, double the total compensation from the previous year. With additional money earned in the form of stock options, Hastings could make even more if NFLX stock continues to climb as it did in 2011. If Icahn or others bid for control over the firm, these stock options could climb significantly, along with the overall compensation.
Netflix CFO David Wells chose to be paid more for 2012 in the form of salary instead of stock options, as did Chief Content Officer Ted Serandos and Chief Product Officer Neil Hunt. Deciding to be paid in fixed salary instead of stock options could be a wise choice if NFLX shares do not continue to climb in 2012. With increased competition from Amazon's (AMZN) streaming services, Hulu, and other Internet and mobile streaming providers, Netflix's climb may come to an end. Future competition may also be coming in the form of an established tech giant.
Apple (AAPL) has consistently hinted at its idea of revolutionizing the TV industry and how consumers have content delivered. Apple has also told analysts it wants to be the largest global media streamer through its iTunes platform. If Apple could combine the content streaming traditionally found online on computers with traditional TV sets infused with its own blend of design and technological innovation, it would crack Netflix's share of the streaming market.
Trading at $89.33 per share, Netflix is valued at $4.96 billion. This enormous firm pales in comparison to Apple's market cap of $479.37 billion, even after AAPL stock has fallen almost 28% since its highs. According to Apple's most recent annual report released Sept. 28, 2012, Apple had over $10.7 billion in cash alone. Carl Icahn has invested in firms in the past with the intent to unload them for a higher price to a larger bidder. Could this be his strategy with his large stake in Netflix?
If Hastings and his team are able to assist Icahn in unloading NFLX to another bidder, Apple or otherwise, their pay increases will be more than worth it to investors. If they can't and fail to innovate, Apple may move in by taking market share and drive down NFLX stock price, upsetting NFLX investors again (similar to the collapse in 2011). Netflix investors still feeling burnt after watching the stock climb in early 2011 from $50 to $287 then back down to $54 in 2012 may wish for a buyout to end the reign of their $4 million CEO Hastings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
