And that’s the explanation for last night’s stock swoon, which followed a solid-to-good Q1 earnings report from the video company.

Specifically, Wall Street doesn’t believe Reed Hastings’s prediction that his company will add seven million customers to its U.S. streaming-video service this year. For a couple reasons:

• That’s the same growth rate that Netflix had back in 2010. But back then, Netflix was growing from a much smaller base. At least as important: Back then, it had the subscription streaming-video business more or less to itself. Now it is facing competition from Hulu, Amazon and Comcast, with more — like a Redbox/Verizon service — on the way.
• Hastings says Netflix can pull this off, even though next quarter’s growth will be much slower than Wall Street was expecting. Netflix has a complicated explanation for this, involving “seasonality” and the size of the company’s subscriber base. Short version: Trust us, it will all work out in the end.

These are the kind of arguments that Hastings used to win, because Netflix was one of tech and media’s most amazing growth stories, and Hastings had the aura of a man who could see around corners.

But 2011 changed all that. Now, if Hastings tells Wall Street that he can see the future, he’s going to get plenty of pushback. Yesterday’s conference call was dominated by questions about his 2012 growth predictions. The first one set the tone: “Why are you so confident?”

That one will take about eight months to explain. Let’s see if investors are that patient.

First look at Netflix numbers: A loss of $0.08 a share on revenue of $870 million. Wall Street was expecting revenues of $855 million and a loss of $0.27 a share. The crucial number: 23.41 million domestic streaming subscribers. Netflix had told investors to expect 22.8 million to 23.6 million.

Netflix had previously said it might lose money throughout 2012, but now says things could get better sooner, and predicts that it may turn a profit in Q2. “The improvement in the outlook is a result of continued member growth (both domestically and internationally), as well as increased efficiency of our content and marketing spending,” CEO Reed Hastings writes in his shareholder letter.

But the market isn’t happy with something — shares are down 16 percent — so we’ll try to figure out why. Perhaps this: “Q2 net adds will be below those of 2010, despite Q2 gross adds following the traditional seasonal pattern, and despite us expecting to match 2010 in annual net additions,” Hastings writes. He adds: “We see nothing new or particularly concerning this quarter to date in our member viewing, acquisition and retention. All are healthy.”

Someone disagrees.

(Update: OK, here’s Citi’s Mark Mahaney’s take on the market’s reaction. As I suspected, it is about the paragraph above — Hastings is saying subscriber growth will slow next quarter, but net out just fine for the year, and Wall Street doesn’t believe him.

“We believe this is due to concerns over the company’s Domestic Streaming Net Adds outlook — 500K Net Adds in Q2 vs. the Street at 1.2MM. NFLX is, however, laying out an outlook for 7MM Domestic Streaming Adds in 2011. This is higher than our 5MM estimate, and we believe is in-line with or higher than most Street estimates. The issue is market skepticism that NFLX can reach this level given the June Quarter guide.”)

Per usual, Hastings notes competition from Amazon and Hulu, and now Comcast’s Streampix offering. Also per usual, he says he can’t see any near-term effect from those services on his business, but promises to “watch them carefully.” And again, he argues that his long-term competition comes from the cable guys, and the promise of their “TV Everywhere” strategy.

Hastings also said the company’s expansion into U.K. and Ireland is promising. But he acknowledges what many Wall Street analysts have already concluded: Latin America will be a challenge. “The odds of us building a large, profitable business in Latin America are very good, but it will take longer than we initially thought.”

Again, here’s the “cheat sheet” from Citi’s Mark Mahaney so you can try to interpret the numbers yourself.

We’ll find out this afternoon, when the company releases its Q1 numbers. And the easiest way to tell will be by looking at one key metric: The number of U.S. streaming-video customers.

Netflix has told investors to expect something between 22.8 million and 23.6 million subscribers. And if the stock veers wildly immediately after the earnings hit the wire today, it’s likely because of that number.

If it’s high, then Netflix bulls get some vindication: Turns out that people still like paying $8 a month for all-you-can-eat movies and TV shows, streamed to any device they want, just like CEO Reed Hastings has been saying.

If it’s low, then Hastings’ doubters can argue that the loss of high-profile movies from Sony and Disney, and increased competition from the likes of Amazon and Hulu, are big problems that aren’t going away.

There will be plenty of other numbers to dig into as well, and Citi’s Mark Mahaney lays out his helpful intrepretive cheat sheet for them, below (click to enlarge). We’ll tear into those, along with Hastings’ quarterly shareholder letter, after 4 pm ET. See you then.

The bad news: As everyone who pays any attention to the company knows, the company’s stock got hammered. So Hastings’s Netflix holdings did, too.

His 4.4 percent stake in the company was worth around $437 million at the beginning of 2011, when NFLX was trading at $175. By the end of the year, the stock was worth $69, and Hastings was down to a mere $172 million.

Netflix stock has climbed back a bit and is now at $106, and that puts Hastings back at $265 million. But that news has a flip side, too: Late last year, Netflix gave Hastings a pay cut for 2012 and cut his stock awards for the year in half, to $1.5 million.

Today’s blast is similar to last month’s in both form and content.

Hastings is once again accusing Comcast of violating “Net neutrality” principles by favoring its own Web video service over those from Netflix, HBO and Hulu, when it comes to data usage. (Last month Hastings also complained that he couldn’t watch HBO GO on his Xbox, but that’s been resolved.)

Here’s the text (you can also see a screenshot, below):

Comcast no longer following net neutrality principles.
Comcast should apply caps equally, or not at all.
I spent the weekend enjoying four good internet video apps on my Xbox: Netflix, HBO GO, Xfinity, and Hulu.
When I watch video on my Xbox from three of these four apps, it counts against my Comcast internet cap. When I watch through Comcast’s Xfinity app, however, it does not count against my Comcast internet cap.
For example, if I watch last night’s SNL episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all.
The same device, the same IP address, the same wifi, the same internet connection, but totally different cap treatment.
In what way is this neutral?

Reminder: Hastings has all sorts of ways to complain/lobby Comcast and/or regulators (see, for instance, the new Netflix PAC). I continue to find it fascinating that he’s taken to posting on Facebook for this stuff. (Another reminder: Hastings is a Facebook board member).

Last month, I asked Hastings and Netflix PR if they wanted to expand on his comments, but never heard back. I’ll let you know if that changes.

In short: The company, which has been steadily ramping up its lobbying presence in Washington, says the PAC — which allows them to make contributions to individual races — is a logical next step.

But it says it is primarily interested in topics like video privacy laws, which prevent it from integrating with Facebook. And not with hotbutton issues like SOPA/PIPA.

So here you go.

“PACs are commonplace for companies that lead a big, growing market and Netflix is no exception. Our PAC is a way for our employees to support candidates that understand our business and technology.  It was not set up for the purpose of supporting SOPA or PIPA.  Instead, Netflix has engaged on other issues including network neutrality, bandwidth caps, usage based billing and reforming the Video Privacy Protection Act.”

Reminder: Netflix has been particularly vocal about the VPPA since last summer. Last year it boosted its political spending significantly in an effort to change that law.

Here’s a screenshot of the Netflix CEO’s most recent post, where he gripes that Comcast won’t let its subscribers watch HBO Go — the pay channel’s “TV Everywhere” app — via an Xbox 360, and goes on to talk about the way the cable provider enforces its broadband usage cap.

Both of these complaints are the kind of thing that most people don’t care about, but vex a certain kind of technically savvy user. They are important, though, because they underscore some of the tensions between programmers and providers that have made “TV Everywhere” more conceptual than it ought to be, nearly three years after Time Warner and Comcast announced a grand launch plan.

Still, this is one of those stories where the form matters more than the content — it’s just interesting to see the head of a public company handling company business on Facebook. Then again, Hastings happens to be on Facebook’s board of directors.

Also note that Hastings doesn’t just gripe about Comcast on Facebook. Here he is a couple days ago, praising the company’s new Xbox app, and complimenting/wooing Comcast executive Sam Schwartz. And then he gripes, just a tiny bit, about Streampix, Comcast’s sorta-kinda Netflix-killer.

When I first heard about Facebook, in 2005, I thought it was really stupid. And the same with eBay 20 years earlier.

– Reed Hastings, in a talk with Wired staff at its London offices

Another possibility: Over time, Apple simply builds an Apple TV set right in front of us, in bits and pieces — so slowly that we don’t really notice it.

Take the remote, for instance. PatentlyApple has its hands on an Apple application for an “advanced TV remote” that would offer some cool features. Like the ability to automatically scan your other devices and figure out the right code to control them, instead of requiring users to use a combination of manuals and trial and error.

At least as important is that, while Apple’s patent, filed back in 2010, could be a standalone device, the application makes it seem much more likely that users will use their iPhones, iPods or iPads to control their TVs.

Which makes sense, because Apple is already offering a “Remote” iOS app that handles some basic functions for its existing Apple TV. That is: There’s a good chance you’re just a download away from owning a bona-fide Apple TV remote already.

This kind of incremental building may be even more important on the content side, which is the real key to an Apple TV: If it’s simply a very nice screen that offers the same content choices that TV viewers already have, then it’s just a very nice screen. And for years, Apple has been making attempts to wrangle different TV choices, at different price points, without much success.

But instead of one grand, sweeping video package, Apple may end up just cobbling together an array of offerings, piece by piece.

To wit: The latest refresh of Apple TV didn’t offer any new content, but it did make it easier for Apple users to buy the content that’s already there. Anyone with an iTunes account can subscribe to Netflix, and soon, Major League Baseball’s MLB.TV service, directly from Apple, without having to pull out a credit card again.

Netflix + iTunes + baseball games won’t make up a full suite of programming choices for most people. But now that Reed Hastings and Bob Bowman have agreed to let Tim Cook handle their billing for them, more media moguls will likely follow in their footsteps. Get enough of them in there, and you could end up with something really compelling.

Netflix CEO Reed Hastings, who is also a Facebook board member, is backing a bill that would change the law. Right now, it’s tied up in the Senate.

But if it passes, don’t expect Netflix subscribers to thank him. They have absolutely no desire to learn what their Facebook pals are watching.

That’s the no-doubt-about-it conclusion from a new survey commissioned by Citi analyst Mark Mahaney: He finds that seven out of 10 Netflix subs are “not at all interested” in “seeing what [their] FB friends have watched on Netflix.”

Here’s what that looks like in a bar chart:

As Mahaney notes, it’s possible that the folks he surveyed just don’t know how cool it will be to learn that their pals are watching “Mad Men” or “Dora the Explorer” or whatever. And that if it becomes possible, they’ll change their mind.

But it’s worth noting that Hulu has synced up with Facebook (I’ve never really understood why it’s not constrained by the same law, but whatever). And so far I don’t think I’ve ever seen a Facebook pal tell me what they’re watching there.

There are a bunch of ways to explain that nonscientific observation away. But my gut is that people are actually sort of private about a lot of their video viewing, and don’t want to automatically share it with the Web.

It’s not like Spotify, where even though you may not be proud that you were listening to .38 Special, you don’t really care if anyone knows.

Yes, lots of people will tell you — on Facebook or Twitter, or maybe even one of those TV check-in services — about a specific show they’re watching.* But that’s a lot different from a deluge, which is what Facebook seems to want.

And Netflix users, at least, want no part of it.

*I just finished season 4 of “Breaking Bad” this weekend. So great. I literally yelped in delight at the end of the last five or six episodes.

(Image courtesy of Shutterstock/Everett Collection)

That’s the first time Netflix has handed off its customer billing to a third party. And it’s a significant step for Reed Hastings and company.

For starters, it will make it that much easier for Netflix to sign up more users. But it also sets up a model for a possible Netflix-cable provider deal.

Reuters reported yesterday that Hastings was looking to bundle his service with pay-TV operators, and to deliver movies and TV shows through cable providers’ set-top boxes. But people familiar with his thinking tell me the Apple TV model is a more plausible tie-up: Netflix would be happy to let cable operators take care of billing, but wants to send its video over the Web, just like it always has.

That assumes that the cable guys buy the argument Hastings has been making for some time — that his service isn’t for cord-cutters, but for people who like watching lots of video, and don’t mind paying another $8 for what is essentially another cable channel.

How much would Netflix be willing to pay to let a third party market its service and take on billing duties as well? I don’t know.

But I have a hunch that that it’s less than the 30 percent per month that Apple has previously required from subscription services that want to let users sign up via its iOS devices.

One hint: Though you’ll now be able to sign up for Netflix using Apple TV, you still won’t be able to do that with Apple’s iPhones, iPads and iPods. Those devices will still require you to sign up somewhere else before you can stream video on their screens.

Worth noting that Netflix isn’t the only outside service handing over billing to Apple. Major League Baseball is doing the same thing with its app, and presumably we’ll see more down the line. Curious to see if Hulu Plus joins in.

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But if Comcast wants to, it can change that overnight, as The Wall Street Journal’s Sam Schechner reported yesterday. The cable giant’s new content deals allow it to sell its stuff nationally, to anyone with an Internet connection, if it wants to.

Comcast insists publicly that it has no interest in doing that. Privately, its executives say the same thing. They say they can’t figure out how to market and support a $5-a-month digital subscription service to noncustomers and still make money.

What if they added more content and sold it for $8 a month, like Netflix does? “That still wouldn’t work for us,” one of them told me yesterday. “We can’t figure out how it works for Netflix, either.”

So if things don’t change, then Streampix will work primarily as an anti-churn tool for Comcast — a carrot they’ll dangle to keep current subscribers happy. And it may also keep a few of them from signing up for Netflix, or renewing the subscription they already have.

Which means it will join the growing number of Netflix killers that aren’t really Netflix killers, because they don’t have the same breadth of content, or are only available to a certain number of customers.

Over the last couple of years, Amazon, Hulu and Dish/Blockbuster have all launched Web video subscription services that offer Netflix-like services. But, so far, none of them have really gone head to head with Reed Hastings.

Later this year, though, Verizon and Redbox will begin selling their own Web video service, and the companies have been very clear that that one won’t be limited to Verizon customers.

And it will definitely feel like a competitive service. There’s a good chance, for instance, that movies from the Viacom-backed Epix pay-TV channel, which currently run on Netflix, will appear on the Verizon service, too.

So that’s one full-fledged (potential) Netflix killer launching this year. And another one that might turn into one, with a flip of the switch. That ought to keep the Netflix executives, and investors, occupied for a bit.

Streaming is the future. We’re focused on it. DVD will do whatever it’s going to do. We’re not — we’re going to try to not hurt it, but we’re not putting a lot of time and energy into doing anything particular around it and then we’re focused on, how do we take advantage of this incredible global streaming opportunity.

Now, with that context in mind, consider this news: Netflix announced last night that customers could sign up directly for a $7.99-a-month DVD-only plan by visiting dvd.netflix.com.

Some of my fellow typers believe that this is a sign that Netflix has re-embraced the DVD business, which has much better margins than the streaming business, but is dropping away, quarter by quarter.

That would be a good narrative, but I don’t think it’s true.

Consider:

• This is the same $7.99 DVD-only plan that Netflix introduced last July.
• It’s the same URL that Netflix introduced last July. Apparently, it must have gone away at some point between then and now, but the fact that no one seems to have noticed its disappearance is telling.
• New customers who head to the Netflix home page will have no way of knowing that Netflix offers a DVD-only plan. If they click around a bit, they’ll find a note telling them they can add DVDs to a streaming-video subscription plan, but no word of the disc-only option.
• It remains nearly impossible to give someone a Netflix gift subscription that includes DVDs.

This doesn’t sound like a newfound appreciation for the DVD business to me. It sounds like Netflix is continuing to “not put a lot of time and energy into doing anything particular around it.”

So why bother with the new/old URL at all? I asked Netflix PR for comment; if they find the time or energy to respond, I’ll update here.

But at least as important are the company’s subscriber numbers and guidance, which should give us a much better sense of whether consumers have forgiven/forgotten its missteps of 2011. Netflix has already warned investors that it would lose money through much of 2012, largely because of its international expansion plans.

Q4 Domestic streaming: 22 million subs
Q4 Domestic DVD: 11.17
Q4 International: 1.86 million

Outlook: The company had already warned that it may not turn a profit in 2012, and it is now being more explicit about that, citing expansion costs and diminishing DVD revenue: “We expect modest quarterly losses, as well as losses for the calendar year.

Netflix ended the year with 24.4 million U.S. subscribers. That’s up 25 percent from the previous year, and — crucially — up from the previous quarter’s total of 23.79 million subs. That doesn’t mean its customer base has completely forgiven the company, but at the very least it means it is growing again.

Investors are pleased, and are pushing the stock up 10 percent in after-hours trading.

This is a case where the cheat sheet that Citigroup’s Mark Mahaney provides is particularly useful (click to enlarge).

Here’s a very interesting note on competition from Amazon: Netflix agrees with a New York Post report this morning which says Amazon will offer a standalone video service: “We expect Amazon to continue to offer their video service as a free extra with Prime domestically but also to brand their video subscription offering as a standalone service at a price less than ours.”

Hope to hear more about that from CEO Reed Hastings during the company’s conference call, which starts at 6 pm ET.

Today’s underscore opportunity: A press release announcing that Netflix customers streamed “more than 2 billion hours” of video during the last three months of 2011. CEO Reed Hastings telegraphed this one in December, when he told an investor conference that the company was set to stream “well over” a billion hours for the quarter.

But beyond a boilerplate reference to “more than 20 million streaming members,” Netflix isn’t saying how many customers were watching that video. And it’s not providing any other meaningful metrics until it announces Q4 earnings in about a month. So no need to spend any more time on this one.

Streaming is the future. We’re focused on it. DVD will do whatever it’s going to do. We’re not — we’re going to try to not hurt it, but we’re not putting a lot of time and energy into doing anything particular around it and then we’re focused on, how do we take advantage of this incredible global streaming opportunity.

That was Netflix CEO Reed Hastings, at the UBS media conference earlier this month, reiterating the point that Netflix has been making over and over again for some time: They want out of the DVD business, even though it is generating more than $1 billion a year for them.

Hastings and his team are convinced that even though consumers say that discs are important to them, their usage data shows that few people … use them. “Old fogey discs,” Hastings calls them.

Netflix tried very hard to accelerate the decline of DVDs with the Qwikster fiasco. Since then, Netflix has been careful to tell its subscribers who are still paying for DVDs that it is happy to have them around.

New subscribers are a different story, though. Netflix exclusively pushes its $8-a-month unlimited-streaming option, on its site and in its promotional materials. You have to work very hard to discover that the company still rents DVDs, and that’s by design.

Same deal for former subscribers that Netflix is trying to woo back: Even if you used to get both DVDs and streaming videos from Netflix, the company will only tell you about its streaming plan in its “come back!” emails. (See the screenshot of an email my colleague Tricia Duryee, who quit her hybrid plan this fall, got recently, at the bottom of this post.)

But the message is most clear for people who want to give someone a Netflix subscription as a present: The company no longer allows you to gift a subscription that includes a DVD plan, period.

Go ahead and see for yourself — there’s no way to give Reed Hastings and company an extra $8 a month for a service they’re still providing to some 11 million subscribers.

The one tiny workaround that the company offers (if you look very, very hard — or do what I did, and call up Netflix PR and ask) is the ability to let current subscribers extend their current deal. So, for instance, if you’re currently getting the equivalent of a $16-a-month hybrid disc-and-streaming option, and someone gives you a year-long $8-a-month streaming gift, you can convert that into a six-month hybrid plan.

But, boy, that’s complicated. Easier to just give someone a year of streaming, and then send them a check so they can add the DVD portion on their own. Which is what we just did this morning, here at the AllThingsD Brooklyn outpost.

So to repeat: If you work very, very hard, Netflix will let you give it money, and will let you rent DVDs in return. But it would really prefer that you didn’t.

They’re less happy than they used to be. But they don’t seem to be going anywhere.

That’s the cautiously optimistic conclusion of a new survey Citigroup commissioned over the past few months. It finds existing subscribers still fairly pleased with the service Reed Hastings is offering: 57 percent say they’re either “extremely satisfied” or “very satisfied.” But Hastings’ good will has certainly eroded a bit: In May, a similar survey found 50 percent of his customers in the “extremely satisfied” category. That number is now down to 18 percent.

As Citi analyst Mark Mahaney points out, the survey is a bit skewed, since Netflix subscribers who were most disappointed with the service’s changes — a price hike, an ill-fated attempt to spin off its DVD business into a separate unit, and the loss of programming deal that gives the company access to Sony and Disney movies — have already bailed.

But a different survey question suggests one reason customers are sticking around with Netflix: They don’t see many other options.

While Amazon has been building up its catalog of streaming video, only 9 percent of Netflix customers said they’ve watched movies or TV shows there. And while 15 percent said they’ve used Hulu, that number is down from 19 percent in May. Apple’s iTunes comes in at 8 percent. (Perhaps the reason only 27 percent of Netflix subscribers say they use Netflix is because they’re distinguishing between apps and the site. But that seems like a fairly precise distinction for a large number of people to make, so who knows.)

The very big picture is that Mahaney still assumes Netflix will keep growing. He figures its DVD-only subscribers will drop by 800,000, to 9.9 million, over the next year. But he thinks streaming subscribers will increase 9.9 million, to 30.9 million, and that the company will add a few million more as it expands in Latin America and the U.K. He also thinks Netflix will become profitable again by the end of 2012.

But none of that is going to help anyone who bought Netflix stock earlier this year, when shares had climbed as high as $300. Mahaney has lowered his price target for NFLX, and is now hoping it climbs back to $80.

HBO Go users, who can watch shows like “Game of Thrones” on their iPad, iPhones, and Android devices, watch 30 percent to 50 percent more than non-users*, Time Warner CEO Jeff Bewkes said today at the UBS media conference.

But Bewkes said that the pay channel’s subscriber count had been “stable” in the past year, which would mean it still has about 28 million paying customers.

That makes sense, given that the “TV Everywhere” strategy Bewkes has been pushing isn’t focused on attracting more customers but in keeping the ones he has — especially those tempted to seek out video entertainment via the Web, or services like Netflix.

Meanwhile, Bewkes was careful to note that those viewership bumps may not continue, given that HBO Go is still primarily in the hands of early adopters, though that’s still a decent-sized number. Last month Time Warner announced that the HBO Go app had hit the 5 million download mark for Android and iOS users.

Speaking of Netflix — just in case you didn’t get the message via this weekend’s interview with the Financial Times — Bewkes reiterated his position on the service. He’s happy to sell them stuff he can’t sell anymore. Services like Netflix and Hulu “can definitely add value to all of us, if you’re trying to get that obscure movie that you haven’t seen yet,” he said.

That kind of faint praise may explain why Bewkes’s initial assessment of Reed Hastings’s company today — “Netflix is our friend” — drew laughs from the audience.

*Bewkes didn’t specify whether that 30 to 50 percent increase was for TV viewing, or an aggregate number that includes TV + devices. I’m assuming the latter, but have asked Time Warner reps to clarify. UPDATE: Yup, aggregate.

And if you didn’t understand that one, he offered another metaphor: A “200-pound chimp.”

In the following months, Bewkes cut back on his rhetoric, which may or may not have had anything to do with a lucrative deal to sell reruns of “Gossip Girl” to Netflix. But now that deal has been inked, Netflix stock has been crushed and lots of smart people think the video service may be on a permanent spiral.

So here’s Bewkes again, damning his new partners with very faint praise, this time in the Financial Times instead of the New York Times: Netflix and similar services (read: Hulu and Amazon, for now) can’t get the best stuff anymore, he says, and are stuck showing “archival content that nobody would want in Blockbuster.”

Not that there’s anything wrong with that! Bewkes adds. “It can do certain things and not other things. It can fly, it’s not a submarine. Don’t turn a hamburger into a cow.”

And that is how a pro mixes metaphors and backhanded compliments.

Again, remember that the real purpose of this stuff isn’t to hurt Netflix CEO Reed Hastings’s feelings — Hastings can probably take it — but to make Time Warner shareholders feel better about the company’s cable holdings. Because Time Warner’s cable channels — like TBS and TNT, and its HBO premium channel — are absolutely competing with Netflix for viewer time and dollars, no matter how much either company tries to insist otherwise.

Does this sort of semi-smack-talk entertain you? (It’s okay to admit it. Me, too.) Then you’ll want to check back on Tuesday: Both Bewkes and Hastings are scheduled to present that day at the annual UBS Media/Telecom conference. I’ll be there to record the slings and arrows, and I’ll report back.

That’s when the streaming video company authorized a $300 million stock buyback plan. Netflix has since spent $259 million of that, all of it on shares priced well above the company’s current $75 level. Ouch.

In the first nine months of this year, Netflix spent $200 million buying back its own shares, at an average price of $222. Almost $40 million of those buys came in August and September, when Netflix shares were headed down on a very steep plunge from $300 this summer. The average price for those purchases was $217 a share.

The company’s last quarterly filing spells it out, if you like rubbing salt in wounds. Here’s the receipt for this year’s first nine months of stock buybacks (click image to enlarge):

And here’s the company’s summer spending spree:

It’s easy to ask: “What were Reed Hastings and company thinking?” And it’s easy to answer: “The same thing they’ve been thinking for years.”

Netflix has consistently been a buyer of its own shares, dating back at least to 2007. The details, via last year’s 10-K:
2007: Netflix bought $100 million worth of shares at an average price of $21.
2008: $100 million at a $26 average, followed by another $100 million at an average of $29.
2009: $175 million at $42, followed by another $149 million at $47.

Map those buys out against most of the NFLX chart for those years, and the Netflix management looks great — just like anyone else who bought NFLX in that time. But that’s the problem with crystal balls — they really tend to work best with hindsight.

J.P. Morgan analyst Doug Anmuth reports back from a recent huddle with Netflix managers, and says he thinks they’re done writing checks for a while: “We believe the vast majority of Netflix’s domestic streaming spend for 2012 … has already been announced or committed. Accordingly, we would not expect Netflix to spend aggressively or announce major new deals until management has better visibility on U.S. subscriber growth.”

Anmuth gives himself some wiggle room in his prediction — it’s possible that CEO Reed Hastings still has some whopper deals he’s signed but hasn’t announced yet — but the winking and nudging seems to indicate that the checkbook has gone away.

Part of the Netflix pitch in recent months has been that it’s going to be spending a lot of money beefing up its streaming video catalog, in part because it won’t be spending it on a Starz deal that gave it access to Disney and Sony movies. And Hastings says that, increasingly, Netflix is going to be paying a premium for stuff you won’t be able to find anywhere else — it’s one of the reasons his content bill is jumping to $3.3 billion, up from $1.2 billion a year ago.

Recent Netflix deals include a new pact to stream DreamWorks Animation movies, which used to run on Time Warner’s HBO, and a deal to grab reruns from the CW, the broadcast joint venture between Turner and CBS. And the company has made one high-profile commitment to original content, via “House of Cards,” the Kevin Spacey/David Fincher miniseries that will run next year.

Are those kind of deals enough to keep Netflix subscribers happy, or to lure new ones back to the service? We may get some hints from Hastings and company in the next few weeks, as they hit the investor-conference circuit. Netflix CFO David Wells will appear at a Credit Suisse gathering on Nov. 29, and Hastings will speak at a UBS conference on Dec. 6.

But Amazon isn’t Netflix, which has to convince investors and consumers that its business isn’t fundamentally broken. Jeff Bezos and company have a much easier story to sell: Profits are down because they’re spending money on expansion.

A lot of the money is going into Amazon’s old business, CFO Thomas Szkutak explained on yesterday’s conference call — the company is building out dozens of new distribution centers to help it ship all the physical stuff its customers still order. And a lot of the money is going into its new digital business — in particular, the new Kindle Fire.

Amazon is ultracautious when providing any details about its business, and Szkutak didn’t break from that tradition yesterday. But he did go out of his way to play up the company’s investments in its new tablets.

And while he didn’t spell it out, he made it quite clear that the company was happy to lose money on the tablets in the short term because it could sell more stuff to Fire owners in the long run.

Here’s a partial transcript from Seeking Alpha; it’s a bit garbled, but much more useful than my chicken-scratch notes from the call. Note the repeated reference to the “lifetime value” of the gadgets [my emphasis added]:

We’re investing in our Kindle and Digital business [and] you’re seeing that reflected in our Q4 guidance as well … if you take a look at our Kindle business, for example, we’ve launched 4 new products at the end of September, and we’re very, very excited about those products. They’re at great prices, and they are certainly premium products … And [when] we think about the economics of the Kindle business, we think about the totality. We think of the lifetime value of those devices. So we’re not just thinking about the economics of the device and the accessories. We think about the content. We are selling quite a bit of Special Offers devices which includes ads. We’re thinking about the advertisements and those Special Offers and those lifetime value[s].

Szkutak hit the same points a few minutes later. Remember that Amazon is disciplined at saying very little on these calls. So when Szkutak hits these talking points repeatedly, it’s not an accident:

We have learned a lot over the past couple of years … since launching Kindle. … what we’re seeing certainly is that once customers purchase a Kindle and are carrying around this really massive selection at their fingertips, they’re buying more content. We’ve talked a lot about that on previous calls. But again as we think about the lifetime value … we look at the total economics which include the device, the accessories, the content, as well as any ad-based revenue and Special Offers. So those are the things that we’re looking at, as we think about the lifetime value of the device. And we like what we see. And so certainly as you think about Q4 and you think about the guidance that we’re giving, certainly we’re going to have a — we expect to have a record quarter in terms of device sales. And because of the back-end loading of it, you should assume that the content would, obviously, trail that device sale. The ad revenue would trail those device sales as well as the Special Offers.. But we’re extremely excited about both our electronic ink and fire devices … and we think that those will be great for share owners over time.

As long as we’re parsing the call, it’s worth noting that Szkutak repeatedly points out the value of advertising on its tablets. I’d previously assumed that the company thought of ads — several of the Kindle base models now come with “special offers” as the default option — as a way to defray the Kindle’s costs, so it could get more of them in customers’ hands. But it seems Amazon has bigger ambitions.

Again, it’s important to stress that Amazon’s gadget model is the opposite of Apple’s: Tim Cook sells media so he can sell iPads and iPhones; Bezos sells Kindles so he can sell books and videos and music and even advertising.

Apple has already established that its model works. Now we get to see Amazon’s theory really put to the test.

You’ll forgive both groups if they’re a tad skeptical.

But if you feel like extending Reed Hastings the benefit of the doubt once more, then pay attention to the shareholder letter he published yesterday — in particular, the part where he explains the company’s content strategy.

In the end, if Hastings does deliver, this is the plan that will let him do it. And it’s a change from the company’s original content strategy, which means some folks haven’t figured it out yet.

Short version: When Netflix was a DVD company, it could afford to offer just about every movie or TV show every made. Now that it’s a streaming video company, it has to pick and choose.

So Hastings is trying to build an $8-a-month version of HBO — a network you pay for in addition to your regular TV package, not one that replaces it. And to make that work, he doesn’t have to have everything — but he has to have stuff you can’t get anywhere else.

Here’s an extended excerpt from his letter:

In television… the networks (ABC, FX, etc.) have long relied upon exclusive content to differentiate among themselves. As video moves online, so too has this practice of exclusive content. HBO has an exclusive license to recent Universal movies that includes its online HBO GO, for example. Netflix has signed exclusive licenses for DreamWorks Animation, for Relativity, and others. In episodic television, exclusives are also the norm. Netflix doesn’t license “Deadwood” from HBO because they see strategic value in keeping it exclusive. Netflix licenses “Mad Men” and “House of Cards” exclusively for much the same reason.

…We don’t have to “beat” Starz or other networks to succeed…We won’t have every movie or TV series; but we do provide enough value that consumers also want to subscribe to Netflix.

Any given consumer will have only one of DirecTV or Comcast, say, for their video service. That is classic either‐or competition. But with premium television networks like Netflix, the more good experiences there are, the more consumers are willing to spend to have multiple channels from which to get enjoyment.

Simple, right? The complicated part is the execution, of course. Hastings and his team have to figure out what their customers, and future customers, will value, and how much Hastings and his team can afford to pay for it.

And if they make the wrong calls — if it turns out that “House of Cards” isn’t interesting to anyone besides Kevin Spacey, or if the DreamWorks movies don’t satisfy people who used to watch the Pixar movies Netflix used to have — then Netflix really is toast.

But Hastings still has some 25 million subscribers, which means he still has plenty of money to keep betting — during his earnings call yesterday, he said the company’s content bill had shot up to $3.3 billion, up from $1.2 billion just a year ago. That’s not enough to pay for an unlimited supply of videos. But it should be enough to build a decent pay TV channel.

This did not make it onto “Saturday Night Live” last weekend, but it is still very funny — a mock interview by Charlie Rose of Facebook’s Mark Zuckerberg, the Huffington Post’s Arianna Huffington, Reed Hastings of Netflix and the world’s oldest “mean girl,” Rupert Murdoch of News Corp., all talking about Apple’s Steve Jobs.

Heh: