Bad time for Netflix CFO to resign

Barry McCarthy, Netflix's chief financial officer and one of the linchpins of the company's management team, has stepped down.

In a statement today, Netflix said that McCarthy is moving on to "pursue broader executive opportunities outside the company." David Wells, a Netflix's vice president of financial planning and analysis, will succeed McCarthy, who has served as Netflix's CFO for 11 years. The change officially occurs on Friday.

Netflix CEO Reed Hastings said in a statement that: "Over the last few years, Barry has balanced his affection for Netflix and the excitement all of us have felt by the tremendous growth of the company--with his personal desire for broader professional opportunities. Barry concluded that now is the right time to seek out those opportunities, and we will be cheering for him."

Efforts to reach McCarthy were unsuccessful, and Netflix spokesman Steve Swasey said McCarthy would not be making any comment.

The news comes at an inopportune time for the movie-rental company. In a year that has seen Netflix record a big increase subscribers, generate scores of positive headlines, and strike two large deals to license content from Hollywood studios, the company is again generating buzz in the entertainment sector, but now it appears to be mostly negative.

Some at the big film studios and TV networks have said in recent weeks that Netflix is a threat to more profitable revenue sources and the company will have to pony up much more money to obtain high-quality content. It's either that or Netflix's streaming service will have little more than the video dregs to offer subscribers. The cable industry appears to be fanning the flames of much of this Netflix bashing. The latest example came yesterday at the UBS investor conference in New York.

Jeff Bewkes, Time Warner's CEO, predicted that media companies would start to squeeze out aggregators like Netflix. According to a report in The Hollywood Reporter, Bewkes referred to the $100,000 that Netflix is reportedly offering to pay makers of in-season TV shows for each of their episodes "a measly little offer."

Bewkes' criticisms aside, Netflix has had a sensational year. The fight, however, for Web TV and digital distribution of films and TV shows isn't anywhere near over.

It remains to be seen how much McCarthy's departure will affect Netflix as it switches from delivering physical goods to delivering digital media and as questions swirl around the company's ability to obtain high quality content.

One thing to keep in mind is that a big part of the Netflix's success has been the nearly flawless execution by the company's management team which the CFO helped anchor.

The successes the company has notched goes back to the little red envelopes. Netflix, headquartered in Los Gatos, Calif., delivered movies via the U.S. mail service and did it much more cost effectively than Blockbuster could rent videos out of brick-and-mortar stores. Blockbuster filed for bankruptcy protection earlier this year.

When it came to the company's streaming service, Netflix linked the Web to living-room TVs by partnering with a score of Web-connected set-top boxes, TVs and handhelds. They didn't do this last week. They started doing this two years ago, long before their rivals.

As for the "broader executive opportunities" McCarthy might be pursuing, it's easy to guess that the CFO of one of the most successful digital media companies would generate plenty of interest. Certainly, the Vudus, Boxee's or Google TVs of the world could use someone with McCarthy's skills and background.

We'll have to wait and see where McCarthy turns up. It will also take time to determine how much his loss affects Netflix.