Netflix CEO Reed Hastings' Backup Plan: Invest $1 Million in Facebook

Just in case that whole DVD-by-mail and streaming video service turns out to be a fad, Netflix

CEO Reed Hastings has acquired more than 40,000 shares of the world's largest social network, Facebook

.

According to an

, Hastings acquired 47,846 shares at a price of $21.03 each, costing the Netflix chief exec just over $1 million. Hastings' investment gave Facebook a

on Friday. Facebook shares traded up more than two percent Monday morning, as investors continue to buy into the social networking giant. While the company has had a number of problems since its IPO, including

, Facebook is largely believed to be one of the

and is expected to be around for a very long time. Netflix, however, may not be so lucky. The company has been

since it announced the

that raised the monthly cost of its DVD/streaming rental combo by 60 percent. The company's share price has been declining ever since. Earlier this summer, Netflix was accused of using a loophole to

. Despite this claim, Netflix shares jumped more than 20 percent during the first few weeks of July. Those gains have since been lost. On August 2, the company hit a new two-year low when its share price dropped to $53.87. While many of Netflix's problems are directly related to its policies (price changes,

, etc.), the company has also faced a rising number of new competitors. With challenges coming from Comcast

, Dish Network

, Amazon

, Coinstar

, and Verizon

, Netflix may be fighting a battle it cannot win. Facebook, on the other hand, does not have any significant competitors. For the social media titan, the beauty of LinkedIn

and Twitter is that, despite their insane popularity, their success is nowhere near that of Facebook. More importantly, LinkedIn and Twitter are vastly different from Facebook. Instead of choosing one of these offerings, users often choose all three. The same cannot be said for Netflix. Very few people are willing to pay for Netflix, Amazon Prime, Hulu,

Comcast Xfinity Streampix, Prior to his latest investment, Hastings became a Facebook board member and acquired 20,000 restricted stock units. His involvement with the Mark Zuckerberg enterprise is very telling. Though it is not uncommon for corporate executives to spread their wings and work for multiple companies, it seems strange that Hastings would invest his time and money in Facebook when he could be focusing his efforts on saving Netflix. Perhaps Hastings knows something regular investors don't.