No matter how it is spun, if Netflix (NASDAQ:NFLX) continues on with its current business model, it'll struggle to survive, because as competitors continue to arise, it will swiftly become a commodity business based on the best price winning.
To that end, Reed Hastings has made the one move that has caught the majority of people off guard and potentially undermines the hold studios had had on the company.
It's the acquisition of the distribution rights to House of Cards, an original series directed by David Fincher, who helmed 'The Social Network.'
As Fortune rightly notes, "If HBO won't sell Netflix streaming rights to its blockbuster shows, or any other cable, movie, or network television company puts the squeeze on content, Hastings is making it clear he will go out and get it himself. If he is willing to pay enough, as he seems to be, and can continue to afford it, content producers will offer their shows all day long."
Of course the caveat is the costs, and whether or not this is just a message being sent to the studios or a declaration of all out war for content.
This isn't going to come cheap for Netflix, but if they can pull it off over a period of time, they have a chance of surviving the upcoming price wars and commoditization of its business.
The challenge is it'll take a lot of $8 a month to pay for this type of expensive content. Interesting twist though, and a brilliant one of they can make it work.
Netflix was trading at $209.60, dropping $4.30, or 2.0 percent, as of 1:46 PM EDT.
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Friday, March 18, 2011
Netflix's (NFLX) Killer Move, Will it Work?
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5 comments:
I keep reading negative appraisals of the Netflix business model. As an personal investor and movie fan, I subscribed to Netflix to get a first-hand impression of the service.
In short, I like Netflix a lot as a service. It is cheap and easy to use. I have my choice of a vast store of content. Much of the content is not brand new, but this is not an issue so long as I have not personally viewed it previously. I especially like it that I can decide to watch content when it is convenient for me instead of when it shows. I like both the streaming service as well as the ability to get DVDs in the mail. I do not find Netflix's pleasing mix of features in other home entertainment options.
Because Netflix delivers a lot of value to me as a consumer for a very low price, I believe that they may continue to add more subscribers as the word gets out about their value and benefits.
I do not share the belief that competitors wil be able to launch a credible alternative in a short amount of time -- like a quarter or even two quarters. It will take many quarters or several years to build the diversity of content, ease of use, and goodwill with customers that Netflix currently enjoys.
I hope this reply helps other consumers and/or investors make informed choices about Netflix.
Sorry, here is the link for all you can eat $7.99/month.
http://www.hulu.com/
People dont understand Netflix's consumer database. These guys are on streaming capabilities, utillizing devices already found in the home. (Xbox, PS3, WII, Blueray Players)and Netflix has already infiltrated the Canadian Market. From a consumer stand point, I would assume that people would pay a $8 dollar subscription and run Netflix on any TV with one of the above mentioned devices.
edit: MORE THAN 1 of the above mentioned devices.
Whatever you can do on Netflix, you can do on www.hulu,com as well. The stock price of NFLX is too high at $213. There will no surprise if NFLX will follow the path of blockbuster in the near future.
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