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October 25, 2011

Netflix’s Buzzsaw

Filed under: Random Thought — Tags: — Nate @ 6:39 am

The blurb I just heard out of CNBC which was kind of funny was was anyone willing to go long into that buzzsaw last night?

I know I said it’d be a while since I wrote about Netflix but I have written some other things since. The situation is just so funny I wanted to laugh in public with their stock down to $76 in pre-market trading from about $118 when the market closed yesterday (off original highs of $280 in early July).

Again from CNBC

Headline from a few of the analyst reports

  • Broken story
  • Unsustainable model
  • Nuclear winter
Name of FirmPrice target
Price target
Goldman Sachs$75$200
JP Morgan$67$205

The boldest call on Netflix Janney Capital with a target of $51.

For some reason I was thinking of it more along the lines of a wheel falling off a car when it was going 60 MPH down the highway. It was a momentum stock after all right.

The main story seems to be the loss of subscribers, and not being profitable over the next year or so due to costs associated with expansion into other markets. They lost more than 800,000 subscribers in the quarter, myself being one of them.

“What we are seeing is a second wave of cancellations from the pricing increase,” said Chief Executive Reed Hastings, during a conference call with analysts.

Oh, and this is AFTER they reversed course on the whole Qwikster thing. I would love to see what Netflix management is talking about now, let me get some popcorn first though.

A guy from CNET says Netflix actually had a net loss of roughly 1.8M subscribers for the quarter, since Netflix typically adds 1M subscribers in the quarter and this quarter they lost 800k. so 800k lost + 1M not gained = 1.8M lost on a service that has less than 24M subscribers.

Hey Netflix, I’ll probably be willing to come back(and pay more) if you increased your content catalog by at least, say 500%.

Content certainly seems to win over distribution in this story.

(I’m not an investor in anything, situations like this are why I like to watch CNBC – it’s so funny for some reason)


  1. what you don’t fancy every direct to dvd movie in existence at your fingertips?

    their streaming product content and quality has dropped sharply over the last 6 months. the only reason to keep the netflix online is if you have kids who want to watch certain TV Shows.

    I think there is a far more lucrative market for older TV shows, and the ability to watch an entire series/season than there is for the movie content. They should tailor their model to support Current and Legacy television and simply drop the DVD by mail business all together. Though, this model will put them at the mercy of the ISP’s and content providers.

    Comment by tbik — October 25, 2011 @ 9:00 am

  2. Hastings has planned changes much along the same lines:

    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.

    Comment by tbik — October 25, 2011 @ 9:07 am

  3. I also found it interesting Youtube investing something like $150 million on original content rather than spending that money on licensing other content. I wonder if the trend will start heading that way, more fragmentation of the content because nobody can afford to license each other’s content.

    thanks for the comment!!

    Comment by Nate — October 25, 2011 @ 9:12 am

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