Analyst: Netflix Facing Uncertain Environment: Pricing Subscriber Loss International - High-Def Digest Forums
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Old 08-24-2011, 02:31 AM
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Default Analyst: Netflix Facing Uncertain Environment: Pricing Subscriber Loss International

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Analyst: Netflix Facing ‘Uncertain’ Environment'

23 Aug, 2011
By: Erik Gruenwedel




Netflix’s pending (and expensive) streaming offensive in Latin America and beyond, coupled with the Hulu auction portends a challenging home entertainment landscape

As online disc rental pioneer Netflix continues with an aggressive international expansion of its all-you-can-eat streaming service, it also is entering a prolonged period of difficult earnings, according to an analyst.

Eric Wold, research director with Merriman Capital in San Francisco, said Netflix shares have dropped 26% in value since he downgraded the stock to a “neutral” rating on July 6. The analyst now is discounting further 10% to 20% Netflix’s stock valuation for 2012.

Principal culprits include burgeoning costs involved rolling out streaming service in 43 Latin American countries, Mexico and the Caribbean, and the unknown impact of a 60% monthly price increase (to $15.98 from $9.99) to select domestic subscribers beginning Sept. 1.

Indeed, many analysts say the price increase could see upwards of 15% of Netflix’s 25 million subscribers jettison the service in favor of other home entertainment alternatives such as Amazon Prime, kiosks and video stores — many of which offer pricing options that rival Redbox and Blockbuster Express.


Netflix CEO Reed Hastings and CFO David Wells, in the company’s most recent analysts’ call, confirmed that short-term subscriber loss was inevitable in the third quarter as a result of the price increase.

In addition, Netflix’s most recent content deal with Telemundo for 1,200 hours of repurposed Spanish-language TV programming underscored the prolific spending required to launch streaming service across such a large region.

Indeed, correspondence with Netflix personnel revealed the company is focusing much of its resources and attention on the launch.

“Although there is the potential for increased gross profits per domestic sub depending on how the price increase takes hold and the shift in subscription type, we believe this is likely to be offset by increased launch costs and initial losses internationally along with the potential for higher marketing spend (subscriber acquisition costs) domestically,” Wold wrote in an Aug. 23 note. “Given an increasingly uncertain environment (both competitively and operationally), we believe it is prudent to be more conservative with our valuation multiple assumptions.”

http://www.homemediamagazine.com/net...ironment-24862
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Old 08-24-2011, 09:51 PM
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Why not use their money to buy up some of these cable series that are getting dumped, one of which because of possible budgetary concerns(looking at you "Breaking Bad")?
"Eureka" has just been canceled and I think it's one of their best Sci-Fi series(I will NOT type Sy-Fi it's just stupid imo). Not to sound like a jerk but while I like "Haven" I think it's lame that it got primetime billing on Friday.
I only hope "Sanctuary" hasn't been canceled as well though Netflix might think of picking that up as well if it's the case.
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Old 08-24-2011, 10:02 PM
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Can't trust the source, and I can see why they would have a bias against Netflix anyway.
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Old 08-24-2011, 10:06 PM
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Originally Posted by bruceames View Post
Can't trust the source, and I can see why they would have a bias against Netflix anyway.
Cute ad hominem attack. :wink:

Do you have any comment on how the story is not accurate to the analyst's comments referred to in the article or is otherwise inaccurate?
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Old 08-24-2011, 10:09 PM
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Originally Posted by Sarang View Post
Why not use their money to buy up some of these cable series that are getting dumped, one of which because of possible budgetary concerns(looking at you "Breaking Bad")?
"Eureka" has just been canceled and I think it's one of their best Sci-Fi series(I will NOT type Sy-Fi it's just stupid imo). Not to sound like a jerk but while I like "Haven" I think it's lame that it got primetime billing on Friday.
I only hope "Sanctuary" hasn't been canceled as well though Netflix might think of picking that up as well if it's the case.
Breaking Bad isn't being dropped because of budgetary issues. The Creator has stated he wanted Season 5 to be the last. In the end, it got renewed with a bonus 3 episodes.

Eureka is a dying show as is Sanctuary. They probably don't want to be the next "Directv". They gambled (and lost) on Friday Night Lights. It did little for new suscribers and any money they would have made from syndication was lost when ABC Family pulled it like 2 weeks into it (I think it's now running somewhere else). The Closer was also a huge bomb.
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Old 08-24-2011, 10:11 PM
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Originally Posted by bruceames View Post
Can't trust the source, and I can see why they would have a bias against Netflix anyway.
Yep.

Plus there isn't really anything in the article. Netflix has already acknowledged that Q3 will likely be flat for subscribers as those cancelling the service and new subs will be about the same number.
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Old 08-24-2011, 10:14 PM
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Originally Posted by PSound View Post
Yep.

Plus there isn't really anything in the article. Netflix has already acknowledged that Q3 will likely be flat for subscribers as those cancelling the service and new subs will be about the same number.
Nothing from HMM can be trusted anymore. I need to get one of their special keyboards.
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Old 08-24-2011, 10:24 PM
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Quote:
Originally Posted by Sarang View Post
Why not use their money to buy up some of these cable series that are getting dumped, one of which because of possible budgetary concerns(looking at you "Breaking Bad")?
"Eureka" has just been canceled and I think it's one of their best Sci-Fi series(I will NOT type Sy-Fi it's just stupid imo). Not to sound like a jerk but while I like "Haven" I think it's lame that it got primetime billing on Friday.
I only hope "Sanctuary" hasn't been canceled as well though Netflix might think of picking that up as well if it's the case.
It would be a good avenue for Netflix to persue. Aren't a couple of Soap Opera's like All My Children being picked up by some website since ABC cancelled them?
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Old 08-24-2011, 10:26 PM
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Originally Posted by Rayzor77 View Post
It would be a good avenue for Netflix to persue. Aren't a couple of Soap Opera's like All My Children being picked up by some website since ABC cancelled them?
Yes - some random website. How they will maintain the $35+ million a year it takes to make them is beyond anyones guess.
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Old 08-24-2011, 10:29 PM
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Originally Posted by GizmoDVD View Post
Nothing from HMM can be trusted anymore. I need to get one of their special keyboards.
Ah. Now we see the real reason for all the angst from the usual suspects recently.
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