8 Reasons to Believe in Netflix

• Report this Comment On October 13, 2011, at 1:26 PM, nhalden wrote:

  First of all NF is cheaper for 1 subset of customers. FOR ALL of the other customers the prices went up and or service levels were lowered.

  3 DVD's price went up OR you could choose 2DVDs for a penny less.

  Maybe you are not as smart as you think you are?

  Point 2.

  Your comparisons are right on but your conclusion is wrong. Amazon is limited but it's got some real time TV shows that are posted Just like HULU and HULU+. HBO and DISH are for subscribers but these are REALY TIME TV shows like like any other on demand feature. NF can't touch this with a 100' pole. So what if NF has "Ice Road Truckers" from 2 seasons ago? Bottom line is they will NEVER stream TruBlood, or Spartacus (again) or any of the premium content from the most post popular premuim channels. Where as site s like HULU or Amazon may have the best chance....one because they have deeper pockets and 2 because they aren't tearing into profits.

  Point 3.

  NF reported shortly after price and split announcements that more than 800K susbscribers had left. (combining the 2 services). Since then it's expected that another 300-600K have left. Canadian #'s are dropping due to regional costs not associated with NF. That brings me to your....

  Point 4. Yes they provide content to other countries. Canada and Brazil most recently. Canada started out strong but lost a 3rd of their susbscribers due to extra cost of bandwidth while using NF. ( I believe the change was 1.2 M to 850K) Growth is expected to be next to nothing...although stated as steady. I don't see how that can be. Brazil will be similar. Mexico has proven to be a tough place for them to do business as the local providers are undercutting NF Much like TELMEX does with say ATT.

  Point 5

  You're right...but you are using BB's reputation against them, which is fine. However, service for service BB and NF are even.(for now) The one thing better about BB is that you can view the entire BB library of DVD's you can't do that with NF. You can search sure...but you can't drill down or view by any specific category ALL of their movies....Point (and I hate to say it....) BB

  Point 6

  Again your'e right....they are the biggest player in the game...however VUDU, HULU, and others have been integrated as well. Blockbusters isn't far behind and neither will Prime. It's not that NF is alone it's that they were the first to pave the way, good for them. NOW it's going to be that much easier for the others to follow.

  Point 7

  Netflix was down graded from a 285/share expectation to 185/share...this will get worse. I doubt your 18 times earning projection took that into account.

  Point 8

  Qwickster was a systematically planned slip that was in the works for over a year. The streaming and DVD services were being split into separate services right under customer's noses. Streaming lost DVD into instant queues, DVD recommendations from streaming, lost drill down ability on streaming menus, DVD lost the social aspect (Facebook deal...that tanked). NF received complaints about all of these things and more, and you say they can't be taught...?

  Qwickster would have had to compete with Flixster for name recognition...nuf said.

  Streaming content is fine for the casual view who doesn't care about newer releases. DVD isthe new release venue. However, the reason on demand works is 1. It's availalbe before NF and 2. There is no subscription fee. (ie. those 1 DVD at a time; X #/month people can stop paying if they don't use the service)

  STARZ STARZ STARZ....NF could have made the deal..nd no price hikes..or kept the hike they made...as it stand NO STARZ DEAL and they lost 8% of their streaming content...that's THOUSANDS OF TITLES plus new releases from Sony and Disney. They didn't want to pay because they couldn't. Hastings admited as much. They are cash poor when it comes to the big deals.

• Report this Comment On October 13, 2011, at 1:40 PM, pooskadad wrote:

  I respectfully disagree. NFLX does not meet Motley Fool's basis for a company in which to invest.

  To quote 3 reasons to pick a stock from step 6 of MF's own "13 Steps to Investing Foolishly", and my take on NFLX meeting those requirements:

  "1. A sustainable competitive advantage: Some businesses have unique, lasting competitive advantages that allow them to earn outsized profits. The more durable a company's competitive advantage, the larger the "moat" that surrounds its financial fortress."

  I see Netflix's "moat" shrinking, and more companies are building bridges. In short, they no longer have that competitive advantage.

  "2. Cash aplenty...Fools look for low-debt, cash-rich balance sheets and steady cash flows. Specifically, free cash flow"

  Netflix does not have much cash in reserve, their cash flow is negative right now, and they have huge obligations to pay for content in the next 18 months.

  "3. Strong leadership: Is management invested alongside you? Do they have a history of creating value for shareholders? Do they have years and years of relevant experience? Do they treat outside shareholders (business partners) with respect?"

  Reed Hastings is decidedly NOT invested alongside us...he has sold $35 million + worth of NFLX in the last year. What happened to the CFO? How many MONTHS (not years) has the current management team been together? And as for respect, Mr. Hastings personifies arrogance. He does not feel the need to tell us what is happening or where the company is going and his comments on earnings calls are well-known for their lack of information. This is a company that is floundering and seeking direction ("oh boy, let's start Quikster"..."no, wait, we don't want to do that").

  I got out of NFLX at $280, and am glad I did. I understand that those fools who bought at under $20 are still happy, but this stock should not be on the current "buy" list, nor should it be on the "hold" list. If and when management gets that lazer focus that it needs to succeed, then builds up some cash, maybe this would be a safe long-term investment, but until then I am staying away.

• Report this Comment On October 13, 2011, at 3:49 PM, Darwood11 wrote:

  Switching to Coinstar? That means you have to get off your couch and do something. How much gas will be spent driving to the local Coinstar Redbox? Redbox also rents by the day, and rentals must be returned "by 9PM the day after you rent" or you pay for another day. I can do that at the local rental store, and they have far, far more choices and give me two days minimum for each $2 rental. So why would I switch to Coinstar??

  I prefer to stick to Netflix.

  As an investor, I sold 2/3 of my shares before it dropped like a stone. I think that investors need to do their homework. I think NFLX was and is a good company. However, it becomes difficult to justify some of the lofty evaluations of tech or media companies and there is a point at which I become uncomfortable. That's when I sell. So it was with the majority of the shares I held in NFLX.

  I didn't expect the mis-steps at NFLX and I am disappointed.

  However, I continue to like the product, and think there is a possibility for the company. So, for the present, I will "hold" the remaining shares I own and will only sell when I see no possibility for future gains, or if I truly believe that my money is better elsewhere. The question "would I buy NFLX today" is one of those I ask of any stock I own. When the answer is a resounding "NO" then I do sell, no matter what the metrics.

  I also should say that my time horizon is longer than 6 months. I can wait.

• Report this Comment On October 13, 2011, at 4:30 PM, Geldej wrote:

  I like netflix a lot

  service is great

  selection online could be a lot better

  I would love it if they had hbo

  especially the sopranos!

  along with all the other stand ups on hbo

  I just think the mng needs to LEAD

  I mean come on

  stop acting like a little girl or wuss boy

  do what you want to do and offer what people actually want!

  its not like they dont know or are blind

• Report this Comment On October 13, 2011, at 4:58 PM, nick1200 wrote:

  Great article. Netflix back to 200 in 6 months.

  For 4 years Netflix has provided me with an awesome service that I just can't get anywhere else.

  I cut my cable bill a long time ago and haven't looked back. I don't plan on subscribing to Hulu.

• Report this Comment On October 13, 2011, at 7:20 PM, nhalden wrote:

  "Netflix back to 200 in 6 months"

  NO CHANCE

  As to the HBO and Showtime and STARZ and other Premium streaming...

  NO CHANCE IN HELL

• Report this Comment On October 13, 2011, at 9:09 PM, TMFBreakerRick wrote:

  nhalden, thanks for the counter-arguments on my eight reasons. I should clear up the first point I was trying to make. ALL DVD only unlimited plans are now $2 less a month. And when someone is saying that they're going to dump Netflix for Redbox they are talking about DVDs only, obviously -- hence the argument that they don't get that they're actually getting a price break. If streaming matters to them -- the only subset that went up in price -- they wouldn't be turning to Redbox.

• Report this Comment On October 14, 2011, at 2:34 AM, nhalden wrote:

  As a customer who has both the streaming and DVD service...my total rate was a penny cheaper.

  HOWEVER to avoid a higher rates I had to select the 2 DVD/unlimited option instead of 3.

  So for $20/month I can stream OLD titles and OLD TV shows and get DVD's.

  To counter what you just said...if my DVD side went down $2/month and my streaming side when up $2 then I should hav broken even and no harm no foul....BUT that's not what happened.

  For $20 (19 and change) I got both services w 3DVDs. That's $10/ service roughly. NOW 2DVDs ONLY is $12/month... are you telling me that that used to be $14/month? I don't believe it.

  EITHER WAY the argument that you are making is beyond ridicules. To say and believe that the service is cheaper across the board is insane and just not true.

  IF YOU LISTEN to the people, unlike NETFLIX did you'll find that very few people have a problem with the DVD side...the issue is the streaming side. That is why NF tried to split the services...fight the battle on 2 fronts one side they win the other they lose but the losing side is the future.

• Report this Comment On October 14, 2011, at 10:19 AM, wyrdmage wrote:

  Good businesses adapt and survive their mistakes. Netflix is a survivor and a good investment at these reduced stock prices. I sold at $280 and now bought at $120...When the economy eventually strengthens, NFLX will rise dramatically.

• Report this Comment On October 14, 2011, at 10:22 AM, ejclason2 wrote:

  "2. Streaming smorgasbord alternatives aren't all that great."

  True, but neither is Netflix streaming. If none of the streaming smorgasbord choices, including Netflix, are all that great, I can live without any streaming sorgasbord.

  That's the shortcoming of Netflix's smorgasbord streaming model. At a price of under $10 a month, they are never going to be able have anywhere near the same size library as they do with DVDs. The content owners have much more control over what content providers (like Netflix) can provide streaming, than they do with DVDs. Content owners will make more money on their most popular products, by providing them via alacarte services like iTunes. Netflix will become the 2nd run theatres of the digitally delivered video market. While this is probably a viable business, Netflix won't be the 800 lb gorilla it is in the DVD rental business.

• Report this Comment On October 14, 2011, at 11:15 AM, caltex1nomad wrote:

  Thanks Rick for saying what I have been preaching since the price hike. If you can't find anything to watch on Netflix streaming you are not looking hard enough. i have been watching things I never thought I would and enjoying it ! BBC shows, AMC Original shows, Foreign Movies,Old TV shows long forgotten. I have found plenty to watch and I won't be running out of things for awhile.

• Report this Comment On October 16, 2011, at 11:10 PM, cfrdog wrote:

  No competitive advantage. Red Box is growing fast, people will drop their DVD's from NF faster and faster - but will not move to streaming. Coinstar will pick up their slack. Streaming will get more and more expensive. Too many competitors out there now and now they are held hostage to the content they must buy. I don't trust this management at all.

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