It’s Time to Bust This Netflix Myth

Shares of Netflix (Nasdaq: NFLX  ) are rallying again. Big Money backing, resulting from enthusiasm for June’s streaming numbers, is likely the cause, but the gains could just as easily be attributed to inept competition.

Hulu Plus this week began offering new subscribers two months of free service. Except that it isn’t really free. Neither Hulu, nor Hulu Plus, is all that different from individual network website archives that provide access to recent TV episodes in exchange for watching a few commercials as you stream. Hulu has the same requirement -- and charges you $7.99 a month for the privilege.

I know, I know, I’m being snarky. That’s because I find Hulu Plus to be a poor alternative to Netflix. Here’s why:

  • An awful movie library. Right now, the most popular movies at Hulu Plus include Quentin Tarantino’s Jackie Brown, a solid choice, alongside ... the Lifetime movie Inspector Mom. Talk about a letdown. Popular selections on Netflix right now include the 2011 action thriller Drive, and Transformers: Dark of the Moon, the latest in Hasbro’s giant-robot action franchise.
  • Few shows outside of network favorites. Say you’re a DISH Network customer looking for another way to view catch-up seasons of blacked out AMC Networks (Nasdaq: AMCX  ) shows, such as Breaking Bad. Hulu Plus won’t help you. Netflix will. The same is true for BBC favorites, such as Doctor Who, and Sherlock. My point? Netflix doesn’t need new, exclusive deals to set itself apart from Hulu.

To be fair, my evaluation of Hulu Plus is neither scientific nor rigorous. All of it is based on opinion, and I know of others who love Hulu and loathe Netflix. Tastes always vary and, as a Hulu fan, you may find my ranting nonsensical.

Yet, there’s plenty of nonsense to go around. Consider the growing number of skeptics who insist that Apple (Nasdaq: AAPL  ) is a massive threat to Netflix despite all evidence to the contrary. The two companies have partnered to create what looks like the perfect foil to Amazon.com’s (Nasdaq: AMZN  ) Instant Video service, which offers both an all-you-can-eat streaming menu a la Netflix and an iTunes-like option to rent and purchase premium flicks and TV episodes a la carte.

Skeptics still skewer Netflix because they believe that the Qwikster debacle, and poorly timed share buybacks, are reflective of broad-based incompetence. They believe CEO Reed Hastings lacks the savvy to build a sustainable business. I say the evidence suggests otherwise. Where do you stand? Please weigh in using the comments box below.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple and Netflix at the time of publication. He also had a long-term call options position in Netflix. Check out Tim's web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Amazon.com, Apple, Hasbro, and Netflix. Motley Fool newsletter services have recommended buying shares of Amazon.com, Hasbro, Apple, and Netflix. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (6) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 13, 2012, at 1:16 AM, seal508 wrote:

    The CEO is on the board of directors at Microsoft and Facebook. How unsavvy is that?

    AMZN doesn't have the content to crush NFLX, but they could and should acquire them to offer another incentive to join Prime (and buy more stuff).

  • Report this Comment On July 13, 2012, at 8:18 AM, jb757 wrote:

    There's no Netflix myth. They now have 29 million total global subscribers. The proof of current success is in the numbers. Netflix added 1.74 million domestic streaming subscribers in 1Q12. None of the competition reports subscriber numbers.

  • Report this Comment On July 13, 2012, at 6:26 PM, rbraseth wrote:

    I suspect Netflix is once again finding its footing. I hope so because it truly is a visionary idea. However, Reed Hastings won the bonehead CEO award in 2011. His customers complaints about the scrolling titles of movies were met with deaf ears. His decision to split the business and raise prices at the same time was a disaster. He did nothing in advance to explain to shareholders and Wall Street what he was doing. Among a CEO's top three skills must be communication. His arrogance, and that is exactly what it was, cost me thousands of hard earned dollars. The fact Mr. Hastings put is company in jeopardy and hurt his shareholders dearly is no myth. I took it personally. I waited for the stock price to move up 20 percent and dumped out. Although I hope the shareholders continue to do well, I wouldn't buy Hastings a lousy cup of coffee, not because he screwed up, we all do that, but because of his comments and attitude after the fact. That is one arrogant dude. For the sake of Netflix loyalists, I hope Hastings has learned something from his terrible judgment.

  • Report this Comment On July 13, 2012, at 9:48 PM, watt99 wrote:

    Gee, is Motley Fool trying to bolster opinions of Netflix due to prior recommendations? Hmm, I wonder.

  • Report this Comment On July 14, 2012, at 6:52 AM, dmcintee wrote:

    I'm new to both streaming video and Netflix, and have been a little disappointed with Netflix's catalog. Usually, when I go searching for something specific I'd like to watch, it's not offered. Oddly, many of these titles are available from Netflix, but as DVDs, not streamed. Frustrating. This does not say Netflix is a bad investment. It may be the best service in a very new and immature field. I suppose my frustration is that breaking the ties with the cable company is proving so difficult.

  • Report this Comment On July 20, 2012, at 9:46 AM, jmoule wrote:

    This stock has suffered a huge drop in price over the last couple of years while the market as a whole has been tending upwards. So, there is a large overhead of investors waiting to sell when and if the price goes up. Is this stock a bargain? With a PEG ratio of about 44 and quarterly operating income trending down, I don't think so. There are better opportunities than this.

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