Is Netflix's Sky Falling?

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Netflix (NASDAQ: NFLX  ) has been one of the hottest stocks in recent weeks, but that doesn't mean it isn't vulnerable. (NASDAQ: AMZN  ) announced a deal with Time Warner (NYSE: TWX  ) this morning that will bring the entire seven seasons of The Closer and past and future installments of Falling Skies to its Prime Instant Video library.

That's a notable catch, and not just because the number of episodes across both shows pushes Amazon's available title count beyond 30,000. And the deal with Time Warner's TNT and Warner Bros. Domestic TV is important because neither show is currently available on Netflix.

Most of Amazon's grabs in the past have been in areas of content where Netflix has planted the flag first. From the juicy EPIX deal to many of its most popular movies and television shows, Netflix has "been there, done that" written all over itself.

However, this is another piece of Time Warner content that Prime Instant Video has -- and Netflix does not. Yet any overlap ultimately helps Netflix. Sure, Amazon is cheaper -- and includes more perks with its Prime membership -- but Netflix is the one that's seamlessly integrated across countless home-theater appliances. When's the last time you saw an "Amazon" button on a Blu-ray remote control player the way many players have "Netflix" options?

Differentiated content is actually in the best interest of both companies. Just as cable customers often find themselves having to subscribe to Showtime as well as Time Warner's own HBO to follow certain channel-specific shows, programming diversity will have more people subscribing to both Netflix and Amazon Prime.

The skies aren't falling at Netflix. The stock has risen nearly 80% since bottoming out this summer. It traded lower this morning -- perhaps reacting to Amazon's news -- but then moved higher in the afternoon. The market gets it. Netflix may not be the darling it was when it peaked two summers ago, but perceptions have evolved beyond fretting what content a lower-priced rival is grabbing. The picture is far larger than that.

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  • Report this Comment On December 18, 2012, at 1:56 PM, BioBat wrote:

    "Sure, Amazon is cheaper -- and includes more perks with its Prime membership -- but Netflix is the one that's seamlessly integrated across countless home-theater appliances. "

    You might want to check that statement. Amazon Instant video is available in over 50 million TV connected homes via Xbox and PS3. Amazon Instant video is also available on tens of millions of iPads and Android devices as well. As a former Netflix subscriber, and current Prime subscriber, the value I get in Prime far exceeds anything I could get with Netflix.

  • Report this Comment On December 18, 2012, at 8:04 PM, FoolishHack wrote:

    I agree with Biobat and would argue that Amazon Instant Prime videos are actually more integrated than Netflix given the Amazon tablets. Amazon instant videos are available on any home-theater appliance and tablet just like Netflix. I also got rid of Netflix because the value of Amazon Prime is tremendous. Being able to rent/buy movies on top of the free content and having them stored in a cloud library is pretty cool. I access Amazon Prime videos on my TV through Blu-Ray DVD player and Roku, on my Tablets both iPad and the Kindle Fire HD and on my computers so that pretty much dispels the argument of Netflix being more integrated. I don't understand why the Motley Fool community likes Netflix. It is overvalued mainly because of Icahn's stake and putting the company up for sale. They also made a terrible deal for Disney content and ultimately will lose subscribers to Red Box and Amazon. We may see some technical trading at the $105 level but I am going to buy puts ahead of the earnings. Stock is worth $30-50 in my opinion.

  • Report this Comment On December 18, 2012, at 8:26 PM, matthewluke wrote:

    "When's the last time you saw an "Amazon" button on a Blu-ray remote control player the way many players have "Netflix" options?"

    When was the last time Netflix created and sold a lineup of popular and cheap tablets to promote its own service and content? Just sayin'

    (Not a owner of either company's stock.)

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