Netflix's $2.8 Billion Moat

In the following video, Fool contributor Demitrios Kalogeropoulos discusses how Netflix (NASDAQ: NFLX  ) manages to spend close to $3 billion a year maintaining its streaming video service. By pumping cash into the content library, global marketing, and service delivery, Netflix has built up an investment pace that few companies can match, Demitrios says. 

The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.


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  • Report this Comment On May 18, 2013, at 10:12 PM, lanceim59 wrote:

    Only REAL Fools would invest in NFLX.

  • Report this Comment On May 19, 2013, at 6:19 PM, Seesaw21 wrote:

    $3 billion moat is great as long as you have a customer base which keeps increasing and as long as netflix can increase pricing without losing customers.

    The concept of moat is to protect something precious which you have the problem with netflix is they don't have anything which they own so basically spending $3 billion to protect a customer base which can be very fickle minded when tempted with better offerings.

    Look at iPhone when it came out it was a new concept and there was nothing similar in capability and there were huge barriers to entry still now android and Samsun ate the apple pie of smartphone shares. So anything which is successful would invite competitors and obviously cable and networks wanting to guard their turf.

    Log onto your Comcast account, hulu account, amazon video , tiki account and there you would see similar interface as netflix. YouTube is also changing its UI 1 week of June .

    If netflix had huge margins it would have made sense but on wafer thin margins, international expansion costs, increasing content costs and losing content .

    Netflix has lost content deals with Starz, epix, Viacom .

    Viacom deal is good through 22nd may after that sponge bob square pants , Dora the explorer, go Diego Go , super why, blues clues, yo gabba gabba, wonder pets, back at the barnyard, avatar: the last air bender , the adventures of jimmy neutron boy genius, all grown up rugrats, invader zim, the fresh beat band,

    Adult fare- jersey shore, teen mom, the hills, mob wives, basketball wives,Comedy central roasts and programming

    Netflix removed trackabily to find out which shows were being removed etc.

    Timing is essential a lot of noise is being raised about arrested development which is just 1 show maybe like 13 episodes or so wherein netflix as per its site on may 22nd is losing major shows.

    Losing these key shows is not going to help with customer retention.

  • Report this Comment On May 20, 2013, at 7:37 AM, TMFSigma wrote:

    @seesaw21, I'd be more worried about content losses if the company wasn't replacing the shows with new stuff. But as it is NFLX can afford to spend more on shows, not less. And the company's streaming margins are actually increasing -- its just the international expansion that's keeping company-wide profits near zero.

    Best,

    Demitrios (TMFSigma)

  • Report this Comment On May 21, 2013, at 1:02 AM, Seesaw21 wrote:

    I agree as long as they can keep adding new content. But problem is they don't own anything they are producing most of the stuff. House of cards, arrested development are owned by somebody else.

    Another major problem is comparison to hbo like game of thrones. The shows at hbo, show time come once a week and the viewer keeps subscribing to shows and that means customer retention then they sell DVD's of the shows.

    Netflix encourages binge watching I could sign up 1 week or 1 month watch what I need and just walk away but not many do that due to $7.99 price which is a steal.

    The only problem is adding content somebody like google, Microsoft, amazon can jump inand outbid content.

    Truste when kids want to see a show they want that show only spongebob and Dora are very strong brands. ( even iron man 3 had a Dora promo )

    I feel this quarter netflix would lose customers rather than gain as competition is becoming intense.

    Netflix would need to raise prices soon bring new rate plans etc to compete otherwise it is in an unjustifiable business

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