Netflix, Inc. Is Copying... Starz?

 

Good news, marathon viewers! You'll have more to look forward to after binge-watching the new season of House of Cards, which goes live on Netflix, Inc. (NASDAQ: NFLX  ) this Friday. A season three order is already in the works.

But is it a smart investment for the company, which is still a relative newbie as a producer of original series? Among competitors, only Starz (NASDAQ: STRZA  ) has been so bold, ordering two seasons of Black Sails ahead of January's series premiere. In the video above, Fool contributor Tim Beyers explains why he likes Netflix's aggressiveness.

First, House of Cards has established its bona fides during awards season having won three Emmys and a Golden Globe for Robin Wright, who took home honors as best actress in a television drama. The ensuing buzz has cemented the show as Netflix's signature property. Tim says it's likely at least 2 million to 3 million viewers watched the first season of the series when it aired last February.

That alone would probably be enough to get Chief Content Officer Ted Sarandos to ink a new deal, yet there's also a second dynamic to consider. Hollywood is locking up talent earlier and more often when it comes to signature properties. In booking a season three now, Netflix gets to tease its subscriber base while also guaranteeing that the show's principal players don't get embroiled in conflicts before pre-production begins, Tim argues.

Now it's your turn to weigh in. Will you be binge-watching House of Cards this coming weekend? Do you agree with the strategy of ordering a season ahead? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short Netflix stock at current prices.

Kevin Spacey stars in House of Cards, which returns for a second season on Feb. 14.
Image source: Netflix.

Hollywood will pay you for tuning in -- really
The entire foundation of the entertainment industry is shifting, leaving $2.2 trillion up for grabs. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.


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  • Report this Comment On February 12, 2014, at 1:05 PM, ashhonfoolish wrote:

    If would be daunting task to maintain the growth which Netflix had last year. It would be foolish disposition to expect Netflix will keep on adding 10 million customers every year for next 10 years which analysts give as an argument to justify price of $400. It is as unlikely as thinking Fed will keep on buying $65B debt every month for next 10 years. Europe especially France are very restrictive markets.

    Netflix does not have a real backbone to deliver the contents. It rides on network providers that can increase prices for high speed streaming any time. Apple is building its own very high speed network which if Apple decides to provide whatever Netflix is today; will pose a big blow to Netflix growth. Amazon has better contents library then Netflix. If Amazon decides to push this part of its business as a main business, it will corner Netflix in few days. HBO is running its business at more than 30% net margin compared to 5% of Netflix because HBO has got its own contents. If HBO makes one announcement that it will stream the movies & shows @5.00 a month (which they can easily afford), share price of Netflix probably crash to $300 in a week. Don't talk about new players which may pop up as buying the contents & delivering the same is not technologically restrictive.

    Netflix added $400 M to its debt recently @ more than 5% cost (reason : low interest rate) & said it may not need it. I doubt the prudence of mgt of Netflix..why they shouldn't add 400 employees even they don't need for the same reason?. Money on the shelf does not earn money.

    McDonald's sales fell for 3 months straight (China sales could cover that lost sales to a good extent though). Can we think that people will eat less & watch movies more?

    The only things which is positive to the overpriced Netflix is relatively less floating stock. If 10 big investors decided not to sell it no matter what, it will not fall. Imagine what will happen if they choose to think other way round? Less floating stock is easier to manipulate.

    Keeping the above facts in mind & noise around its growth, I wouldn't pay more than $125 for Netflix.

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