Rocking rentals and ratings retreads were passing ships that were fit to be featured this past week. Let's take a closer look.
Nothin' but Netflix
I've been a Netflix (NASDAQ:NFLX) shareholder since 2002, so I was looking forward to seeing how one of my favorite companies made out over the holiday quarter. After managing to keep Amazon.com (NASDAQ:AMZN) out of the domestic rental market and watching Blockbuster (NYSE:BBI) continue to buckle under the weight of its gargantuan debt, my portfolio smiled kindly on me in 2005. It was a far cry from 2004, when Netflix shares crumbled as the rental-by-mail specialist got caught up in a profit-devouring price war with its would-be challengers.
It's a different vibe these days at Netflix. The company continues to grow, and when a flattering rumor arises -- like last year's scuttlebutt that Amazon was interested in buying Netflix at $42 a share -- it's no longer greeted with incredulous laughter.
Netflix gained a little more respect on Tuesday, when its December-quarter results trounced market expectations. Earnings before a favorable benefit were up 43%, and free cash flow skyrocketed 350% higher. Granted, this was stacked against a challenging fourth quarter in 2004, when the calamity hit the queue, but it was still a much quicker turnaround than many had been expecting.
However, just as interesting as the actual report was a Tuesday morning announcement from the company assuring movie buffs that it will support the new HD-DVD and Blu-ray formats as the next-generation DVD films start hitting the market. One could have assumed that Netflix would do this eventually, but not before either format achieved critical mass. This is important, because many of the early adopters of these technologies are also Netflix subscribers. That's why Netflix couldn't afford to ignore this niche, no matter how small it is.
So maybe my longstanding gripe -- that Netflix hasn't followed Gamefly.com into renting out video games -- may eventually be resolved. Offering DVD films in as many as three formats may eventually open up the service to offer more individualized service for media -- like games, music, and even software.
But, I'm getting ahead of myself again. For now, it's enough to say it was a great quarter for Netflix.
Network alphabet soup
Farewell, UPN. Rest in peace, WB. CBS (NYSE:CBS) and Time Warner (NYSE:TWX) have decided to ax both of the network laggards and team up to create the CW. Yes, I know, it's not a very snappy name. When I hear CW, I think country-Western, or Cable & Wireless, or chopped walnuts. It also can't be a good omen that CW is the abbreviation for one of the most notorious Web browser hijacking programs, which spawned the CWShredder software antidote.
In short, CBS and Time Warner aren't going to get a whole lot of style points with the new moniker. I'm guessing that it's "C" for CBS and "W" is for Warner, but don't write me back if I'm wrong. It won't matter. For now, "CW" may as well stand for "Can't Watch." That's because, right now, UPN and WB combined couldn't muster enough ratings to crack any of the top four networks. This venture is going to have a hard road ahead of it.
There may be some advantages to this strategy, though. Combined, the networks will be able to piece together their best shows and perhaps gain more clout with viewers, affiliate stations, and advertisers. It's worth a shot.
Until next week, I remain,
Amazon, Netflix, and Time Warner are all recommendations of the Motley Fool Stock Advisor newsletter. If you'd like to take a peek at what other stocks Tom and David Gardner are picking, treat yourself to a free, no-risk 30-day subscription.
Longtime Fool contributor Rick Munarriz loves to look back, even if it means he falls on his face going forward. He does own shares in Netflix. The Foo l has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
