Alyce is right. Netflix
"Once Blockbuster starts to increase what it charges its subscribers, there could be a major shift over to Netflix," my friend Alyce argues.
I don't see it that way. Netflix isn't signing up as many new users -- or keeping old ones -- as it once thought. It will only get harder at higher price points. Amazon.com
Netflix can't win. If it hikes its rates to match Blockbuster, it rolls out the red carpet for Amazon. If it sticks to its $17.99 price point -- just as Blockbuster raises its subscription fees to the point where it's a profitable pursuit -- it will have inherited an even stronger competitor.
This comes at a time when even Alyce concedes the threat of video-on-demand and digital downloading. Comcast
Alyce feels that Netflix is cheap at 22 times next year's earnings, but that multiple will grow if Netflix comes in below analyst profit targets the way it did this past quarter.
I'm in no rush to dump my shares. Even if I feel that the longtime Motley Fool Stock Advisor pick can't win in the near term, that doesn't mean I think it will lose in the long run. Further price deteriorating may shake out buyout offers from Amazon, Yahoo!
And as the competitive pricing environment has proven, Netflix isn't a very good limbo dancer.
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Longtime Fool contributor Rick Munarriz has been a subscriber and shareholder in Netflix since 2002. He does not own shares in any of the companies in this rebuttal. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.