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Netflix Is Short a Dolly

By Rick Munarriz – Mar 20, 2014 at 12:38PM

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Netflix lands another piece of original content.

There's more original content coming to Netflix (NFLX 0.22%).

The leading video streaming service announced yesterday that Grace and Frankie -- a sitcom starring Jane Fonda and Lily Tomlin with Friends creator Marta Kaufman on board as one of the writers and creators -- will be coming exclusively to its digital vault. The 13 half-hour episodes of the show's first season will debut next year.

Teaming up two-thirds of the trio from the campy 9 to 5 movie seems like a genius casting call. Dolly Parton's agent should be making phone calls about now. Naturally, casting Fonda can be polarizing. The top comments on Netflix's Facebook post are "Hanoi Jane" related with some calls for boycotting Netflix or joining rival platforms.

Netflix will be fine, of course. The very concept of building out a library of exclusive first-run content is that it can appeal to all tastes. House of Cards and serialized dramas may be the service's bread and butter, but Netflix has already dabbled in dark comedies, including Derek and Orange Is the New Black. There was also last year's Arrested Development revival.   

In other words, Netflix doesn't really have to worry about the vocal yet likely limited dissent.

It's hard to fault anything that Netflix has been doing these days. It was the hottest S&P 500 stock last year, and it's crushing the market again so far in 2014. Subscriber growth is on a tear, and its closest competitor -- (AMZN 2.97%) -- is boosting its plan's price. Today is the day when Amazon Prime's increase from $79 a year to $99 a year kicks in.

Naysayers have argued that Netflix's growth has come at the expense of its profitability, and that has certainly been true in the past. Netflix invested heavily in streaming content and accepted losses overseas for the sake of brisk international expansion. It's all starting to come together now on the bottom line. Analysts see earnings more than doubling this year and soaring another 82% come 2015.

In the big scheme of things, Grace and Frankie is just another show in Netflix's growing digital library. Whether it stirs up nostalgia the way that Arrested Development did, buzz the way that Orange Is the New Black did, or controversy the way that Derek did, the point is that it ultimately gives some subscribers something more to watch.

When the time comes for Netflix to follow Amazon Prime and increase its rate -- and that will happen -- consumers will have to understand that they are paying more because they're getting more.

Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of and Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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