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Netflix's Walls Aren't Caving In

By Rick Munarriz - Sep 6, 2015 at 11:00AM

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The leading video service had a bad week as the competition got smarter, but it's future is still bright.

The well of Wall Street loving finally ran dry for Netflix (NFLX 0.58%). After four consecutive weeks of positive analyst notes, there was no one singing the praises of the leading premium streaming service this past week. 

The lack of bullish voices was only made worse by the loud bearishness. The stock tumbled every single trading day last week, stretching its streak of lower closes to six days of negative returns. 

It didn't help that this was a week when many of Netflix's smaller or potential rivals made waves for their own platforms. Let's go over a few of the things that were announced over the past week.

  • Hulu introduced an $11.99-a-month option, eliminating ads completely. Its current plan at $7.99 a month comes with limited commercial breaks, and it will continue to be an available option.
  • (AMZN -0.03%) announced that folks can now stream select movies and TV shows from Prime Instant Video's growing catalog offline on Android and iOS devices. It's technically a download -- not a stream -- but it could be a game changer for traveling families or folks heading somewhere with spotty connectivity. 
  • Finally, Hollywood trade periodical Variety reported that Apple is in preliminary talks with studio executives to acquire original content. Apple (AAPL 4.01%) has been long rumored to be rolling out a streaming TV platform, but making it a push for original content suggests that it will be taking on Netflix, Hulu, and Amazon instead of merely cable and satellite television providers.

It was a week when the competition got better, sure, but did it warrant a 16% slide? That's the kind of slide that media giants suffered last month on fears that their cable networks empires were under siege from cord cutters. Let's not compare Netflix to the media giants where things have gotten so bad that even ESPN suffered a sequential dip in subscribers.

Netflix is growing, tacking on 15.5 million net additions worldwide over the past year to close out June with 65.5 million subscribers. This growth happened even as Amazon won an Emmy for Transparent and Hulu ramped up its investment in original programming. The pie is getting bigger, and Apple's inevitable presence will likely cause more pain for cable and satellite television providers than the stars of streaming video.    

Shares of Netflix aren't expected to go up every week. A week of analyst silence isn't the end of the world. The industry's push to follow Netflix into original programming isn't a threat. It's hard to take any of these moves as challenges, since Netflix -- with far more paying subscribers than the competition combined -- will always be able to spend more on content because it can break down the costs into a a larger base of accounts. The pie is getting bigger, and that means thicker slices for anybody that plays this game the right way.

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