Netflix's worst nightmare comes true
Amazon has signed a content deal significant enough to challenge Netflix for subscribers. And that's not even the worst of it.
By Richard Saintvilus
This would not have been possible had it not been for streaming movie giant Netflix (NFLX). The ease with which the service makes television shows that were old new again is certainly Netflix's best quality to the consumer.
For investors, however, the question is how much worse things can get.
Retail and tech giant Amazon (AMZN) has just signed a content deal significant enough to challenge Netflix for subscribers. Yet that's not even the worst of it.
The deal, announced last week, is with premium TV joint venture Epix, bringing content to Amazon's Prime Instant Video streaming service. Though the terms of the deal were not disclosed, it is said the partnership will bring popular hit movie titles such as "Hunger Games," "Thor" and "Iron Man 2" to Amazon's streaming offerings.
What this means is exactly what many Netflix investors had feared would have occurred -- no more exclusivity.
What was once originally a five-year deal, of which two were exclusive, has lapsed. Now enters Amazon.
But what is Netflix thinking? This continues the streak of yet another misstep for the struggling movie giant, which has seen its stock price erode during the course of the year. Several weeks ago, as the stock traded just above $80 per share, I asked whether the company can stay afloat and survive the unrelenting assaults from Amazon, cable giant Time Warner (TWX) and Coinstar (CSTR) (Redbox).
While it may have been able to avoid death by those three, the story changes when one considers Apple (AAPL) and Google (GOOG) have TV and potentially movie plans of their own. What are the odds that Netflix will survive a living room revolution unlike anything the market as ever seen?
I still maintain that a takeover is its best option. Outside of that, there is no chance Netflix will survive.
By having allowed Amazon to forge a deal with Epix, does Netflix truly appreciate the dire situation it's in? It is as if it no longer values its streaming content -- the same reason it opted to ignore its once-popular DVD model. Now it does not appear to want to protect that decision.
Even worse, during its second-quarter earnings report, Netflix said that although it expects to remain profitable in the third quarter, it is forecasting a loss for the fourth quarter due to international market expansion.
So essentially, the company has, for all intents and purposes, killed off its DVD business, allowing Amazon to chip away at its streaming division by losing exclusivity, but somehow thinks international expansion in Latin America and continental Europe is worth a fourth-quarter loss.
It would stand to reason that a change in focus would be the wise decision until Europe gets its act together. At least that would be the option for a smart management team. However, no one has ever accused Netflix of having one.
I would stay away from the shares until things get more clear in terms of the company's strategic direction. Until then, there is only one direction the stock will go and that is down -- affirming that things can indeed get worse.
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They also need to offer all their titles under one price, not this pay-by-title model they have now. I can get all the current DVDs I want from Netflix for $8. Can't do that with Amazon.
I've had Netflix streaming for almost two years, and it's cheap, and I'll never have time to watch everything they offer. I tried Amazon Prime and it had no selection. Great place to buy books though. I think this is all hype. What do peopole expect for $8 per month?
Netflix was an ingenious business plan...and until they got greedy and DOUBLED their fees, they were doing fine...now they are in decline.
I suppose this is just a sign of the ignorance of people in general. Most actually believe that when a company has an operating cost increase, they simply cut their bottom line and obsorb the cost. This is not and has never been the case. Take a basic economics course and you will find that increased operational costs are almost always passed along to the consumer.
Hey Netflix lost us when they decided that splitting things up was a good idea!
It's 8 bucks a month. I drink more than that in cokes in 3 days. I have had Netflix for several years, and yes I agree they do not have all the latest stuff...but for 8 bucks I can watch a lot of different things when I want to. I don't even own a t.v. and I am not going to pay those ridiculous cable prices. Plus I can watch it anywhere I have my laptop. It may not be for everyone, but I personally think it is one of the best bargains around.
'Besides needing new movies, I don't see anything wrong with Netflix is has far better movies than those game shows on TV.
If Amazon releases a streaming service of the quality this article suggests, I will drop Netflix faster than a hot potato and jump on Amazon. Netflix also shot themselves in the foot when they decided to charge extra for DVD delivery (which is where most of the good titles are). No thanks.
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