Netflix picks odd time to expand in UK, Ireland
The payoff for CEO Reed Hastings' international push may take a long time.
For example, business leaders in the U.K. expect the country's economy to get worse in 2012, according to a poll released Monday. A recent Goldman Sachs survey forecast that the U.K.'s gross domestic product (GDP) will rise 0.7% this year, down from 0.9% in 2011.
Ireland, which got a $113 billion bailout in 2010, isn't in great shape either. Data from the Irish government says that the country's economy contracted by about 2%, worse than expected, in the third quarter. Ireland, which had the second-worst performing eurozone economy behind Greece in the third quarter, slashed its GDP forecast twice in December and now expects growth in 2012 of 1.3%.
Shares of the Los Gatos, Calif. company, which got pulverized last year, are trading up Monday morning even though Netflix admitted that it may not be profitable in 2012 because of its overseas expansion. Moreover, it is taking on a formidable competitor in Amazon.com's (AMZN) Lovefilm business. The 7-year-old Amazon business claims about 2 million members in the U.K., Germany, Sweden, Denmark, and Norway.
Hastings, who lost 800,000 customers in the third quarter, told Reuters that Netflix regained customers in the fourth quarter though he was vague on specifics, telling the news service ". . . we're doing great," and adding that the firm didn't need to raise additional capital. Maybe consumers have forgiven Netflix, or maybe they have forgotten about its missteps.
Netflix, though, has many challenges ahead, including rising cost for content. This is the year that Hastings will have to put up or shut up. Investors have grown tired of his empty rhetoric. If he wasn't a major shareholder, the CEO would have lost his job long ago.
Jonathan Berr does not own shares of the listed companies.
I am one of the ex-Netflix customers who have never returned. It was not so much the money as it was the impertinent way they went about it. I don't like being blindsided and that is what
they did. Not sure I'll go back.
I am a former Nexflix customer and will never go back. It was not the rate hike but the way they did it. On top of that the "new" content was pretty outdated. I will not be returning.
Netflix streaming is priced at a fare value. But don't let anyone tell you its great. DVD increases at Netflix was done at the wrong time and customers never like such a instant and big increase in costs. I am a Netflix streaming customer and I actually use Hulu and Amazon more and more. Netflix to me has just lost steam in new content.
I agree that much of the UK is slipping into a recessionary period and Ireland is facing high unemployment already. Worse then the US! But I am sure Netflix is looking for customers wherever it can find them at this point. I'm just not sure how many of them will stick.
At least Netflix still understands the value of commercial free content delivery. Watch your favorite show on Netflix without commercials for the first time is like eating a delicious meal without having to eat your vegetables. This is what paid media should be, if you can afford it. As soon as they add a single commercial, I am out. Even if I see so much as a single advertisement on the website or other menus. Until then, they have a loyal paying customer.
As a user of their service, I can only attest to their professionalism in dealing with the delivery of their product and the easy manner I can keep up with their plans. The cost is very reasonable, and having a Netflix subscription allows me to watch the first-rated films of my choice.
Which means, that if the company decides to branch out to other countries, they will be first backed up by their own first class service. If this service persists, costumers will notice. And if costumers notice then other new clients will notice as well.
I am sure investors will be happy...
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