Netflix shows recovery in streaming business
A substantial number of subscribers are shifting from hybrid service to streaming only.
Netflix (NFLX) recently released its fourth-quarter and full-year 2011 results. As the company returned to growth in terms of net unique subscribers, the stock jumped significantly. We have raised our fair value for Netflix to $133, which now stands at a premium of about 15% to the market price. The earnings highlighted a couple of things -- Netflix is back on growth track and DVD subscribers continue to decline substantially. A little confusing? The point is that customers are not leaving Netflix as much as before and a substantial decline is coming from subscribers dropping hybrid service and moving to streaming only.
Netflix's competitive advantage over other video rental companies, such as Dish Network's (DISH) Blockbuster, Hulu and Amazon (AMZN), still remains.
While Netflix lost over 800,000 subscribers in Q3 2011, it gained more than 600,000 subscribers in Q4. This is something that the market was not expecting. Our price estimate has stood at a significant premium to Netflix's market price for some time now and some of that premium was hinged on our expectation that Netflix would return to subscriber growth in Q4 2011 or Q1 2012.
Netflix has started to recover from the temporary slump resulting from its new pricing plan. The majority of the subscriber losses resulted from DVD subscribers quitting the service. This rate has come down and most of them seem to be just downgrading to streaming services, and thus we expect unique subscriber count to grow. In fact, Netflix has stated that, so far for Q1 2012, the net subscriber additions are tracking the rate observed in Q1 of 2010.
At some point soon, I will end up dumping Netflix 100%. The online streaming library hasn't improved and I can find what I want via Amazon's library on a pay as you go basis. The monthly subscription fee isn't much money but we're noticing that we're using it less and less each month.
I'm not concerned with their price increase but don't increase the price if service isn't gonna improve!
I've said it before, and I'll say it again:
Nextflix is still the best entertainment value. for about 14 bucks a month, I get unlimited streaming, and one DVD physically mailed to me at a time, with a turn around of roughly 3 business days.
That's WAY better, for me, (and cheaper) than cable, dish, or anything. Now, it works for me because I like Anime, foreign films, star trek, and cheesy horror. All of which are well represented on netflix instant view. I keep the DVDs for new releases. Cable has no competition in my state, and charges 100/month for 99% programming I'll never watch. With commercials.
Netflix rules, IMO.
I have had a Netflix account for more years than I can remember. I wasn't unhappy when they separated the DVD and streaming accounts. I am actually paying less for DVDs only. I want to see the new releases. Plus, I have an old TV and do not have the streaming capability. I grew up with the mind-set that you don't buy a replacement until the one you have no longer works. I really want a flat screen HD TV, and I can afford it, but I won't get one until my current one dies.
Not really that surprising. They stopped making stupid decisions, people signed up again. That shocks people? They made several dumb decisions in a row, peeved off their consumer base, and now that things are back to normal people want the cheap, likeable service they provide. I think its an amazing deal to get all that streaming for that tiny monthly charge. Haven't had cable in almost 8 years, will never go back so long as companies like Netflix are offering smart deals.
But they have to STAY smart to keep us. You listening, NF?
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