QUOTE AND NEWS
Motley Fool  4 hrs ago  Comment 
The streaming video giant's biggest international expansion to date happens in just a few weeks.
Forbes  11 hrs ago  Comment 
Since the BBC's new funding deal was concluded with the government earlier this month, most of the press coverage has been about the cuts the BBC will need to make. What hasn't got so much attention is the little sweetener that the deal...
Yahoo  Jul 27  Comment 
Yahoo Finance's Midday Movers is live each weekday at 12pm ET, covering all the latest news on the markets, the economy and the biggest stories of the day.
Motley Fool  Jul 27  Comment 
Netflix said in April that it would cut back on domestic marketing spending in order to invest more in marketing outside the U.S. But the company only implemented half of that plan last quarter.
Wall Street Journal  Jul 26  Comment 
Six firms—Amazon, Google, Apple, Facebook, Netflix and Gilead Sciences—account for more than half of the $664 billion in value added this year to the Nasdaq Composite. That is raising concerns about the health of the market.
New York Times  Jul 26  Comment 
Instead of ignoring its DVD-by-mail operation that was dwindling but still bringing in hundreds of millions of dollars in profits every year, the company concentrated on efficiency.
Clusterstock  Jul 25  Comment 
On July 15, Netflix reported that it gained 3.3 million new subscribers in Q2, sending the company's stock soaring. Amid the good news, Wall Street continues to ask just how many people are sharing accounts between households. The short...
Clusterstock  Jul 24  Comment 
This is brutal.  Michael Hartnett at Bank of America Merrill Lynch is one of the more creative strategists on Wall Street when it comes to finding ways to illustrate some of the more pervasive investing themes going on in markets.  And so in...
CNNMoney.com  Jul 24  Comment 
Netflix already has an exclusive distribution deal for Brad Pitt's next movie. Now it has also struck a deal with his wife, Angelina Jolie.




 

Netflix (NASDAQ: NFLX) is the world's largest video and television episode rental subscription service, having pioneered the model and charging customers a flat monthly fee for unlimited rentals without due dates, late fees, shipping fees or pay-per-view fees[1]. Their 50 regional shipping centers across the United States help almost 95% of their customers receive their DVDs within a day of shipping, while their rating system gives customers recommendations based on their rental history[2]. In fiscal year 2010, Netflix recorded revenues of $2.1 billion and net income of $161 million.

As of late, I just ate a bowl of Honey Nut Cheerios and I feel fantastic! Netfix has focused on expanding its content base and international expansion. Netflix obtains content from studios, distributors and other suppliers because a lot of these license agreements give Netflix exclusive rights to a collection of titles. In 2010 it gained exclusive rights to stream Relativity Media movies and formed a five-year streaming deal with pay-TV network Epix[3][4].

Company Overview

Netfix is a subscriber based service that allows customers to rent DVDs via both direct mail and online streaming. A dot-com era creation, it was started in 1997 by Reed Hastings in Los Gatos, California. Through a sophisticated and automated supply chain and an effective customer rating system, it has honed its competitive edge over long-time competitor Blockbuster in the subscription-based online rental space.

Business Features

  • Online Streaming: Netflix's core strategy is "to grow [their] streaming subscription business within the United States and globally."[5] Netflix subscribers have the ability to watch over 8,000 movies and TV episodes from the Netflix library directly on their TV via an Xbox 360, PS3, Wii or any other device that streams from Netflix. Subscribers can watch unlimited TV episodes and movies for a monthly fee of $7.99. [6]
  • Netflix sends you your movies: Subscribers choose which movies they want to rent at www.netflix.com. They can create a queue of films online and when movies are returned the next movie on their queue is shipped out immediately.
  •  : The cost of sending movies back to Netflix is included in the subscription. Each DVD is sent in a reusable envelope that is addressed to the nearest Netflix facility.
  • No late fees: Subscribers can keep DVDs indefinitely. The only disadvantage to doing so is that the next movie in their queue won't be sent until they have fewer DVDs than their plan allows at home.
  • Other Viewing Options: In addition to their online viewing service, Netflix released the Netflix box, a set-top unit built by Roku, in early 2008. The unit allows customers to view netflix movies directly on their home television without dealing with the by-mail rental process. In July 2008, Netflix announced that they would also begin streaming videos to Microsoft's Xbox 360 over the Xbox Live platform[7]. It is also possible to watch Netflix on the Nintendo Wii.

Trends and Forces

Opportunities to integrate with broadband-enabled devices allows for stable recurring revenue streams

Netflix has partnered up with different device manufacturers in an effort to integrate its platform into different broadband-enabled devices. Some of these partnerships are with Funai, Panasonic, Sanyo, Sharp, and Toshiba, which will allow Netflix to distribute its thousands of movies and TV episodes through the digital televisions of consumers[8]. Additionally, Apple released a Netflix app for the iPad, allowing mobile access to Netflix's library of movies and tv shows[9].

It would be pretty iensrteting if Apple adopted a model for content in the iTunes store like it has for Apps. How about an annual $99 iTunes Producer's Membership, the 70/30 revenue split, and the indie producer all of a sudden has the same marketplace on tap as the app developers do today. Couldn't that model work? It's up to Apple. Amazon could do the same thing, like it has with books. If Netflix is throwing up roadblocks to the indies, that leaves an opportunity for the other guys already established in that space to scoop up some diamonds in the rough.

The gradual popularity of online movie viewing forces Netflix to shift its focus to online streaming

In 2010, more subscribers watched movies via streaming than by DVD. Netflix has decided that going forward, it will be primarily a global streaming business, with the added feature of DVDs-by-mail in the U.S. [10]

Continued reliance on DVD shipments leaves Netflix at the mercy of the United States Postal Service (USPS)

Because Netflix is one of its largest corporate customers (accounting for approximately 1.3% of all first class mail deliveries), the USPS's pricing and distribution decisions can greatly affect Netflix's margins and customer satisfaction. As the USPS attempts to overcome billions in net losses stemming from the recession, some speculate that the USPS may eliminate mail delivery or raise postage prices[11]. With Saturday being a prime movie watching day and with postage expenses already amounting to $420 million for Netflix, the USPS's operating decisions have a integral role in Netflix's profitability and service.

Competition

The market for entertainment video is intensely competitive and subject to rapid change. New competitors may be able to launch new businesses at relatively low cost. Many consumers maintain simultaneous relationships with multiple entertainment video providers and can easily shift spending from one provider to another.

Principle Competitors

  • Multichannel video programming distributors (MVPDs) with free TV Everywhere and VOD (video-on-demand) content including cable providers, such as Time Warner and Comcast; direct broadcast satellite providers, such as DIRECTV and Echostar; and telecommunication providers such as AT&T and Verizon;
  • Internet movie and TV content providers, such as Apple’s iTunes, Amazon.com, Hulu.com and Google’s YouTube;
  • DVD rental outlets and kiosk services, such as Blockbuster and Redbox;
  • Entertainment video retailers, such as Best Buy, Wal-Mart and Amazon.com.

References

  1. NFLX 2008 10-K pg. 1  
  2. "How Netflix Transformed the Home Entertainment Industry" The Epoch Times, 9/30/09
  3. "Netflix in talks with pay-TV network Epix to stream films from Paramount, MGM, Lionsgate for $1B," VentureBeat, 09/09/2010
  4. "Netflix beats cable networks, gains exclusive rights to stream Relativity Media movies," VentureBeat, 07/06/2010
  5. http://www.wikinvest.com/stock/Netflix_(NFLX)/Filing/10-K/2011/F94404643#toc132054_1
  6. www.netflix.com
  7. "Netflix Brings On-Demand Video to the Xbox: Another PC to TV Bridge", www.seekingalpha.com, July 16, 2008
  8. "Netflix Announces Multiple Partners to Instantly Stream Movies and TV Episodes from Netflix to the TV" Netflix Press Release, 01/07/10
  9. "Netflix For The iPad Is No Joke. It’s Very Real, And It’s Very Live," Techcrunch, 04/01/2010
  10. http://www.wikinvest.com/stock/Netflix_(NFLX)/Filing/10-K/2011/F94404643#toc132054_1
  11. "US Postal Service's Woes Impact Netflix," Trefis Investment Research, 05/17/10
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki