Netflix: Another Negative Datapoint – HULU/DISH

If the CNBC report is accurate and DISH has won the bidding war for HULU, then this is another negative data point for Netflix. Let’s recap recent news flow: 1) changing subscription terms alienating investors; 2) higher content costs; 3) STARZ termination; 4) missing subscriber targets; 5) DISH offering streaming from Blockbuster; and 6) DISH reported acquisition of HULU.
NFLX has had a virtual monopoly on subscription television and movie programming. This has ended with DISH stepping into the market from a position of strength. Now there is a competitor to drive up content costs in addition to the content providers potentially offering their own services. Furthermore, as I look at the disparity between the $1.4 billion offered by DISH and the reported $4 billion offered by Google, the difference tied to contract extensions on content, it tells me that content is worth more than the technology. Content always drives subscriber growth and the providers now intend to take advantage of their positioning versus arguably cut rate pricing during NFLX’s earlier years of existence. Not all that much is known about the deal Netflix cut with Dreamworks but the number that sticks in my mind is $30 million a picture. The question is whether or not each film will be worth $30 million to them or if the price of the content is adjustable. Besides, this does not kick in for 2 years so it won’t help them now. I am not short NFLX but am considering buying puts. i have tremendous respect for Reed Hastings but he is in a tough spot. Keep in mind that the information in this article is based on news reports and not a press release or 8-K from either company.

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1 Response to “Netflix: Another Negative Datapoint – HULU/DISH”


  1. 1 stephenlweiss September 29, 2011 at 11:00 am

    Addendum: It just keeps getting worse for NFLX. AMZN will apparently offer 11,000 movies and television shows for free. Bezos says they are just getting started with content. I have no position in AMZN or NFLX but may enter a short position on NFLX either through puts or stock.


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