The Buzz: Some Good Days Ahead for Netflix
The buzz in the market is about Netflix (NFLX): The online video streaming and DVD mail service was heavily criticized by many investors and analysts for spending so much money on the content acquisition: Among the major ones, the $300 million with Disney for exclusive rights to stream company’s products from 2016; and Lavish spending on developing an all original series starring Kevin Spacey titled “House of Cards”.
But the strategy seems to be working: The company added 2.1 new subscribers in the 4th Quarter only in the US and has now reached a 27 million subscriber base. The contribution margin for the streaming service is also up to %18.5 from previously reported 16.4 in the 3rd quarter.
These are all good news, however the rivals are not sitting idle: Amazon.com Google are still pushing their free and paid video streaming to the U.S. customers; higher proliferation of streaming among U.S. audience might lead to counterattack strategies by cable operators as they’ll feel pressure on their TV programming service and services like Hulu, though small as of now, might pose some challenge.
Having said that, for now the not-so-cheap stock of Netflix is a hot stock! Whether the party lasts remain to be seen.