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Business, Finance, Occupation & Industry

Netflix's Need Is Apple's Opportunity

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By Tim Beyers, The Motley Fool

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Reed Hastings wants Netflix investing in more original series. And why not? House of Cards is already a success, and early signs point to a similarly strong showing for the horror series Hemlock Grove.

Trouble is, this sort of content doesn’t come cheap. In a manifesto posted to Netflix’s investor-relations site recently, Hastings confessed that original program development is “cash-intensive” and that producing more shows is likely to mean raising money from investors or partners:

As we expand Originals, they will consume cash. Since we are otherwise using domestic profits to fund international markets, we will raise capital as needed to fund the growth of Originals.

And that, Fool, is where Apple comes in. The Mac maker should be investing in Netflix original programming.

Source: Netflix.

How about an iPad with that?
It’s a rich opportunity. Netflix’s bulkier content portfolio led to hefty profits in Q1. Revenue rose 17.7% to $1.02 billion as the company turned an $0.08 per share loss into a $0.31 per share profit, after accounting for charges related to paying off debt. Wall Street was expecting just $0.18 a share. The stock promptly soared 20% on the news.

Why should Apple care? Math. Better TV apps means a better TV experience on the iPad, which means more reasons to buy an iPad, which means more iPad sales.

Or at least that’s how the market seems to be trending: iPad unit sales soared 65% and came in almost 1.5 million ahead of consensus estimates in fiscal Q2 versus a 7% year-over-year increase in iPhone sales. IDC is right — tablets are becoming an everyday item for American consumers, none more so than the iPad.

A natural partner
Apple and Netflix also share competitors. Consider Amazon.com and Google . Each sells individual tracks as iTunes does. They also offer music, books, and magazines in addition to streaming. Apple mutes their stores on its devices for this very reason.

Hulu isn’t a competitor, but management uncertainty makes partnering a risk. Redbox Instant would be an alternative as a development partner if executives had any interest in original programming. So far, they don’t.

Which brings us back to Netflix. Hastings needs Apple’s cash, and CEO Tim Cook has demonstrated a willingness to invest in ways the late Steve Jobs never would. Listen to how CFO Peter Oppenheimer described the company’s cash strategy in announcing fiscal Q2 earnings.

“We continue to generate cash in excess of our needs to operate the business, invest in our future, and maintain flexibility to take advantage of strategic opportunities,” Oppenheimer said in a press release. That, Fool, is how an investor talks when he’s searching for the next win.

Wait till Ringo hears about this
Starting a studio is probably out of the question given Apple’s litigious history with The Beatles. Any move to broaden the “Apple” brand in entertainment could get nasty in a hurry.

Yet Apple needn’t go that

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Netflix Should Kill DVDs

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By Rick Munarriz, The Motley Fool

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If I’m going to upset you — and I will — I may as well cut to the chase: Netflix should just get rid of its DVD business.

This is going to be controversial, but I have a feeling you’ll agree with me if you’re patient enough to hear me out to the end.

Netflix doesn’t need its DVD business, and at this point its bread-and-butter appendage is simply holding the company back from its true potential.

Stop shaking your head. Give me a chance to explain. Besides, I have one more point that will rattle you.

Netflix was right about Qwikster
Deep down inside, Netflix has always wanted to unload its mail-based DVD business. Qwikster is now a punch line. It’s hard to write the word “Qwikster” without following it up with “fiasco.” However, Netflix’s plan to separate its streaming business from its original mail-order rentals operations would’ve been the right call.

Netflix was just early. Consumers were just stupid.

Oh, I just went from upsetting you to making you angry.

Well, let’s assess the knocks on Qwikster. Members complained that they would be inconvenienced by having to maintain two separate accounts. The promise to add video games to Qwikster would’ve made it more competitive with DISH Network‘s Blockbuster and Coinstar‘s Redbox that offer console title rentals, but subscribers outside of diehard gamers didn’t seem to care. Folks were just starting to overcome Netflix’s decision to stop offering streaming at no additional cost to unlimited disc-based plans, and now Qwikster was asking them to separate their streams from their discs.

Members complained. Netflix listened. How did subscribers repay Netflix?

Well, there were roughly 15 million disc-based subscribers at the time. Killing off Qwikster didn’t stop the exodus.

Quarter

DVD Subs

Change

Q3 2011

13.93 million

 —

Q4 2011

11.17 million

(2.76 million)

Q1 2012

10.09 million

(1.08 million)

Q2 2012

9.24 million

(0.85 million)

Q3 2012

8.61 million

(0.63 million)

Q4 2012

8.22 million

(0.39 million)

Q1 2013

7.98 million

(0.24 million)

Source: Netflix.

Netflix has lost nearly half of its DVD subscribers over the past two years. Do you really think it would’ve lost more if it had gone through with the Qwikster move? I doubt it. If anything, a dedicated site would’ve helped build some brand equity. Now when folks hear “Netflix,” they think “streaming.” It’s certainly not “discs.”

Stream on
Since its inception, Netflix has delivered a total of 4 billion DVDs. That’s a lot of discs over the span of more than a decade. Well, it happened to serve more than 4 billion hours of streams during the first three months of this year alone.

There are now 36.3 million streaming accounts worldwide, and that’s more than 80% of Netflix’s audience. Are we really going to worry about the feelings of the 8 million disc-based customers who may very well be just 4 million disc-spinning fans in two years? What if the DVDs are keeping streaming from

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Netflix: Madder Than Competitors

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By Tim Beyers, The Motley Fool

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Wouldn’t you know it? Just as talk of Netflix facing stiff competition reaches yet another fever pitch — including fresh rumors of music streamer Spotify entering the biz — Reed Hastings and team today quietly posted all 13 episodes of season 5 of “Mad Men,” a move that’s sure to make some of the company’s 30 million-plus subscribers happy.

“This show is perfect. The look is great. Characters are complex and seriously flawed. Love the way they bring historical events into the show (Kennedy assassination, riots, Vietnam)… we need season 5!” wrote one reviewer at Netflix’s page for the AMC Networks hit.

“LOVE LOVE LOVE this show! My only regret is watching all 4 seasons so fast. Come on with Season 5!!” wrote another.

Their enthusiasm is understandable: “Mad Men“ is a multiple Emmy award winner. Amazon.com also carries all five seasons of the show but only for purchase. Prime members aren’t permitted to stream episodes for free the way I can on Netflix.

Source: Netflix.

Hulu doesn’t have an answer either, while Redbox Instant — the still-beta streaming joint venture between Coinstar and Verizon — plans to offer movies only.

My point? Reports to the contrary, it’s a relatively small (and apparently) shrinking pool of bidders for the sorts of episodic content that makes for Netflix’s bread and butter. Getting more of shows like “Mad Men” helps tune and rev the earnings engine.

Not that you’d know it from the news wires. No fanfare accompanied the update. I wouldn’t even be writing this were it not for an email from Netflix, which tracks my interests well enough to know that I watch “Mad Men” from time to time. (Presently, I’m going through episodes of “The West Wing.”) The email was a simple reminder to check back in, which I will when time permits.

What about you? Are you a Netflix subscriber? Let us know what you think about the company and its competitors in the comments box below.

And if you’re interested in tuning in to a closer view at the streaming market and Netflix’s role in it, I invite you to try our brand-new premium research report. Inside, you’ll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We’re also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

4 Reasons Netflix Shouldn't Kill DVD Rentals

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By Rick Munarriz, Munarriz, The Motley Fool

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Netflix is quietly tiptoeing past an important milestone. The leading video service has sent out 4 billion DVDs since rolling out its original mail-based rental platform in 1999.

That’s a lot of optical discs, but Netflix isn’t shouting the milestone from the rooftops. There was no press release. There was no blog post. There was no questionable Facebook posting by CEO Reed Hastings.

Earlier this month, Netflix merely alerted what are now just 8.2 million disc-based subscribers of the milestone by slapping the achievement on its DVD mailers.

The small print reads: “We ship emotions … 4 BILLION DVDS and counting. Thanks for helping us reach this milestone. Your love of TV shows & movies made it possible!”

To DVD or not to DVD
Netflix is mailing out fewer DVDs with every passing quarter, so the path from here to 5 billion will be longer than the one it took from 3 billion to get here. Since peaking two years ago, Netflix’s pool of DVD renters has been shrinking sequentially at an alarming pace.

 Quarter

DVD Subs

Q3 2011

13.93 million

Q4 2011

11.17 million

Q1 2012

10.09 million

Q2 2012

9.24 million

Q3 2012

8.61 million

Q4 2012

8.22 million

Source: Netflix.

It’s not just Netflix that’s seeing waning interest in DVDs and Blu-ray discs. Studios have been suffering declining retail sales. DISH Network is closing far more Blockbuster video rental stores than it thought it would be shuttering since acquiring the chain out of bankruptcy two years ago, and it recently pulled out of the kiosk business when Coinstar‘s Redbox took over the Blockbuster Express.

Redbox is the only name growing in DVD rentals, but that growth is padded by a late 2011 rate increase and the 2012 takeover of the Blockbuster Express machines. Analysts see revenue growth at Coinstar slowing to just 4% next year, when results will be more organic.

All of these moves seem to validate Netflix’s shift away from optical discs. The bulk of its marketing is steering video buffs to its streaming smorgasbord, where Netflix doesn’t have to worry about making subscribers wait for content or foot the bill for round-trip mail shipments.

The move has paid off. Over the past year, Netflix has seen its global streaming accounts climb from 23.5 million to 33.3 million as its disc-based subscribers have contracted by 3 million.

However, that doesn’t mean Netflix should turn its back on the service that put the company on the map. Even in its shrinking state, DVDs remain a competitive strength at Netflix.

Let’s go postal
Doing business by mail has never been ideal. DVDs get lost or damaged in transit. It takes subscribers at least two days to get a new rental after mailing one out. There are also some current developments that will make the process slower and more expensive — namely, the move to eliminate Saturday deliveries and a recent move to …read more
Source: FULL ARTICLE at DailyFinance