I'm taking some advice from CNBC's Herb Greenberg. After I questioned his decision to make the "silly" prediction that Facebook would buy Netflix (NFLX) in 2012, he told me to "chill." I'm now so chill that I present my five big predictions for 2012. If it's good enough for the entire staff at CNBC, it's good enough for this poor little writer from Santa Monica on Seeking Alpha.
Now, remember, these predictions are only "silly" if they don't come true. If they hit, I'll tout them in a year as one reason why you should pay attention to my five big predictions for 2013.
Prediction No. 1
- Nobody will buy Netflix streaming.
On April 5, 2011, I wrote the following about Netflix:
Not sustainable. Check. Cash flow problem. Check. Short written all over it. Check. Two years from now. Bit too generous. Takeover. I no longer believe that.
If you buy Netflix's streaming division, as is, your company's board needs to have its collective head examined. Inheriting billions of dollars worth of on- and off-balance sheet expenses and debt related to content obligations and international expansion makes the likelihood of an acquisition pretty much nil. As the numbers of Netflix competitors continue to grow, the prospects of a take-out decrease. Obviously, it's pretty easy to start up a streaming service as long as you have lots of cash.
Prediction No. 2
- Netflix will sell its DVD division.
The last thing Netflix CEO Reed Hastings wants to do is swallow his pride and go to market in 2012 for more financing. While he might end up having no choice, I think he can spare himself the embarrassment by finding a buyer for his company's DVD unit.
Yes, Hastings claimed, in the company's Q2 letter to shareholders, that he will not sell the DVD business. He even went so far as to sound excited about that segment's prospects, noting that the company was "planning some great improvements ... to keep DVD as healthy as possible for as many years as possible."
Netflix changes business plans quite frequently if you haven't noticed. Interestingly, Hastings did not sound so keen on DVD just this past Tuesday:
That's quite an update and a serious vote of confidence for all of the hard-working men and women putting in long hours in Netflix's new dedicated DVD unit.
Anyhow, in his quest to not only prove that streaming is the future, but that the future is Netflix, Hastings is unwittingly neglecting the very thing that brought his company to the dance. While I understand the excitement over streaming and "smart TV," I don't quite get why the push to get there needs to include killing off the revenue line that helps subsidize Netflix's digital ambitions. Value still exists in the DVD business. Other companies realize this and will pay Netflix enough of a premium for Hastings to justify selling DVD to avoid another round of fundraising and to keep Netflix afloat.
Prediction No. 3
- Big media consolidation.
Something happened in radio the other day that, because it happened in radio, will fly under the radar. Clear Channel (OTC:CCMO) signed a deal with Cumulus Media (CMLS) to include the latter's stations on the former's iHeartRadio web and mobile applications.
While this is not consolidation, it is a partnership that basically says, as we (terrestrial radio) attempt to compete with everything from the iPod to Internet radio to Sirius XM (SIRI) satellite radio, we believe we're stronger as a somewhat united front than in complete competition with one another. In 2012, I expect some combination of television programmers, movie studios and cable or satellite companies to come to the same realization and take similar actions.
As streaming video services continue to proliferate, it will dawn on the content owners that it makes a heck of a lot more sense to run digital as something that looks more like the cable model. Ideally, everybody under the sun would just take an equal stake in Hulu, load it with content and share subscription/advertising revenues, but that's probably a bit too ambitious for this bunch.
Instead, I expect to see the players with the most foresight - companies like Time Warner (TWX) and Disney (DIS) - join together in some fashion, be it partnership, merger or outright acquisition to stream their content from the same platform. The bigger and the more partners the better.
In any event, 2012 will see the programmers and movie studios, possibly in concert with cable TV, take control of their content - much like Time Warner did with HBO GO - and box out the middlemen, such as Netflix and Amazon.com (AMZN).
Prediction No. 4
- Tim Horton's (THI) heads further west.
This is more wishful thinking than legit or "silly" prediction. When I was a kid growing up in Niagara Falls, New York, you had to go to Canada to get your Tim's fix. Now, you can easily walk to one and drive to several within minutes of my parent's house in Western New York. I think opportunity exists for Tim Horton's to move further west.
The chain recently closed a bunch of underperforming stores in the Northeast. Right now, living in California, the closest Tim Horton's to me is in Victoria, B.C. Hardly practical. I fully understand that the company has its hands in lots of pies right now - a stake in Wendy's (WEN), a partnership with Cold Stone Creamery - but opportunity exists in California and other western states. Other than local donut shops that also happen to serve Chinese food and hot dogs, we do not have a tried-and-true chain of ubiquitous donut shops. One simply does not exist. It's a smart move to scale back in an ultra-competitive donut market like New England, but take those resources and plant them in California.
Prediction No. 5
- Sirius XM gives the "peanut gallery" a board seat.
I've been known to refer to the cult of chronic commenters to articles about Sirius XM as the "peanut gallery." I'm certain that they work in shifts, with somebody manning the switch. The moment an article that includes SIRI, but does not praise SIRI hits the wire, they activate the telephone tree loading message boards and the article's comments section with disparaging words for the author and talking points about the Sirius XM service. Where else can you can get news, sports, traffic, weather, talk, any kind of music you want, all in one place, with crystal clear sound!?
Well, I have learned that, after culling the Yahoo Finance Sirius XM message board and the comments on SIRI-related Seeking Alpha articles, Sirius XM will extend a collection of "peanut gallery" participants a seat on the company's board in 2012. Fellow Seeking Alpha contributor Cameron Kaine will serve as chairman of this sub-committee of the board, while contributor Crunching Numbers acts as the entity's treasurer.
In all seriousness, though, I wish everybody, including the most ardent SIRI longs, a happy and safe holiday season. Thanks to the urging of another Seeking Alpha colleague, Robert Weinstein, I submitted my first article to the site in February. At the time, I never even imagined things would take off like they have. I'm grateful to Seeking Alpha for the opportunity to be part, albeit a small part, of the conversation.
Thanks to everybody who takes the time to read and/or comment on my articles as well as those who take the extra step to follow me, recommend and share my articles or communicate personally via private message or email. I very much appreciate it all.
Additional disclosure: I am short NFLX via a long position in NFLX June 2012 $40 put options.