Netflix: Live By The Writers' Strike, Die By The Writers' Strike

Netflix (NFLX) had its largest decline (-23.70%) in more than three years today after reporting inline expectations and lowering guidance for the rest of the year. One reason for the loss of earnings momentum going forward may be related to the Hollywood writers' strike that began in November 2007 and ended in February.

While the period that different shows went on hiatus varied (using NBC's "The Office" as a benchmark), most shows started airing reruns in mid-November and didn't begin running new episodes until early April.

Overlaying those dates on the chart of NFLX shows that from the time that reruns began airing to the time that new episodes came back on the air, NFLX enjoyed a run of 52%. While it could just be a coincidence, the fact that one of NFLX's key competitors -- original programming -- temporarily went off line had to have had at least some positive impact on the stock's performance.

Comments

[Oldtrains:]

Netflix should do better in periods when their customers watch MORE original programming, not when they turn to Netlfix for DVDs. Every DVD not delivered adds to Netflix's bottom line. And because the service is "sticky", most users don't bother to cancel because they are watching more TV and less DVDs since they know they will ramp up at a later date.

2008 Apr 23 08:56 AM

[WORRIED:]

I made a huge bundle many years ago on Netflix. I started buying again when it was in the low 20's, and will not do anything until it hits 40 by the end of 2008. Then, I will sell options and keep holding. I might sell at 50 if I need some cash.
sincerely, the reincarnation of Nostradamus.

2008 Apr 24 01:20 PM

[engineer1:]

Anyone who thinks having a dvd mailed to them is a good file transfer method is living in the stone age. Netflix has new competitors and they are not the best of the net. The streaming video feature is low quality and problematic on their website, other sites that rent downloads have much better quality and you don't need to wait for the mail guy to show up. Also Netflix only does business in the U.S. (you might have heard about our little slowdown) I see a lot of problems with growth for this company it's situation is changing and none of this is priced in yet. JJ

2008 Apr 25 09:50 PM