Steven Davidoff argues the hotly-debated Netflix (NFLX -1.9%) poison pill is a "non-event" that...

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Michael2343 Comments (450)
 
So, back to focusing on fundamentals, and guessing how soon Icahn is going to dump his holdings. I can't imagine he'd want to ride this down into the ground. The valuation has gone parabolic based on PE, and regardless of Netflix's penetration, there is competition, and more and more content is migrating to the digital pipe. Media consumption capacity is a finite resource, and no one consumer needs 10 digital media content platforms. At worst, they are happy with 1; at best 2-3. There aren't enough hours in the day.

So what happens going forward? Netflix has to acquire far cheaper licensing for its content delivery in order to increase earnings. That will become possible only when that content is delivered simultaneously to 10, 20 or more comprable networks. Costs will drop, but so will revenues.

It's lose lose, unfortunately, for Netflix shareholders. For consumers, its wonderful.

What the heck was Icahn thinking? Surely he wanted to game the system or take over a majority interest, maybe to put together some other deal. But now he'll just dump shares right? I can't read minds but I'd be pissed and want to get out if I were him. And quite nervous looking at the media marketplace and the market at large for the next 4 years.
7 Nov 2012, 08:42 PM Reply Like