Wall_St_Geek

Netflix: High Flier or Falling Star?

<<And since the company’s costs are relatively fixed, much of the revenue from these additional subscribers flowed directly to the bottom line.>>

Not sure how you arrived at this conclusion. Each new sub is not more profitable than prior subs. Their SAC cost is fixed - per - sub, but therefore is variable, and their content licensing and fulfillment costs are also variable based on the number of movies watched. While their G&A expenses are largely fixed, this represents a smaller portion of their overall expense base.

Coinstar and Netflix: Two Shorts on Movie Rentals

I also think the NFLX is due for a correction, but not for the reasons you state. NFLX's plans are roughly equally profitable regardless of the X-out status due to corresponding usage, so if subscribers reduce their plans due to discretionary spending cutbacks, their earnings should remain intact. While some may cancel all together, NFLX actually saw strong sub adds in the last quarter, as people moved away from dining out, going out, to home entertainment. I believe this trend will continue.

With regards to the online competition, your comment....

"Their moat will disappear quickly, as giants such as Amazon (AMZN), Apple (AAPL), Hulu and Blockbuster move into the arena"

...is a a little off-base. First, each of these players are ALREADY in this space, and in the case of AMZN and AAPL, have been for some time. This has not slowed the growth in NFLX. These other players still have to work out a decent revenue / pricing model. As a NFLX sub, I get free access to the online content with my sub, rather than paying / view with the others.

Having said that, I think that growth will slow due to less "new" subscribers, and that a miss on topline revenue may be waiting, as people reduce their plans. IMO, this will cause the correction.

Sony's Latest Play for Your Living Room

"None of these have really taken off--largely because each option only has a sliver of content."

On what basis do you believe they have not taken off? From tracking order numbers, we know that the Netflix Roku box sold over 50,000 units within 2-3 weeks, and it is believed they sold over 100,000 before they hit supply difficulties. They have ~ 10,000 titles ready for instant viewing on your TV at no additional cost to the NFLX subscription. I don't call that a "sliver" of content.

Having said that, I agree Sony is late to the game here, and the PS3 has not sold that well, so this may be too little, too late. However, I do think it is a good, strong move to make.

Share Buybacks a Good Sign from Netflix

5. They can make strategic investments (without acquisition).

I'm not quite as positive on the buyback. I just see it as a continuation of a previous trend, and anticipate that much of the purchased stock will be issued in options to employees (not in itself a bad thing), so is nothing to get particularly excited about. Plus the amount doesn't exactly ring of "we think our stock is a screaming buy and are going to profit from all you who don't believe in us".

Personally, I would have preferred them to announce a new strategic initiative - perhaps accelerated overseas expansion, an adjacent space opportunity or partnerships with cable cos to replace their PPV services....now those would have been exciting.