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Technology Stocks : Netflix (NFLX) and the Streaming Wars
NFLX 107.58+1.4%Nov 28 9:30 AM EST
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To: CFA who wrote (185)3/1/2005 3:40:20 PM
From: Dave  Read Replies (1) of 2280
 
First, I didn't know that this "pricing plan" has been around for years. It looks as if NFLX is just marketing it now.

Second.

My guess is that Netflix is feeling pressure from Blockbuster's $14.99/month plan. Apparently, many people are opting for Blockbusters's $14.99/month plan instead of Netflix's $17.99/month plan.

I disagree that NFLX is "feeling pressure" from BBI and their plans. Churn declined to 4.5% and net subs added increased to 381k in the 4th quarter.

I don't believe that NFLX is "financially unable" to match BBI's 14.99/month plan. I believe that NFLX is acting like a rational competitor and furthermore, NFLX is less "asset intensive" than BBI when you look at Asset Turnover ratios. Moreover, NFLX doesn't have the burden of added storefronts and personnel costs like BBI and their brethren.

We shall find out in about a month and a half to two months to see the result of these marketing efforts.

In the end, a capped plan is a non-event, spurred by a desperate company that's quickly losing share.

I think that comment requires some further clarity. Of course, NFLX is currently the "dominant" online DVD rental company and, as competitors enter, their "share" will decline.
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