Netflix (NFLX) and the Streaming Wars Message Board

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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: Dave who wrote (186)	3/1/2005 4:05:14 PM
From: CFA	Read Replies (1) of 2280

<<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.>> Just as you weren't aware that NFLX's price plan has been around for awhile, perhaps you're also unaware that at the time of NFLX's 4th Q release Blockbuster's $14.99 price point had only been around for a few weeks. Consequently, I wouldn't have expected 4th Q results to reflect much pricing pressure. The pressure will heat up with this quarter's release. Going forward, NFLX will be forced to either cut prices or lower subscriber guidance. Blockbuster releases its own earnings in approx. 1 week. I'm expecting 500K online subs as of end of year and at least 700K online subs as of end of February. <<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.>> I think that you have a poor grasp of this industry. You seem ignorant of even the most basic price points. The reality is that Netflix is a 1-dimensional player. Blockbuster generates $1 Billion in cash flow annually from its stores, which it can use to bleed NFLX to death. A few months ago, the big question was how hard would Blockbuster attack Netflix. People assumed that Blockbuster would put forward a half-hearted effort. It's now clear that Blockbuster is coming after Netflix much more aggressively than even Netflix anticipated. Clearly, Blockbuster's goal is to kill Netflix. As I've been saying for months, NFLX has no competitive advantage, and Blockbuster continues to chip away at NFLX from multiple angles. Back in September, I believe that you were saying that NFLX had a competitive advantage because of "indie" movies and a rating system. That comment was laughable. At the time, BBI was at $7.5 and NFLX was at $15. Message 20498195

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