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Technology Stocks : Netflix (NFLX) and the Streaming Wars -- Ignore unavailable to you. Want to Upgrade?

To: Dave who wrote (188)	3/1/2005 4:37:43 PM
From: CFA	Read Replies (1) \| Respond to of 2280

<<No comments on the Asset Turnover I assume. In fact, NFLX Asset Turnover is nearly double. That basically shows how much more efficient that NFLX is at squeezing a dollar of revenue out of their assets>> It's great that you've memorized a few financial ratios. I'm sure that all pure-play Internet firms make the same "efficiency" claim...you know like Webvan, EToys, etc. Regardless of how "efficient" Netflix is, the fact is that Blockbuster has the option to use the cash flow generated from its stores to subsidize its online operations and bleed NFLX to death. By the way, I saw a stat a few months back where Blockbuster was claiming that 70% of its online subscribers were coming from Netflix. This implies that Blockbuster's online price cuts are not hurting its stores significantly. There's a certain segment of the market that simply prefers the physical store experience (teenagers, families, couples...people who want movies ASAP and/or browse movies as part of a social occasion such as a date). This segment will likely not shift to online unless there's a huge price disparity between online and in-store. For this segment, Blockbuster offers an in-store unlimited plan called MoviePass for $25, a $10 premium to its online plan.