View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Business
23 April 2013updated 22 Oct 2020 3:55pm

In all the gushing over Netflix, there’s room for caution

The reaction is predicable. The share price is not.

By Douglas Blakey

With a certain depressing predictability, the newspapers today are gushing in their praise for Netflix. The US-headquartered service now streams video to US 29.17m subscribers, up just over 2m since the start of the year, enabling it to claim to be the most watched network in the US.

Netflix added another 1m streaming members outside the US in the first quarter, bringing total international subscribers to 7.1m. It currently offers its service in Canada, Latin America and since early 2012, the UK. Netflix’s first quarter results provided a further boost to a share price that has been skyrocketing of late: at the end of last September, the share price was $55.

Since then, the share price has risen almost four-fold to $213. According to Netflix, its future success will be boosted by producing original content. The sum total of its original content to date is the grand total of one programme; that requires a generous definition of original, namely a remake of House of Cards.

It currently charges £6.99 per month in the UK; by contrast, the BBC licence fee seems really quite a snip. Just before potential investors empty the piggy bank and rush to invest in Netflix shares, they might care to reflect on the nature of this market sector. Netflix’s main rivals, the Amazon-owned LoveFilm and HBO, are not going to go away any time soon and can be expected to fight back.

If and when Amazon bids more aggressively for the rights to film and TV shows, the acquisition costs for Netflix cannot but rise. Also, as a number of sharper analysts have spotted, Netflix may have cash flow challenges, with $3.3bn in off-balance sheet content liabilities and only around $1bn in cash. As for producing further fresh content: House of Cards cost around $100m to produce. At that sort of cost, do not expect too many headline grabbing productions of that calibre to follow any time soon.

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

One other thing jumps out from the first quarter Netflix results and that is how way out the performance of the firm is compared to the management predictions. If the firms own management finds it so hard to predict its performance, heaven knows how the analyst community will get on in their forecasts.

Investors may get lucky and Netflix could be an acquisition target for an Apple or a Microsoft in the coming months. On the other hand, the shares are wildly volatile; not shares one would suggest for savings put away for a rainy day.

Content from our partners
The promise of prevention
How Labour hopes to make the UK a leader in green energy
Is now the time to rethink health and care for older people? With Age UK

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU