Black and White Program

Why Netflix will never be the same

November 2nd, 2012 by Steven Barnes

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Investor Carl Icahn invested over $168 million into Netflix stock, forever altering the landscape and potential independence of the video streaming and movie rental company. His actions essentially put the company into play and inspired significant volume in trading of the company’s stock on the markets. Icahn’s purchase represented approximately 5.54 million shares. Potential suitors discussed in the financial circles and publications include Amazon.com and Verizon Communications. Netflex has a welled heeled position in its industry with an estimated subscriber base of 25.1 million U.S. customers, accompanied with nearly 5 million subscribers on the international front. The trend of consumers to access the internet for entertainment such as movies and TV series, makes the outlook promising for Netflix. As a result, a bidding war by interested parties could incite resulting in a soaring stock price (now at 77.69), quite beneficial to Carl Icahn. According to a SEC filing, Icahn’s investment includes options for 4.29 million shares. The company has distanced itself from rivals by aggressively expanding into online video streaming at a time when competitors were still focused on DVD-mail service.

The company, headed by CEO Reed Hastings, started out as a DVD-by-mail service company and grew into a significant streaming video subscription service at present offering movies and TV shows. An aggressive $7.99 monthly fee for unlimited use has enabled its subscriber growth. Competing firms and products include Hulu with approximately 2 million customers, Amazon.com’s PRIME service with approximately 5 million subscribers ($79.00 yearly) are far behind with Amazon best positioned to play catch up with its large online retailing base and growing cloud technology platform.

Noted concerns ahead for Netflix include a slowing subscriber growth rate in the U.S. and concerns about a large amount of financial resource allocated to growing international subscriber base. Infrastructure costs and content obligations may tie up company profits for years to come as well as make cost cutting by a suitor difficult.

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