Sunday, May 24, 2015

Netflix vs. Comcast: Update

Can Netflix keep delivering movies a lot cheaper than the cable-and-online TV giants?

Netflix vs. Comcast: Update

At $9 a month for repeat DVD rentals, plus free-to-users movie and TV downloads, Netflix looks like a bargain vs Comcast and other cable services that charge the average subscriber upwards of $100 a month plus $5-6 per recent-release movie, notes quick-hit stock-research startup Trefis in this report.

But time may be on Comcast's side. "Netflix can't sustain its low-cost base for acquiring content" because movie studios and networks "are likely to demand higher prices," ending its "competitive edge" vs. cable companies, Trefis concludes.
ALSO:  "We rate Netflix a SELL," writes Janney Capital Markets analyst Tony Wible. "Netflix remains overvalued based on [Wall Street] expectations that do not adequately discount: 1) potential changes in the competitive environment, 2) content cost inflation as [Internet Protocol TV] demand grows and studios exercise more control over supply, and 3) digital risks that will only grow as Netflix pushes more subscribers towards digital content." 

Cheap Redbox supermarket video rentals and online cable-company movie packages will "siphon [subscribers] from both ends of the user spectrum," he adds. The US Postal Service's planned 2-cent postage increase "will increase Netflix's shipping costs by $18 to $30 million annually or $0.19 to $0.32 per share."  Plus, Netflix "faces inflationary pressures from the Starz contract renewal," other cable TV cost increases, and higher TV ad rates.

Wible is looking pretty far ahead. As cable rates keep rising and video stores keep shutting down, Netflix is likely to keep gaining paid viewers for now.  (Remember Blockbuster?)

About this blog

PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

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Joseph N. DiStefano