This business model is fascinating. Shorts keep saying that NFLX can't cover its $5+ billion (and growing) in content obligations. NFLX will fail. I do not agree.
NFLX has 33 million streaming subscribers. And that is growing at a rate of a couple of million net subscribers per quarter. Every 10 million subscribers is another $1 billion in revenue. And at this point, every additional subscriber adds a great deal to the bottom line. As the content obligations are covered, each additional sub is pure profit. NFLX is not being charged based on eyeballs for the content. Fixed rate.
The foray into original content was brilliant. Google "House of Cards Reviews" and do some reading. NFLX hot a home run with its first series. More to come. Deals with Disney and Dreamworks ensure that every kid under 12 will have to have NFLX.
In short, I believe that NFLX has reached critical mass. No stopping it now. How big ti becomes will be determined by its success internationally. I will be watching these numbers closely.
Netflix is showing it can cover the content obligations, but the key here is $8 a month. At this price and an ever growing content library Netflix is appealing to the masses. Also at this price is there anybody else that can cover the content obligations, it looks like investors are starting to believe that there isn't.
I am starting to discount AMZN, Hulu, RedBox/Verizon, etc. as competitors. LIke I wrote, NFLX has reached critical mass and for $8 a month, there nowhere else to go. The contracts for content are for years, so even if AMZN wanted to deficit spend massively to obtain content, they can't. By the time the big-time deals are up, NFLX will have 60 million worldwide subs and will be unstoppable.
Dreamworks, Disney, House of Cards, and other great original programming on the way. Not stoppable.