Albert Fried: NFLX Double Trouble! Reiterate Underweight and $68.00 Target
by kwooozie . Feb 11, 2013 9:43 AM . Permalink
Albert Fried & Company
Contact: Rich Tullo
NFLX Double Trouble; Reiterate Underweight and $68.00 Target
A) We Expected NFLX to win the bidding for Sony's (SNE, NC) content Library.
B) SONY Streaming and VOD rights will go to STARZ -NOT NFLX-
C) We think these rights are critical for NFLX as with the rights NFLX would have access to roughly 40% of the top 100 motion pictures.
D) As NFLX was outbid we think the financial reality of NFLX's constrained balance sheet may see the light of day as recent media coverage of NFLX was more like an infomercial as compared to tough journalism. We think they needed these rights to limit churn and grow streaming subscribers and offset the losses we expect from declining DVD subs.
E) On Sunday February 10, 2013 Verizon released its Apple iPad APP and we think the app is a NFLX killer.
F) The APP entitles VZ subs to watch linear TV on their iPad, save Linear TV to their remote and provides a terrific GUI to replace current remotes thereby enhancing the value proposition for users.
G) As the Linear TV on the iPad Apple distributes the exact Linear Ad inventory to the iPad user we think this new technology is a game changer. Currently Networks such as AMCX (OW, $80) can go over the top with Linear TV economics. RENT (MP, $20) will measure all of this and they could get to the next level if this technology is widely adopted.
F) As future improvements to the APP will most likely include TV targeting as APP users and Linear TV users could get different inventories thus networks and MSO's can charge less per 30 second spot but expand the inventory my making more spots (TV spots, and iPad Spots) available to advertisers.