It feels strange saying this, but, while I am not quite ready to pull the long trigger, the stock might be turning into a buy. It's certainly no longer a short.
Netflix appears to be aggressively moving away from the unsustainable model of buying loads of stale reruns and second-rate movies for its streaming service. Instead, it now places focus on original programming, cancelled shows with a considerable cult or lingering following and -- as we move forward -- specialty programming.
It flew under the radar a bit, but Netflix signed a deal to stream "both contemporary and classic matches from the Ultimate Fighting Championship (UFC)" for its Canadian customers. In and of itself, this is not a big deal; however, it becomes meaningful if the company pushes forward with this type of strategy.
To be clear, I consider NFLX a tentative buy and no longer a short. It remains to be seen where things go from here.The company still faces headwinds. It will have difficulty cracking the original programming nut, let alone producing anything on par with what Time Warner (TWX) does at the legendary HBO. And it can never compete for truly premium sports programming and highly-valuable "appointment viewing," such as live sporting events. That said, over the last several weeks, Netflix has spun the notion that it is cable's "frenemy" quite well, as a recent article on CNET makes clear:
Ted Sarandos, Netflix's chief content officer, said . . . that Netflix can offer a value to its cable partners by helping them grow their audience. He used the popular AMC series "Mad Men" as an example. He said that between the long period between season 4 and season 5 of the series, millions of new viewers started watching the series for the first time on Netflix . . . And because Netflix offered all four previous seasons, these viewers could "catch up" on the series before the Season 5 debut. Now, these new viewers are able to watch the current season of the show on AMC.I've got to call a spade a spade. That's pretty powerful stuff. Maybe Netflix does not cause people to cut the cable cord; instead, it acts as an extension cord. If it can successfully position itself in that vein -- and do a decent job adding original and specialty programming -- it could save itself and turn things around after a few more bumps in 2012.