This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Netflix Has Monetization Issues, Not Facebook and Pandora

Stocks in this article: NFLX FB P

Netflix has never taken the e-commerce route. And it does not have ads on its website. You can think of quite a few logical tie-ins, ranging from sales of content-related merchandise to deals with pizza restaurants to deliver food to movie-watchers. Because Netflix has location data on its users, it could forge local deals much the same way Pandora does. There's really no limit, all else being equal, to what Netflix can do in this regard.

But all else is likely not equal.

Netflix, for all intents and purposes, counts one meaningful stream of revenue == cash collected from streaming subscribers. It's in the process of torching its DVD business, which once provided high margins and much-needed money to chase content and fuel international expansion.

Investors should worry about one-trick ponies such as Netflix. Multiple, synergistic revenue streams belong on every Is this a worthy investment? checklist.

Why hasn't Netflix moved forward with e-commerce in some fashion, be it from the typical to the creative? I do not buy the argument it would hurt the user experience. Done well, it could actually enhance it.

Instead, and I would love an answer from the company on this, I can only assume Netflix's content contracts constrain its user monetization possibilities.

If Sony and Starz felt like they were getting robbed because they were effectively giving away their content, how would they, and others, feel if Netflix turned that $8 a month into much more from users who took the bait on an e-commerce initiative? In practice, Netflix would be using somebody else's content to pump its own revenues. (Of course, it could work out a revenue share deal with the content owners.)

Maybe Netflix will, at the very least, test some sort of e-commerce pilot with its own original programming. It should tinker. Like any other company in the broad tech/Internet/new media space, Netflix needs to bring multiple revenue streams to the table, revenue streams that talk to one another, that fuel one another. Buzzword: synergy.

This potential issue, assuming I am not missing something or Netflix simply just chooses not to go this route out of some purist ethos, only underscores who the winners are in the media space. It's not middlemen or glorified bootleggers such as Netflix. It's the old-guard establishment. The types of media companies I argue define the word value.

Facebook and Pandora do not have monetization "problems" of any kind. Both companies have incredibly clear ways forward. They're executing. You just cannot expect massive change -- and the structures that nurture it -- to complete overnight. Netflix has the issue, whether it's just not willing or simply not able to squeeze more than $8 a month out of its diverse and burgeoning subscriber base.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, the author was long FB and P.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs