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 Will Raise Prices

Stocks in this article: NFLX TWX

NEW YORK ( TheStreet) -- Barring a buyout of epic proportion or another desperate cash infusion or three, Netflix (NFLX) will raise prices. It's not a matter of if or even when. In some fashion, it will happen. It's simply a question of how.

Why?

The economics of licensing content and producing original programs, coupled with Netflix's unworkable pricing structure, make it impossible for the company to survive without more revenue.


By the way, before you read my rationale on this, you have to check out this excellent CNBC video with Scott Wapner where Wedbush's Michael Pachter exposes Netflix's original programming charade for the dog and pony show it is:

That's typical Hastings. And it ties back to the issue of the company's one-tier subscription pricing scheme. Hastings absolutely knows this must change for Netflix to accomplish something greater than an inconsistent level of subsistence.


Outside of a buyout or another cash raise, Netflix needs more revenue. Of course, it could devise another stream -- maybe advertising or e-commerce -- but it doesn't need more revenue simply because it requires more cash.

Let's make sense out of that statement . . .

Yes, Netflix needs cash because it continues to bleed it. No doubt. But, even if the company was in a healthy financial position, it will still need to charge higher prices. At least if it wants to attract premium programming.

However, higher prices do not even guarantee that big content owners will give up top-notch content to Netflix. They can stream it themselves much like Time Warner (TWX) does via HBO GO and its new Warner Instant Archive service.

This is why Netflix took a flyer on original programming: It has absolutely no leverage in its relationships with content providers -- they can pull programming or stop licensing whenever they want to in most cases. It needs to produce its own stuff to fill streaming inventory.


But let's suspend reality and put that elephant in the room aside. Let's assume we live in a fairy tale world where the old guard media will license Netflix more and more and better and better content. To make this happen, Netflix must shed the very real image that it dilutes premium programming by giving it away, all you can eat, for $8 a month.

1 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 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

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