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!

The Deal: Netflix CEO's Bet on Content Depends on Who Controls It

What actually happens to cable TV's bundled packages will likely fall between the smooth transition envisioned by Hastings and the doomsday scenario predicted by DCA. It's also possible that, for a while longer at least, a certain video streamer wants to let certain sleeping giants lie. Hastings assumes more authority, however, when addressing barriers to entry that Netflix has already managed to erect. Although he doesn't call them barriers, that's pretty much the thrust of such declarations:


"We spend over $450M per year on global marketing to attract people to try Netflix, and to reinforce with our members why Netflix is worthy."

"We are currently spending about $350M per year on a wide range of efforts to improve our service and app, and we are constantly getting better." "We're now investing over $2B per year in content licensing and the creation of original shows."

While the quantity of these investments is enough to stop most would-be intruders in their tracks, Hastings also presents Netflix as a quality investor.

"We've realized that the 20th documentary about the financial crisis will mostly just take away viewing from the other 19 such docs, and instead of trying to have everything, we should strive to have the best in each category," he writes of insights gained over Netflix's 16 years. "As such, we are actively curating our service rather than carrying as many titles as we can."

These insights are also being applied to original programming, an area where Hastings admits there's more judgment involved. But he's confident all the same that Netflix's data on members' viewing habits and experience in licensing content give this original-content newcomer an edge over more traditional producers. Hence his opinion, "We think we can do as good or better [a] job than our linear TV peers in choosing projects and setting budgets."

DCA, for its part, appreciates Netflix's accomplishments but believes the digital transition has triggered a virtual land rush for content providers -- new and old alike. Its white paper notes that YouTube LLC has invested $350 million to create content in a campaign that will continue to fund the top 40% of programs so created. It also cites Google Inc. (GOOG)'s giving Machinima Inc., the No. 1 entertainment destination on YouTube, $35 million in a recent investment round, as well as Discovery Communications Inc. (DISCA)'s year-old acquisition of Revision3, another online television network with more than 27 million monthly unique users, for an estimated $30 million.

2 of 3

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!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

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