The streaming service, which claims to have seen just a "small reaction" to its recent price increase, said at Internet Week in New York that it will be looking for shows that get bigger audiences in the future, and will push viewers to accept fewer choices.
It's illustrating how the new strategy will work in Latin America, where it will be heavily pushing a soccer-related title called "Mata Mata" in the run-up to next month's World Cup.
Offering fewer, higher-value choices sounds like a model that can adapt to high fees for last-mile access to customers, so investors rewarded Netflix handsomely yesterday, giving the stock a 2% gain.The shares are nowhere near their all-time high of almost $455, but given their Amazon-like price-to-earnings ratio of nearly 140 they're high enough. Are they too high? In order to justify the current price, Netflix needs to accelerate its 20% annual top-line growth rate, or regularly earn a lot more than the $112.40 million, or $1.85 per share, it brought to last year's bottom line. The most recent quarter, however, saw only an 8% rise in revenue quarter to quarter, and a 10% sequential gain in net income. The strategy seems to be that Netflix will become more like its pay cable rival, HBO, which it passed in subscribers earlier this year . But if that's the case, should it really have more than one-third the value of Time Warner (TWX) before its pending split into print and video units next month? That's because wherever it looks Netflix sees an environment where costs are rising and competition increasing.
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