View Full Version : 5 Reasons why Netflix will be sold. Very soon.

As Porter Bibb, managing partner at Mediatech Capital Partners points out (http://www.bloomberg.com/video/82641842/), Reed Hastings has "painted himself into a corner". Besides the more public flubs of a botched price increase and business split (w/name change), there are bottom-line business realities that are now forcing the CEO's hand toward selling, and selling soon:

Declining Customer Base (http://www.bloomberg.com/news/2011-10-24/netflix-3q-subscriber-losses-worse-than-forecast.html) -- Triggered by a 60% price increase, 800,000 Netflix customers jumped ship in Q3. At $200 a subscriber per year, that's pretty significant.
Declining Stock Price (http://news.cnet.com/8301-13506_3-57330305-17/how-low-can-netflixs-stock-go-much-lower-analysts-say/) -- Only in the finance industry have we seen a stock lose value this quickly in recent times. From a high of nearly $300 a share, Netflix has lost more than 70% since the summer. Shareholders are looking for an out, and the sale of Netflix is on the short-list as an exit strategy. To a potential buyer, a 70% dip in stock price looks like a 70% sale...
Shrinking cash (http://seekingalpha.com/article/309964-avoid-netflix-on-cash-flow-issues-part-2) -- Linked to stock price, Netflix only has $350 Million in cash and is feverishly aiming to raise more. A troubling sign given it said it had adequate cash only a month ago (http://files.shareholder.com/downloads/NFLX/1489574550x0x511281/1683a2ad-795c-42e5-b136-2690fe0981ad/Investor%20Letter%20Q3%202011.pdf). Even more troubling given the next point...
Expensive content (http://finance.yahoo.com/news/Netflix-NFLX-Navigating-twst-1316037948.html) -- Perhaps the most unsustainable liability for Netflix given its current woes is its 2.4 Billion in content costs, and the promise of Billions more in content costs for it to remain competitive in the space.
Buyers galore! (http://tech.fortune.cnn.com/2011/12/14/netflix/?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top +Stories%29&utm_content=Google+Feedfetcher) -- With content providers looking to fill their coffers with licensing fees, there are many cheerleaders rooting for someone with deep pockets to step in and buy Netflix. From rumored suitors like Verizon and Amazon, to the cash rich ($40B+) giants like Google and Apple, to the more closely aligned potentials of Microsoft and Facebook (Reed Hastings sits on the board for both), the Netflix Merger & Acquisition story is just warming up...

Don’t use netflix ever since my friend cut his subscription….thats my friend and about 8 freeloaders with an xbox and his password that dont watch netflix anymore

Good point. Although it’s less about the moment in time and more about potential negative trends from here out

I can’t imagine anyone wanting to buy Netflix. It’s more trouble than it’s worth. Hollywood is hell bent on killing Netflix. The name itself is poison over there.
It’s better to just make their own deal. The only value of Netflix is their declining and increasingly unhappy user base. They can’t give any buyer a guarantee to access any high-quality content which is why potential Hulu acquisitions failed.
They tried to leverage the users into forcing the hand of content owners and failed. Netflix is up shit creek without a paddle.

The Netflix brand is still worth something in the eyes of the consumer though, and that’s worth something to Hollywood. They’ve still got 20+ Million subscribers and the brand carries weight even in the gadget world (tablets/readers like the Nook & Fire gain legitimacy when Netflix streaming apps are announced).
Yeah, I think they would love to kill it, but I bet they’d rather opt to make money from it, and are lobbying hard for someone with a lot of cash on hand to take it over and buy their content.