Netflix Streaming Spending May Hurt Margins

Posted Tue Jan 25, 2011 at 07:00 AM PST by Dick Ward

Netflix is paying a lot for new streaming content, but that might end up hurting them.

The folks over at Netflix are at the top when it comes to paid streaming content, and they'd like to stay that way. In order to keep that position, they're spending money - lots of it - on the acquisition of streaming content, no matter the quality or lack thereof...

It's a sound strategy, but industry analyst Michael Pachter of Wedbush Morgan Securities says the company may be going a bit overboard. Spending too much on new content will offset the increased subscriber base and eat into the company's margins.

"We believe that Netflix will be challenged to grow at its current pace for more than another year," says Pachter.

This also does not take into account drop off from former customers unhappy with resulting changes to the mail delivery options in connection to 28-day rental delays and inconsistent stocking of related titles.

Source: Home Media Magazine

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Tags: Streaming, Netflix (all tags)