Tuesday, November 06, 2012

Netflix In Play

It seems that buyers are circling around Netflix and that the company is very much in play. This is hardly surprising, apart from a faux pas over pricing, the company has built an impressive technical infrastructure and online delivery model to complement their offline business.

But placing a poison pill defence against a takeover is disingenuous and will do the company's shareholders no favours in the long term. Most Board who have adopted this type of strategy have ended up reducing shareholder value.

Indeed, I would argue that Netflix is at the top of its game and should look for a buyer. The technology is largely in place, but the content remains thin on the ground and will become thinner as new players up the ante and offer un-commercial rates for rights windows. I know a number of people who have abandoned their online subscriptions recently because of the dearth of good content. (One anecdotally told me that using Netflix was like going into a Blockbuster at 7pm on a Saturday after all the best movies had gone..).

Delivering content is a tough game and it's going to be a market which will continually used as a loss leader. Can Netflix cope ?