Leading SVOD provider Netflix (NASDAQ: NFLX) saw its shares dip slightly this week immediately following an appearance by Ted Sarandos, head of content, at an investor conference in which he said the company has faced some resistance from content owners as it negotiates for global content rights.
Share prices slipped about 5 percent and set off another flurry of speculation by pundits and analysts on whether investors were getting uneasy about Netflix's prospects for future growth. Prices stabilized in Tuesday morning trading, however.
Sarandos told attendees at the UBS Global Media and Communications Conference in New York that convincing TV networks and studios to license their content to Netflix on a global basis "has not been an easy road," The Wall Street Journal reported. He said that part of that resistance comes from studios' regional sales teams that are worried about their jobs being "marginalized" by content being available across their market territories.
Some analysts pointed to Sarandos' comments as being the main factor in the share price wobble, but others feel that there's much more beneath the surface that is causing minor investor jitters. After all, rising content costs are happening across the industry and are well known; so is Netflix's long-term debt situation. Neither of these factors has significantly impacted the growth of its shares, which split seven-to-one in July and have seen almost 40 percent growth since early September, Fortune said.
Ampere Analysis, for example, continued to sound a warning note about subscriber saturation in the U.S. and Europe, which might cause Netflix revenue to stagnate unless it diversifies into additional business models. "Netflix is still growing its subscriber base and expanding into new international markets. However, we expect it to see subscriber growth slowing in 2017-18 and, at that point, numerous options such as diversification of content, pricing and subscription tiers -- as well as advertising -- will need to be considered," said Richard Broughton, research director for Ampere, in a note to investors.
A Motley Fool article said that Netflix's extremely high valuation -- its market cap is about $56 billion, on par with major pay-TV operators like Time Warner Cable (NYSE: TWC), and it "currently trades for about 500 times multiple earnings" -- is giving some investors pause. "To many investors, that stratospheric earnings multiple in itself is reason to avoid -- or even short -- Netflix stock," the article said.
Still, the SVOD provider is pushing forward with both its international expansion, which it hopes will eventually reap benefits, and its drive to add more original content to its lineup, offsetting some licensing costs.
Sarandos said that Netflix will have 30 original shows and movies available to its subscribers by the end of 2016. That reportedly includes 10 new feature films, 30 children's shows (lining it up against Amazon in this category), 12 documentaries and 10 stand-up comedy specials.
Meantime, a trailer for the upcoming Netflix-Weinstein Company sequel to Crouching Tiger, Hidden Dragon, now titled Sword of Destiny, hit the Internet this week. The movie is slated to premiere simultaneously in IMAX theaters and on Netflix on Feb. 26.
For more:
- see this Fortune article
- and this article
- see this WSJ article
- see this Motley Fool article
- see this Nerdist video
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