How Much Are Netflix Original Programs Worth?

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July 22 (Bloomberg) -- Bloomberg Industries Paul Sweeney reports on Netflix's quest for more subscribers with Jon Erlichman on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Let's all talk about this here.

Tell me what you saw in this quarter and maybe what you didn't see.

When you think about netflix right now, it really is a subscriber-driven story much more than the reported revenues and profits that this company generates.

Investors are looking for this company to grow.

Subscribers quickly, domesticcally and internationally.

Investors are sensing this is a land grab for online video subscribers.

Netflix are first to market.

They have a brand in the marketplace.

People are focusing on subscriber numbers.

Unfortunately for netflix, they came in a little bit late in terms of net ads for the quarter up 630,000. that kind of really causes investors to step back.

This stock has been absolutely priced to perfection.

Any little hiccup, investors take a little money off the table.

Jon, i'm wanting, i don't care about stocks, but i do care about the business.

Is that where the battle is, online subscribers and is there a sense that something has changed here?

Last quarter they had many more subscribers than this time around.

Yeah.

You can get into the regular quarterly stuff like the seasonally slower quarter.

This was also a quarter when they had another high profile original series that they introduced, "arrested development"." last quarter they had introduced the high profile original that just got a lot of emmy nominations "house of cards." they quickly said, look at that, that helped us to bump up our subscriber numbers in a big way.

On the spending side, days like this are a reminder that they can spin it two ways.

They can say it's great, the originals are terrific for bringing in the sub describers if the numbers are higher than what wall street think will be.

The originals are a small percentage of the whole content spend right now.

At the end of the day, they don't want to convince people who mike like "house of cards" or "arrested development" to use the service, they want to keep you there, lock you in, get those people who are not paying the service, on the monthly freebies and stay for the term.

In terms of subscribers, is this a situation where you think they're going to have to spend a lot of money on content so that viewers think that there it is going to be there for them in the future?

The service is moving from a focus on movies to original tv-like content, is that what is going to matter to add subscribers?

I absolutely think that is where the battle is being fought.

The netflix of the world are taking a page out of the book that hbo wrote and focusing on originally produce and high quality content.

Think about "the sopranos." we have seen that not just in hbo, but also at showtime and a.m.c. network with "mad men." the streaming video on demand operators such as netflix, they recognize to compete in the marketplace for subscribers, it has to be unique programming.

That's where "house of cards" and "arrested development" comes in and making big bets to get subscribers.

Netflix hasn't been crystal clear when they acquire content, the expense for it, how much is sitting hidden away on the balance sheet and rolled ofover time, based on use or content, is that ok to keep that secret?

They clarified that this quarter.

They talk how they amortize their programming.

Put a number on it, $3 billion of program assets on their balance sheet, significant investment obviously.

They're amortizing it on the four-year straight-line basis.

They mention in their later today, actually, they're based on usage trends that they're seeing.

They may amortize a little bit more in the early part of the term than in the later part.

They might, i think they're trying to really match the usage versus how they amortize

This text has been automatically generated. It may not be 100% accurate.

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