Netflix and the Battle Over Original Content

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Oct. 21 (Bloomberg) -- S&P Capital's Tuna Amobi, Swan Wealth Advisors' mark Sebastian and Bloomberg's Jon Erlichman examine Netflix's business model. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Why so much focus on how many streaming subscribers netflix has?

Such a huge part of the business.

Every additional person you can get to pay for a netflix subscription is going to give you the revenue that has really been powering the stock.

Revenue expected to be in the neighborhood of 1.1 billion this quarter.

This is not a cheap business to be running.

They have to pay a lot of money for the content and expand it globally and they just did an expansion in the netherlands.

If you can offset that by getting more subscribers, that helps your business.

Certainly people expecting this company will continue to add on subscribers by the boatload so the outlook just as important.

Just as important as surpassing hbo.

Content is why they have been able to surpass hbo.

The content is increasingly more expensive the more successful it is because in many of the cases they do not own it.

How do they diffuse the cost?

I think they are very pragmatic and how they are managing the content cost.

They are starting to spread that into the original programming.

They have been disciplined to walk away from dear's -- deals.

You saw them walk away.

They are trying to leverage the exclusivity, and at the same time to grow the library offerings, not just on the television side that the movie side.

While there are still concerns, i think they have done a pretty good job to contain some of the concerns that we have.

Talk to me about the opportunity they have an cable by getting into the boxes?

The story for so long is netflix is the cable killer.

That so many people could cut the cord because it has become a significant part of the story.

I think pay tv customers are looking for any reason to keep you inside the world.

Offering this would be a no- brainer.

This comes down to what the revenue-sharing agreement will be.

Is netflix willing to give up the $7.99 per month and give it to the cable operators?

You are right.

Could they played tough and continue to chart $7.79? -- charge seven dollars 99 go like that is an interesting question.

Just as important is the issue of who controls the customer relationship.

One thing i found interesting in the partnership with virgin media and tivo if they are maintaining the relationship and that the tick killer case.

If you think about the potential upside from the data of the customer, those things are very attractive to a whole lot of parties.

I was very sad -- surprised.

The cable operators would allow that.

The revenues with i really have my doubts because you could argue they have a lot more leverage in this particular case in the u.s. compared to in the u.k.. adding some actionable information with mark joining us from chicago.

Give us an idea of what you are doing ahead of the important earnings report.

Netflix we have a technical term, cuckoo bananas.

The stock moves around everywhere.

Down 70% over year and then up to reenter percent.

This is a crazy stock.

The last earnings did not move that much.

They are pricing up the moves at around 45-50 bucks.

A lot of movement.

I think this might be a quarter where we see a little bit of a holding pattern.

I would want to put this in a hedged position.

The trade i am looking at us in october 25 weekly calendar at one dollar $.40. if it blows up, i am out the $1.40 i paid.

I think i will double or triple my money.

We will have their earnings for

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

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