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Netflix Cornering The Content Market
Netflix reported blow-out subscriber numbers for the quarter, with 5.3 million new subscriber additions. 4.45 million came from international, while 850,000 came from domestic. The company noted it plans to spend another $7-8 billion on content in 2018 and has $17 billion in content commitments over the next several years. It feels almost like Netflix is going out and trying to recreate the last 80 years of Disney ($DIS) content in a fraction of the time. In 2016 Disney spent $6.5 billion on TV program licenses and rights, and another $4.6 billion on Film and TV production. Netflix is certainly spending a lot.
However, there could be a unique method to this madness. Netflix is exceptionally aggressive in spending money now for content and building a library, which in theory can exist till the end of time. Additionally, with only so much content created in a year, and just so many stories developed, it is almost as though Netflix is trying to corner the market on content. Buy up as much content as you can now, get all the rights to the shows, and build the audience loyalty. Additionally, if Netflix owns all the “best” content, then why tune into Amazon or Hulu?
With less quality content available, it could, in theory, drive up the price of future content, and talent. It makes the expenses higher for your competitors while buying inferior content, with inferior talent. Sounds crazy? Yes. But is all that different from what Amazon does, just in reverse? Amazon ($AMZN) puts products on their website, drives prices lower, willing to lose money for long periods of time, to put its competition out of business. Look the retail space in 2017. In this case, Netflix buys all the content, drives up the price for future content, making it too expensive for some of its peers to compete.
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Biotechs
Biotechs, as measured by the Nasdaq Biotech ETF ($IBB) were strong to start the day, and then fell after some comments surrounding drug prices pressured the group. We about the action in the biotechs in the member area, and some of the companies that need to be watched in the group. In the mean time, the ETF seems to be finding support around the $336 level.
Nvidia
Nvidia shares have entirely broken out at this point, a move to $200, seems like a given. The company likely has a clear path from now until it reports results on November 10, to continue to rise. The same thing occurred going into quarterly results back in August. Consensus estimates have revenue growing by nearly 18 percent to $2.359 billion and EPS climbing by 14 percent to $1.07 for the November report.
AMD
AMD ($AMD) is set to report results on October 20, and analysts are looking for revenue to rise by 15 percent to $1.505 billion, and EPS to have grown by nearly 147 percent to $0.08. But more interesting is a potential breakout the chart is signaling. The chart below shows the stock is about 62 percent of the way through a rising-triangle formation, a bullish pattern. Perhaps results trigger a breakout?
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Michael Kramer and the clients of Mott Capital own shares of NFLX and
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Thematic Growth Investment Portfolio – IB Asset Management
Mott Capital Management uses a long-term thematic growth approach to investing in equities. We search for investments that both reflect and help to shape…
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
Tags: Netflix, Nvidia, AMD, Biotech
