Friday, December 23, 2011

Diary: NFLX

I don't follow US shares, but I kinda have this fascination with NFLX (Netflix), on account of Tilson's interest in it. Tilson made a bad shorting bet against it last year, but then decided to go long.

Jacaob Wolinksy reported that Tilson established a long position in NFLX on 26-Oct-2011. Tilson had good timing, and it seems that he must have gotten in at a price of around 80p - maybe a little bit less (77p min., say), maybe a little more (84p max, say).

My worry with Tilson's purchase is that on a PER of 16.8, it's not super-cheap. It has no barriers to entries. Content suppliers can simply up their prices if they see a successful model, and competitors like Google, Youtube, Microsoft and Apple might be tempted to enter the fray on streaming content. LoveFilm has been buying up DVDs-by-post operators. So NFLX faces competition on all its fronts.

Yesterday, for instance, LoveFilm announced signing a Sony deal for UK streaming. It will have premium TV shows and Hollywood movies on its service. “The number of recent high-profile deals we have secured means we are able to keep expanding the service.”
 Lovefilm who boast 1.8 million subscribers, recently launched a streaming-only service priced at £4.99 monthly, which will be a direct competitor to the streaming only Netflix product.
 Investing genius that he is, I think Tilson got this one wrong. I'll keep tabs on this one.

1 comment:

Monevator said...

That Lovefilm deal better be directly interesting to Tilson, too, as well as providing context -- Netflix is set to spend a lot of money trying to enter the UK market next year!