Netflix rides original content to continued highs

15th May 2013 No Comments

stocks upIt’s hard to believe that not all that long ago, Netflix looked to be in serious trouble. Their Facebook account was riddled with nonstop complaints from whiny, entitled customers, incensed that they couldn’t have unlimited DVD/Blu-ray rentals and unlimited streaming content for $7.99 a month, and alternatively mad that their selection of streaming content was being limited, even though they didn’t want to pay more to allow Netflix to afford more content.

Netflix was being squeezed by demanding consumers and rising costs from content providers, and many thought that the end was near. Netflix didn’t, though, and saw value in adopting the kind of strategy that has made HBO indispensable to many TV viewers- when content gets too costly or too easy for consumers to get elsewhere, create your own content.

It has largely worked, first with “Lilyhammer”, then “House of Cards”, followed by the new “Hemlock Grove”. The most recent surge, taking Netflix up 4% to a new 52-week high, comes on the precipice of the return of “Arrested Development”, a resurrected cult favorite show that will take its fourth season to Netflix.

The show counters skeptics who believe that Netflix will just attract parasites who sign up for a trial, quickly binge-watch the series they are interested in, and then disappear. With show after show coming in quick succession, Netflix isn’t allowing its customers to lose interest in such a fashion. Plus, the company says that very few trial members are adopting such a “watch and cancel” strategy thus far.

Who would have expected such a resurgence? The recent surge means that Netflix stock has soared to 150% of its January, 2013 value by now, which means it has been easily the best performer in the S&P 500 this year. It’s quite a comeback story, and one which bullish investors are expecting to continue.

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