Netflix is at a crossroads. Facing unhappy customers, increasing costs for content as the networks play hardball, and all with little money in the bank, could this be the end of Netflix or is there still hope for the online video streaming company?
The End Of Netflix?
Netflix has had a somewhat tumultuous year, as if you didn’t already know. Price hikes, Qwikster, stock collapses, and customer dissatisfaction have all combined to make 2011 a year Reed Hastings and co. will be happy to see the back of.
The question on everyone’s lips now is: Will Netflix stage a recovery or is this its final curtain call? Some are even declaring Netflix dead or near death after its latest move.
Stock Sale, Loss Admission
Netflix has raised $400 million in cash by selling stock and debts. It sold the stock for $74-per-share, shares which it had itself bought back during the first nine months of the year for an average price of $222-per-share. Which any fool can see does not represent a good deal, but Netflix needs to add funds in order to pay for content both at home and abroad.
Worse than that is an admission the company will lose money over the course of 2012, with Business Insider finding the following note tucked away in the stock prospectus:
“As a result of the relatively flat consolidated revenues and previously announced increased investment in our International segment, we expect to incur consolidated net losses for the year ending December 31, 2012.”
That’s not good. But the international expansion (initially to the U.K. and Ireland) is a costly move that should, potentially, pay off in a big way.
Conclusions
There are now serious concerns as to whether Netflix will ever recover from this series of missteps, as it has so eloquently been described as. There are still signs to be hopeful, but they’re lessening and being replaced by more and more bad news.
What is clear is that this recovery will take years rather than months, and that Netflix is going to have to speculate to accumulate. The rest is in the lap of the gods.
[Via Reuters]
