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How Much Of Netflix's Value Is Tied To Streaming?

How Much Of Netflix's Value Is Tied To Streaming?
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With Netflix, Inc. (NASDAQ: NFLX) shares up a whopping 81 percent year-to-date, it's obvious that the company's original business model of sending DVDs through the U.S. Postal Service is long dead.

A bare 9.5 percent of Netflix' annual revenue of $6.77 billion derives from DVD subscriptions, according the financial website Trefis.

About 60 percent of revenue derives from domestic streaming subscriptions, followed by 31 percent from international streaming.

Most of Netflix' value "hinges on its U.S. Streaming services," where the company has a margin of about 30 percent and 39 million subscribers, Trefis said.

Related Link: Why Spotify's New Features Pose A Threat To Apple, But Not To Netflix

Netflix has additional subscribers in about 50 countries, and although the international market presents a huge potential, "it also presents obstacles," according to Trefis.

Low broadband penetration and speeds, local competition and content licensing complications, could present risks to Netflix' expected international growth rate, Trefis said.

Netflix is also facing a growing phalanx of competitors, both foreign and domestic, that could threaten its future.

Along with, Inc. (NASDAQ: AMZN) and Hulu, Dish Network Corp. (NASDAQ: DISH)'s Blockbuster brand and Comcast Corporation (NASDAQ: CMCSA) also compete with Netflix.

Time Warner Cable Inc. (NYSE: TWC)'s HBO plans to launch a stand-alone subscription service in 2015 as does Sony Corp. (NYSE: SNE).

Apple Inc. (NASDAQ: AAPL) and Google Inc (NASDAQ: GOOGL) might just get thrown into the mix.

The competition not only puts pressure on Netflix's subscriber growth, but also increase content costs due to bidding by competitors, Trefis noted.

Posted-In: Hulu TrefisAnalyst Color Tech Best of Benzinga


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