Netflix’s perilous future

December 23, 2010 § Leave a comment

Interesting banter between Reed Hastings, CEO of Netflix, and his short-seller “friend”. It could be unwise to second-guess Netflix, but much of Hastings’ defense seems to be that the threats noted by Whitney are longer term than 2011. Yet, if 70% of an equity’s value is captured by the NPV of its cash flow beyond foreseeable years (the “terminal value”), there could be a material impact on Netflix’s stock if any of the threats gain traction in 2011. So here’s what I’d really like to know now … how successful is the $7.99 streaming plan, and to what degree are DVD-plan subs truly shifting usage to streaming?

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