Netflix Needs to Prepare for War

In the battle for supremacy in the online video streaming arena, Netflix's (NFLX) most serious wounds have been self-inflicted. The field is thick with competitors, but it isn't playing for blood. It seems as if they are content to sit around and wait for Netflix to fall on its sword. Surprisingly, this tactic actually appears to be working.

Netflix experienced its first self-inflicted wound when Andy Rendich, Netflix chief service and operations officer, announced that it would begin charging separate fees for its DVD and streaming services. The fee restructuring took effect immediately for all new subscribers and on Sept. 1st, 2011, for all current subscribers. The blogosphere blazed with outrage over the 60% price increase. Netflix CEO Reed Hastings managed to rub salt in the wound with his dismissive attitude toward the outcry from subscribers. Hastings' hubris is summed up perfectly in his now infamous quote: "It's something we'll monitor, but Americans are somewhat self-absorbed." Those are words I expect he would like to take back.

The next wound came 17 days after the price hike took effect for current subscribers, as Hastings offered some reflections and explanation for the price hike and announced that the company would be split up into Netflix and Qwickster. Netflix would be the streaming business and Qwickster would be the DVD by mail business. This would take place in a "few weeks" and would require subscribers to manage their DVD and streaming services from separate websites, with separate logins and passwords. Read more...

IMAX: The Bear Case Just Doesn't Add Up!

It is important to read analysis that is contrary to your opinion when doing stock research. So many people have already made up their mind before they begin their research. I see this mistake so often with retail investors. They google a ticker symbol and read the articles that "confirm" their point of view and pat themselves on the back for getting it right without putting in the work. It is a difficult thing to be critical of your own ideas. You don't often hear, "Man, I have this really terrible idea I just have to tell you about." That is why it is so important to seek out the contrary perspective especially when everyone else seems to agree with you.

 This was exactly the case of my bullish stance on IMAX Corp (IMAX). While I was doing my stock research I found article after article that treated a bullish stance on IMAX to be obvious, so much so that the articles rarely included much substance or analysis. I was guilty of this myself. It wasn't until I was blasted in the comment section of another one of my articles that I realized it. I decided it was time to step up my game. I decided that the way to do that was to re-write my first article and take on the biggest IMAX bear I could find. Read more...

Hook em While They're Young

Have you ever tried bringing up the stock market in casual conversation around friends and family? It's an odd experience. You are likely to get a variety of reactions. Some raised eyebrows, some crinkled foreheads, perhaps a tirade against big business or curiosity surrounding the mystery the market represents for most Americans. The average American knows next to nothing about the stock market and views it with a mix of suspicion, derision and awe. Many think of it as that place that rich people make their money. Others think of it as gambling but a lot less fun. Many don't even realize that they are stock owners themselves because they don't truly understand how their pension plans, 401K and IRAs work. I try to raise the collective financial IQ of those around me but I often feel like a door to door evangelist but instead of asking "have you been saved?" I ask "have you saved for retirement?"

Perhaps the lack of education is because our parents depended on company pension plans and social security to take care of them in retirement. They didn't need to know about the stock market so they simply don't have the knowledge to pass on. Unfortunately, the world has changed and company pension plans are nearly extinct and social security is on life support. Our education system reacts to the changing world about as well as the Titanic reacted to that iceberg.   Read more...

Buy American!

Growing up my father always told me to work with my mind instead of my back because my mind will last a whole lot longer. My mother always said that I need to go to college, get a degree and find a job with a big company and if I stay with them for 30 years they will take care of me when I retire. Well, as far as advice goes I am going to give the edge to my father on this one. It is not that my mother was wrong, at least not when she said it, through the late 1980’s and early 1990’s. The world changed and that advice became obsolete. Employers have retired traditional retirement plans. Now we are left to fend for ourselves with 401Ks and what is left of Social Security.

If you have a self-directed 401K or IRA or perhaps you simply have a long investment horizon (5 years +) I have a bit of sage wisdom for you. Buy American! I am a veteran of the US Army and I definitely consider myself a patriot but that is not why I believe in investing in American companies. I believe in investing in companies you know and businesses you understand. You should own companies that you don’t need to subscribe to the Wall Street Journal (great publication by the way) to hear about. You should see their advertisements on the television and in magazines you read. Read more...

Netflix: Their Perfect Blunder?

Eleven months ago Netflix (NFLX) was on the verge of becoming a $300 a share stock, a milestone Apple (AAPL) was striving for at that time. While Apple reached its peak at nearly $630 a share and is still valued in the upper $500 range, Netflix has plummeted to $62 a share.  A lot can happen in eleven months. What is so tragic about Netflix’s fall from grace is that it was entirely their doing. If an analyst wrote a script on how to drive Netflix customers away, I expect it would look exactly like what happened from July to September in 2011.  

Netflix and Coinstar’s (CSTR) Redbox had already sent Blockbuster into Bankruptcy proceedings and Netflix was still light years ahead of every would-be competitor in the streaming video market both in technology and content. Customer satisfaction was sky high, subscriber numbers were over 23 million and climbing and then it happened. In July of 2011, Reed Hastings, CEO of Netflix, announced that as of September 1^st, 2011 Netflix was going split the streaming and DVD delivery services and charge a separate fee for each that equated to a 60% price hike. Public outrage erupted immediately. The Facebook (FB) post in which Netflix announced the price change received over 28,000 comments many of which were customers threatening to cancel their subscriptions. Read more...

IMAX: The Big Picture

Avatar, the overwhelmingly successful James Cameron film, didn't change anything for IMAX Corp (IMAX). It just cast a light on the potential that none of us understood the week before it opened. The recipe was there the whole time but nobody was biting until James Cameron put out a spread that was irresistible. Avatar showcased everything that is great about the IMAX experience; the larger than life screens, the vivid high definition effects, the incredible sound systems, the next generation 3D technology and the fat premium attached to the ticket sales for the IMAX format and 3D. It was not only incredible for the consumer but attractive for the movie houses as well. Since Avatar there has been a string of blockbusters that have shattered box office records with a big boost from IMAX Corp's premium formats. The most obvious successes have been Harry Potter and the Deathly Hallows 2, Transformers: Rise of the Fallen, Hunger Games and The Avengers.

A few films grossing over a billion dollars isn't the whole story though. In fact, it is just a thumbnail of a much larger picture. In 2008, there were just 210 commercial IMAX multiplexes. Fast forward to the middle of 2012 and there are over 580 multiplexes, over 300 of which are the joint-ventures in which IMAX takes a share of the box office. Read more.....