retail news in context, analysis with attitude

by Kevin Coupe

Yesterday’s Eye Opener started this way:

It is just one measurement of value, and not necessarily the most important one.

But here’s a story that grabbed my attention yesterday.

According to Variety, “Netflix surpassed Comcast in market value Wednesday, thanks to a new record high for the video streaming company’s stock price. Netflix’s market cap also came within arm’s-length of Disney, with both companies separated by just a few hundred million dollars.”

Netflix ended yesterday with a market cap of $152.8 billion, compared to Comcast’s $147.15 billion.

Now, this could change, based on the vagaries of the stock market. But it is notable, especially one considers that Netflix is a business that has been built on both a disruptive attitude and disruptive technologies, while Comcast has its roots in a more traditional media construct.


That was yesterday morning. By the end of the day yesterday, Variety was reporting the following:

“For now, Netflix is the world’s most valuable media company, after its stock rallied again Thursday to record highs — pushing the video-streaming leader’s market capitalization past media giant Disney for the first time.

“Shares of Netflix closed up 1.3% for the day, to $349.29 per share. That gives the company a market cap of about $161 billion. Year to date, Netflix shares now have increased 82% in value as of May 24.”

It is reassuring, I think, that Netflix CEO Reed Hastings has a history of being unimpressed by such numbers. The Variety piece says that “the seemingly insatiable investor enthusiasm for Netflix calls to mind CEO Reed Hastings warning five years ago about irrational exuberance amid volatile swings in the company’s stock price.”

But the numbers are worth noting, as I said yesterday, because Netflix is a business that has been built on both a disruptive attitude and disruptive technologies, while Comcast and Disney both have their roots in a more traditional media construct.

Equally important, I think, is the fact that Netflix continues to invest in proprietary content - its version of private label - that differentiates it from competitors ranging from Amazon to HBO to the traditional broadcast networks.

“Netflix is burning through tons of cash as it spends an ever-increasing amount on original content for its global audience — and it expects the business to be free-cash-flow negative for the next few years,” Variety reports. “The company will spend upwards of $8 billion on content in 2018, with 85% of new spending being poured into original programming, according to chief content officer Ted Sarandos. Netflix expects to have around 1,000 original TV shows, movies, specials and other programming on its service by year-end.”

There is no such thing as the unassailable business model.

That’s the Eye-Opener.
KC's View: