Netflix, the company killing traditional TV, last week made deals with the nation’s largest cable operator and one of the broadcast networks. Wall Street wasn’t wowed. Two analysts wrote reports saying Netflix’s explosive growth was slowing and downgraded Netflix’s stock.
Going from over-the-top to into-the-box, Netflix and Comcast confirmed on July 5 they had reached an agreement that Netflix would be available to Xfinity subscribers who have set-top boxes running the X1 operating system. The deal should be a big deal in getting older viewers who watch a lot of TV to sign up. So even though Netflix appears to be beating TV networks, it was joining them via Comcast—which presumably will take part of the fees its subscribers pay to stream House of Cards, etc.
The next day, Netflix and The CW announced that all episodes of all CW programs would stream on Netflix exclusively eight days after the end of each series’ season, cutting out Hulu, which had been streaming episodes in season. The deal gives Netflix fresh broadcast programming at a time when Fox, Disney and NBC are steering more shows to Hulu, which they coown. The deal, reportedly worth billions was also important for The CW: the original 2011 deal was a key to keeping the struggling weblet afloat.
The news didn’t help Netflix on Wall Street, skittish since the company indicated during its first quarter earnings call that subscriber growth for the rest of the year would be slower than expected.
Two analysts doubled down on the slow-growth script. Laura Martin of Needham & Co. on July 5 warned investors that England’s vote to leave the European Union would hurt the economy there, leading to increased churn and slower growth of Netflix in those markets. The EU was also making new rules requiring Netflix to stream more content made on the continent, a requirement that would hike costs, she noted. Martin cut Netflix from buy to hold.
John Janedis of Jeffries Group the next day lowered Netflix from hold to underperform because more rivals will be jumping into the stream, resulting in flatter than expected domestic growth.
“Given the number of new SVOD/OTT products that have launched in the past year, and investment made by existing platforms (Hulu, Amazon), we believe the landscape will be much more competitive,” Janedis wrote. “Longer term, we think the media conglomerates understand the need to come to market with an integrated SVOD/OTT offering.”
