Shares of Netflix (NASDAQ:NFLX) took a hit Monday and Tuesday after the Macquarie Group gave the company an “underperform” rating, and research analyst Tim Nollen adjusted the price target to $50. “In keeping with our positive thesis on media names like Time Warner and CBS, we believe content owners rule the roost; Netflix is a price taker in an increasingly competitive market,” he wrote.
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Netflix has claimed for a while that its content is so diverse that it can live without any one given program, or even set of programs. Regardless of whether it is true or not, Netflix uses this idea to try and reduce the leverage of content providers at negotiations.
Right now, Netflix and A+E Networks, which is owned by Hearst and Disney (NYSE:DIS), are grappling over licenses for some popular cable series. “Storage Wars,” “Ice Road Truckers,” “Pawn Stars,” and “Hoarders,” among others, are on the line. Netflix wants to drop about 800 hours of content that does not attract enough viewers to justify the licensing fees, and keep about 250 hours of other material. A+E might not license the remaining material because Netflix is insisting on exclusive rights to the programming. It’s unclear who has more power in this situation.
Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and Amazon (NASDAQ:AMZN) are all quickly becoming Netflix competitors as they try to attract users to their video streaming services. Content producers like Time Warner (NYSE:TWX) and CBS (NYSE:CBS), along with A+E, may find themselves with more sway in negotiations as competition for their content increases.
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