Investors are skeptical Netflix (NASDAQ:NFLX) can restart its engine. And, Netflix (NASDAQ:NFLX) wants its customers to believe it will have the videos they want to watch despite losing some amenities.
The shareholder letter Reed Hastings published yesterday explains the company’s content strategy. When Netflix (NASDAQ:NFLX) was a DVD company, it could afford to offer just about every movie or TV show ever made. Now it’s a streaming video company. That means Netflix (NASDAQ:NFLX) has to pick and choose what movies to offer and what content to offer. In order to do this Hastings must offer what cannot be obtained through other companies. Basically, he is trying to build an $8-a-month version of HBO — a network you pay for in addition to your regular TV package, not one that replaces it.
“But Hastings still has some 25 million subscribers, which means he still has plenty of money to keep betting — during his earnings call yesterday, he said the company’s content bill had shot up to $3.3 billion, up from $1.2 billion just a year ago. That’s not enough to pay for an unlimited supply of videos. But it should be enough to build a decent pay TV channel,” according to All Things Digital.
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