Just a few hours after Tuesday's announcement about that multiyear deal, Comcast unveiled plans to undercut Netflix with a less expensive version of a service that will stream old TV series and movies to devices with high-speed Internet connections.
The Comcast service, called Xfinity Streampix, will be available this week to the company's subscribers. It will cost $5 per month, below Netflix's $8 monthly price for its Internet-streaming service. Some Comcast customers who pay for multiple services, including high-speed Internet access and phone, will get Streampix at no additional cost.
Comcast owns the last mile. This sort of competition was inevitable; either Netflix would get forced to pay for their transport or others who actually owned it would undercut their model. Either way has the same impact.
This is bad news and if you bought into Netflix coming off that bottom, take the money while you still have a profit in the trade.
IMHO Netflix is a potential zero; the issue is the content costs they've commited to .vs. revenue. If they get on the wrong side of that they're finished, and it would be quite easy to have it happen. I've written on the broken nature of the firm's business model for a while and now it appears to be turning into realized risk.
Disclosure: No position as of this point but strongly considering a short -- PUTs are expensive and this stock has a history of going onto the "hard to borrow" list along with having a material percentage of the float out short, so be careful.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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