If you look at the growth rates of both companies, they are both stagnant but when you compare earnings projections, Netflix is the clear winner. Sure they lost about 55,000 subscribers during Blockbuster’s media blitz earlier in the year with “Total Access”, but where is Blockbuster now? Seen any ads for Total Access lately? No you haven’t because they have all but eliminated their advertising budget.
Analysts predict a loss of .87 cents per share of Blockbuster compared to an estimated gain of .15 cents a share for Netflix.
Besides these nitty gritty details, a savvy investor would realize that Netflix’s operating margins are much smaller than Blockbuster because they don’t have the burden of physical stores and customers. After announcing their much anticipated instant viewing service which allows subscribers to watch movies online from among the 75,000 titles currently in the Netflix library, the mass exodus that seemed to be plaguing them faded.
Instant viewing is so far a success. Subscribers get a certain number of hours based on their subscription price. Essentially one gets 1 hour viewing time for each dollar of subscription. Thus the $17.99/ 3 DVD plan allows a customer 18 hours viewing time online.
Besides offering the online viewing service, Netflix has partnered with Showtime to offer the pilot episode of “Californication” starring David Duchovney as well as having a celebration of classic movies hosted by Dana Carvey and offered for free to subscribers just last week.
Netflix continues to innovate and expand it its field and is quickly leaving Blockbuster in the dust. On stock price alone one can expect a few dollars out of Netflix over the next few months whereas Blockbuster may net you only a few cents per share going into the new year.
Netflix announces Q3 earnings October 22, 2007. Expectations are .15 cents a share. I think Netflix is going to have an upside surprise here at near .20 cents a share.
