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Analyst Laments Netflix's 'Broken' Biz Model

Here's a look at what's turning cable's crank today.

  • Netflix Inc. (Nasdaq: NFLX)'s business model "was broken" when the company decided to raise prices for customers who subscribed to both its streaming and DVD rental offerings, Wedbush Securities analyst Michael Pachter concluded as he cut Netflix shares to "Underperform" with a US$45 price target. Pachter, who believes Netflix will now need to spend more on marketing to staunch the flow of fleeing customers, estimates that Netflix will spend $800 million on streaming content this year, and $1.7 billion in 2012. Netflix shares, which have been in a freefall amid stumbles in the second half of 2011, closed Wednesday at $64.43. (See Netflix Warns of 2012 Loss and How Far Will Netflix Fall? )

  • Italian broadcaster Mediaset S.p.A. plans to offer video-on-demand (VoD) content on Microsoft Corp. (Nasdaq: MSFT)'s Xbox 360 console in time for Christmas. Mediaset's new Premium Play service offers more than 2,000 VoD titles. In the U.S., Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Verizon Communications Inc. (NYSE: VZ) will soon be piping VoD shows to the Microsoft box, with Verizon adding more than two dozen live channels from the FiOS TV lineup. (See Verizon Takes FiOS TV to the Xbox.)

  • Cablevision Systems Corp. (NYSE: CVC) says it fought off a Distributed Denial of Service (DDoS) attack on its high-speed network on Tuesday evening that knocked out service on portions of the network for about six hours. The MSO managed to resolve the problem, but "is continuing to investigate the cause of the attack."

  • Comcast "adamantly denies the allegations" and says it will "vigorously defend itself in court" following claims that the MSO discriminated against black workers in Chicago, who say they were subjected to working in a facility infested with bugs and rodents and forced to install defective boxes in South Side-area homes.

  • HBO didn't endear itself to the cord-cutting crowd Wednesday when an executive confirmed that the premium programmer won't turn its successful HBO Go TV Everywhere service into a pure over-the-top service. HBO Co-President Eric Kessler, speaking at a VideoNuze event in New York City, said the company will instead continue to couple HBO Go to subscription services sold through MSOs and other pay-TV partners.

    — Jeff Baumgartner, Site Editor, Light Reading Cable



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