Courtesy of Benzinga.
Is Netflix (NASDAQ: NFLX) on the verge of becoming the next AOL (NYSE: AOL)?
Rich Tullo, Director of Research at Albert Fried and Company, is seriously concerned about the future of Netflix’s business model.
He told Benzinga that the streaming video giant should acquire AMC (NASDAQ: AMCX) and open its doors to new revenue opportunities.
“The one thing I do know is that, somehow, the content guys are gonna want to sell direct to consumers because they don’t want to lose margin to cable companies or some other party,” said Tullo. “If I’m watching AMC and there’s a good aggregator in place, it’s better for AMC to be on the aggregator than to try and make me log into AMC or make an AMC app. You want to have an aggregator of all that, which is what linear TV is — it’s an aggregator of over-the-air content and satellite content, essentially.”
Tullo believes that this will lead to new forms of aggregation.
“And when there’s new forms of aggregation, Netflix does become something like an AOL,” he said. “It really does. Netflix probably has 25 percent of the content universe. But I have 100 percent exposure of the content universe. Therefore the user is going to want 100 percent exposure for free versus $7.99 for 25 percent.”
When asked if Netflix’s days are numbered, Tullo replied, “We think so. That’s why we have a $68 Price Target.”
Netflix currently trades at more than $178 per share.
The Other Netflix
Hulu — the TV-based alternative to Netflix — is reportedly searching for a buyer. While a number of companies have been tossed around as potential suitors, Tullo thinks that News Corporation’s Fox (NASDAQ: NWSA) is the most interested party.
“I think Fox is the most engaged,” he said. “Disney (NYSE: DIS) seems to be the least engaged. Comcast (NASDAQ: CMCSA) is hard to gauge because of the NBCUniversal deal.”
The problem for Hulu is that content makers may ultimately wish to cut out the middleman and sell directly to consumers. This is where Apple (NASDAQ: AAPL) and/or Intel (NASDAQ: INTC) could benefit — if they are successful in their mission to revolutionize TV.
“Hulu is a great execution,” said Tullo. “The problem is that it was founded on an ad-based model, and they [content makers] found that the execution was so good that it could be a cannibal to their bread-and-butter business.”
Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ
