Ed’s Daily Notes for April 22nd   2 comments

Bloomberg: Netflix to Raise Prices as Earnings Jump Spurs Shares

Watching “House of Cards” on Netflix is about to get more expensive, and investors are cheering.

The company that popularized binge-watching said today it plans to charge new customers $1 to $2 a month more for its online video service, starting later this quarter. Netflix Inc. also reported first-quarter profit and subscriber growth that beat analysts’ forecasts. The shares soared.

The price increase reflects growing confidence that original shows like the political thriller “House of Cards” and exclusive movies will continue to attract new subscribers, even with soccer’s World Cup starting in mid-June, a distraction the company said will temporarily slow user growth. Netflix currently offers unlimited Web viewing for $7.99 a month.

“The earnings leverage of even just a dollar is pretty substantial,” said Daniel Ernst, an analyst at Hudson Square Research in New York who recommends buying the stock. “For what Netflix provides, it’s an incredible value for consumers.”

I have to agree with Mr. Ernst. Since I have “cut the cable”, Netflix is all I watch on tv, and there is plenty there for me to watch, especially with as little time as I spend watching tv. I would easily pay $1 or $2 more each month for the service.

As for the stock, it is still overpriced. As much as I like the company, even a good earnings report isn’t enough to make NFLX cheap.

Washington Free Beacon: Comcast Merger Could Dominate Market for Local Political Advertising

Here is an aspect of the Comcast-Time Warner merger which I was unaware of:

Comcast—the cable television and Internet service giant with extensive ties to the Democratic party—could dominate the market for local political advertising if the company’s proposed $45 billion merger with Time Warner Cable (TWC) is approved, according to industry sources.

…Comcast sought to assuage competitive concerns about the deal by announcing in February that it would shed about 3 million subscribers, bringing its combined customer base with TWC to 30 million. However, sources say the 30 million figure does not reflect the company’s growing involvement in the local advertising market.

Other cable and satellite providers such as Verizon and DISH have outsourced their ad sales to Comcast and TWC. The combined companies could reach as many as 50 million households with ads sold as a result of these “rep deals.”

Comcast, like other cable companies, owns two minutes of advertising per hour on every network that they contract with. These ads are seen at the local level. The companies use some of that time to advertise their own wares and sell the rest to national, regional, and local advertisers.

Following the merger, Comcast would own 80 percent of the cooperative through which national advertisers purchase airtime at the local level, 54 percent of the cooperatives though which regional advertisers purchase this airtime, and 69 percent of the market through which local advertisers purchase airtime. Locally owned businesses fear that this consolidation will give greater power to regional and national businesses.

Small businessman Roy Hunter, owner of Sarasota Bay Real Estate in Florida, told the Wall Street Journal earlier this month that he was “held for ransom” after Comcast signed a deal with Verizon to conduct its ad sales in the area. Hunter said his business was priced out of the ad market in Sarasota County.

Politicians consider these two minute chunks particularly valuable because they can “geo-target” voters down to the county or congressional district. According to an executive in the cable advertising industry who spoke with the Washington Free Beacon on condition of anonymity, Comcast’s cornering of the advertising market has broad implications for political campaigns, which could be priced out of the local market or forced to purchase time for a larger region thus diluting their ability to geo-target.
“Given that Comcast owns some control of each aspect—national, regional, and local—they could actually grant favors to particular political candidates,” the executive said.

For example, Comcast-TWC could cut deals on ad rates for some favored candidates. Other campaigns could be charged more to buy ads covering broader geographic areas, eliminating the benefits of geo-targeting.

The situation is “potentially rife with abuse” because of the relatively unregulated nature of the local advertising industry and the political leanings of Comcast, the executive said.

Comcast’s employees, their family members, and the company’s political action committee have donated more than $33 million to political campaigns since 1989, with roughly $18 million of that going to Democrats. Comcast Chairman and CEO Brian Roberts and Executive Vice President David Cohen also have close ties to the Obama administration. They raised millions for President Barack Obama’s campaigns.

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Posted April 22, 2014 by edmcgon in Earnings Season, News, Politics, Stocks

2 responses to “Ed’s Daily Notes for April 22nd

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  1. On Comcast: So the dirty capitalist who charge too much for service may be socialist in capitalistic clothing supporting the Democrat Party?

    • As highly regulated as the cable industry is, they know which side their bread is buttered on. If the greedy capitalists (GOP) won’t let you get away with murder, why not play ball with the crooks (the Democrats)?

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