On the heels of Comcast’s announcementthat it will launch a video-streaming service, one analyst thinks Netflix could face a “difficult future” from additional rivals unless it scales back its spending.
“Well, the issue for Netflix is their spend,” said Barton Crockett, an Internet analyst with Lazard Capital Markets. “They’re spending so much money that you have to have most Americans with broadband subscribing to Netflix for the stock to work.”
He told CNBC that unless Netflix is able to cut its spending, it will experience difficulty because the company’s ability to have most Americans subscribe to its service is limited by rivals, who will enter the streaming business in the near future.
Crockett called it “inevitable” that all the cable and satellite TV companies will eventually offer streaming and have an advantage over Netflix because the service can be bundled into customers’ standard video subscriptions.
“I think overtime it will be difficult for Netflix to compete with,” he said. “I think it’s a headwind for the stock.”
Comcast’s decision follows an announcement two weeks ago that Verizon Communications andCoinstarRedbox unit have formed a joint venture to sell video services.
Although he said a Netflix stock retreat to around $70 is “not totally out of line,” the company should post better growth — at least for the short term.
“I think it is a business that is going to have better growth for the next couple of quarters than it has had for the last couple, but looking out over the next couple of years, it’s hard to see how that growth can continue with more options,” he said.
Comcast is the majority owner of NBC Universal, the parent of CNBC and CNBC.com.
Additional News: Comcast Launching Netflix Rival
Additional Views: Is Comcast’s Video Service Bad News for Netflix?
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Disclosures:
Lazard Capital Markets makes a market in Netflix securities.
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Follow Katie Little on Twitter @katie_little.
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