What's Next for Netflix?

Netflix shares have gained a whopping 185 percent over the past 12 months, but the stock is off from its all-time high it hit recently, now facing analyst downgrades and a slew of changes to the media landscape. GoogleTV is launching this fall, there's talk of Apple re-launching its Apple TV set top box, and even postage rates are inching higher. As we wait to see how GoogleTV shakes up the business, what's really happening with Netflix's stock?

On Wednesday Morgan Keegan downgraded Netflix to "Underperform" from "Outperform," with a price target of $100 -- right now it's around $130. Analyst Justin Patterson was reacting to Netflix's deal to stream movies from Viacom's Paramount, MGM, and Lionsgate through Epix. Reports that the deal cost Netflix some $1 billion over five years raised red flags for Patterson, who says that this sets a baseline for future content negotiations. A couple industry insiders have told me Netflix couldn't have possibly paid that much, but even if Netflix paid half that much, it's still a huge chunk of change every year.

Netflix doesn't *need* to replace premium cable, but its Epix deal indicated that it would like to move in that direction. The problem here may be that HBO won't play ball with Netflix and offer its shows via Netflix streaming. Without HBO and its online streaming rights to both series like Entourage and premium studio films, Netflix won't be able to replace premium cable.

Time Warner CEO Jeff Bewkes is a huge believer in the TV Everywhere model, and has been rolling out "HBO GO," which allows cable subscribers access HBO online. Will HBO GO keep customers paying their cable bills? Will TV Everywhere compete with Netflix? Will consumers order more video on demand directly from cable companies like Comcast? Are we moving to a model of content companies delivering their own shows directly to consumers without a middle man like Netflix or Hulu?

And what about Hulu, which is reportedly prepping for a $2 billion IPO -- should Netflix be threatened by Hulu? Probably not. Hulu's subscription service, Hulu Plus, costs $1 more than access to Netflix streaming. While Hulu's content is limited to its three parent companies -- Disney, News Corp, and CNBC's parent, NBC Universal -- Netflix has been growing its content library. The question is whether content creators will try to work around Netflix AND Hulu, and how quickly that could steal share from both players.

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