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Goldman Issues Netflix (PT: $200) Update: Sees Facebook As A "Credible Threat"

Tyler Durden's picture




 

Following the earlier news that Facebook is now entering the virtually no barriers to entry market of content streaming, Goldman has just released a note that will make even more of the longs very to quite very nervous.

From Goldman's Ingrid Chung, "Facebook could some day become a credible threat to Netflix"

News

Warner Bros. announced this morning that it will begin testing an offering of selected movies for purchase or rental through Warner Bros’ Facebook movie pages. Consumers can use Facebook Credits to buy or rent titles within the Facebook platform. Fans who “like” “The Dark Knight” can rent the title for 30 Facebook Credits or $3. Additional Warner Bros. titles will be available through this test over the coming months.

Analysis

We believe that on a short term basis, this is not an immediate threat to Netflix as Facebook’s is currently only a pay-per-view platform which is more of a threat to other forms of VOD (such as iTunes or Amazon), lacks content, does not have wide distribution across devices that connect to the living room TV, has few people on the payments platform, and does not have an incumbent business that is under threat from increasing online video viewership.

However, on a longer-term basis, we think that Facebook could become a credible threat as its video business evolves for three reasons: (1) Facebook has more than 500 mn active users, 50% of which log on to Facebook in any given day, according to its website, which compares with Netflix’s 20 mn subscribers; (2) We believe that the “wisdom of friends” could be a bigger driver of movie viewership than the “wisdom of crowds”; and (3) We believe that many of the issues outlined above could be fixed over time, including the gap to the living room TV.

Implications

Facebook’s foray into pay-per-view does not impact our Netflix estimates. However, Facebook represents a new potential entrant that few in the investment community were concerned with prior to this announcement, so we believe it does indeed represent an incremental negative for Netflix shares. No change to our rating, estimates, or price target.

 

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Tue, 03/08/2011 - 13:52 | 1030143 gwar5
gwar5's picture

I wondered how facebook was going to make serious coin. Twitter next.

Tue, 03/08/2011 - 14:06 | 1030206 financeguru500
financeguru500's picture

This is complete bullshit. Facebook doesn't stand a chance against netflix. They are offering $3 online rentals. Sorry that isn't even a good deal. Why pay $3 when you can rent from redbox for $1.

Add to that the fact that Netflix has FREE streaming of online movies. If netflix decided to make premium online movie rentals, I bet they could do it at $1 to compete with redbox.

I'm guessing there are alterior motives to this announcement by Goldman. Could they already be invested into Facebook to reap the rewards when people jump ship from Netflix over to facebook when FB becomes publicly traded. Go to hell GS and take your crappy social network with you.

Tue, 03/08/2011 - 14:42 | 1030321 BorisTheBlade
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This is complete bullshit. Facebook doesn't stand a chance against netflix. They are offering $3 online rentals. Sorry that isn't even a good deal. Why pay $3 when you can rent from redbox for $1.

It's just a beginning, once Facebook connects more studios and content providers to its online streaming services, they will definitely have a stronger bargaining power to drive the prices down. They do have one big hammer in their hands, and it's their 600 mln people user base, one click away from purchase - no subscription needed, just put the credit card details.  FB can change this market in quite a short period of time, I'd give them one year to struck some good deals with studios, develop additional functionality to lure more lemmings to buy movies by integrating service into social network context, i.e. 'watched that movie, luved it, share' button.
Tue, 03/08/2011 - 15:04 | 1030421 Id fight Gandhi
Id fight Gandhi's picture

If shitbook can convince the studios to do exclusive deals and close out unlimited monthly streaming they may have something. This of course would be a loss for consumers.

But $3 to watch a 3 year old movie is moving Netflix down is just another sign of toppy market.

Tue, 03/08/2011 - 15:14 | 1030458 channel_zero
channel_zero's picture

'Unlimited' to consumers is smart.  Netflix's costs are generated per view.  No one in Hollywood would be so stupid to let Netflix have some kind of flat-fee/buffet deal.

Thu, 06/09/2011 - 05:25 | 1353897 shanelee
shanelee's picture

Facebook could become a credible threat. It is one the most effective tool of social media which is very helpful in boosting up the reputation of our business.

Facebook Marketing

Tue, 03/08/2011 - 15:11 | 1030446 channel_zero
channel_zero's picture

I'd give them one year to struck some good deals with studios,

haha!  You don't know studios.  There are no 'good' deals for anyone BUT the studios.  The studios are unsurpassed experts at separating fools from their money.  Facebook's sponsors are fools.

Tue, 03/08/2011 - 15:34 | 1030505 BorisTheBlade
BorisTheBlade's picture

We'll see, you could be right since youtube even with its massive number of users and a platform that is almost perfectly designed for the same thing, didn't achieve much of a success. Could also be the case of Goldman, another expert on separating fools from their money, talking more 'sophisticated' investors into FB private placement before the latter goes public.

Tue, 03/08/2011 - 13:52 | 1030147 Misean
Misean's picture

We believe that many of the issues outlined above could be fixed over time, including the gap to the living room TV.

What gap to the living room TV? And with the Bionic and Atrix coming on line? Morons!

Tue, 03/08/2011 - 15:06 | 1030423 channel_zero
channel_zero's picture

The 'gap' is getting the internet onto your tv AND THEN being able to use a TV remote to essentially operate a browser.  Many of us just connect a laptop to an open port on the TV and can deal with the less optimal user experience of getting one's @ss off the couch to get around netflix.

Somewhat related.....

The content owners (studios) want to monetize *every* single view of any given show and get lots more personal information. The absolutely control the way this technology is developing by picking winners and litigating losers.  Netflix is small business.  Less than half of homes have it.  Not much money for Hollywood.

The 'dvd' revenue model made the studios richer than the VHS that made them richer than theaters.  The streaming revenue model will be even more expensive to consumers and make even more money for the studios.

The studios will probably go with a TPM to lock you out of your personal devices.  They are good enough security, very uniquely identify you, and they can easily turn everything into a pay-per-view.  Given FB is owned by a trusted capitalist, there's good reason for netflix to worry.

 

Tue, 03/08/2011 - 15:11 | 1030449 PuppetRepubl1c
PuppetRepubl1c's picture

the "gap" between your pc and the tv is the most important part of this puzze.  The reason every person i know uses netflix is that they can stream movies to their tv/couch using their existing xbox/ps3/wii.  Until facebook streams content on all of these 3 consoles they won't gain any serious traction.  

 

$3 is more than i am willing to pay if i can't watch it on my tv.  Streaming to my pc is boring and i have no intention of watching a 2 hr movie at my desk.  

Tue, 03/08/2011 - 14:17 | 1030151 Don Birnam
Don Birnam's picture

Goldman-Facebook: "Wisdom between friends."

http://www.zerohedge.com/article/facebook-goldman-sachs-we-trust

Tue, 03/08/2011 - 13:56 | 1030170 Hedgetard55
Hedgetard55's picture

NFLX being thrown under the bus today.

Tue, 03/08/2011 - 14:02 | 1030183 The Axe
The Axe's picture

code...for .....(sell this POS )   today.....

Tue, 03/08/2011 - 14:03 | 1030195 tahoebumsmith
tahoebumsmith's picture

In investing $450 million in the social networking giant, Goldman has established itself as the leading candidate to win the lucrative and prestigious assignment of Facebook’s initial public offering…. Looking out for big dadda SKANKFEIN...People will get sick of the ads and pop-ups and facebook will become a joke.

Tue, 03/08/2011 - 14:03 | 1030199 velobabe
velobabe's picture

i still don't understand these movie viewers income stream. i thought most users who log on a daily basis, probably aren't full time employed.where are they getting the money to rent these movies? i think it is just an addiction to watch the boob tube. it is rote† jiust staring at the picture tube does it for them. hell facebook should just get a tv series and be done with it.

Tue, 03/08/2011 - 14:29 | 1030285 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The culture is wasting its time.

Tue, 03/08/2011 - 14:06 | 1030212 b_thunder
b_thunder's picture

Goldman and its "clients" of course are  very and deeply "long"  everything Facebook....

 

Tue, 03/08/2011 - 14:08 | 1030213 AN0NYM0US
Tue, 03/08/2011 - 14:10 | 1030221 Sudden Debt
Sudden Debt's picture

FACEBOOK won't be able to take marketshare from Netflix!

BS!

 

I wonder how many Americans have a digital home cinema. And MAYBE, 10% of these might cross over in time.

 And those who have want to watch S HD movies only.

 

Tue, 03/08/2011 - 14:15 | 1030244 Oh regional Indian
Oh regional Indian's picture

Wow. Takedown. 

Be interesting to look at who has been selling chunks in the past week or so, could be quite a tell.

But I really think that all this mind-melting-media should go into  he toilet, never to return in this cancerous form.

I look around and I see metastasised thinking. Mad, needing it's daily chemo just to stay insane. and facebook, talk about a social engineering masterpiece. 

The sooner they all burn (the sun will do it, mercifully), the sooner we can return to sanity and build something meaningful.

ORI

http://aadivaahan.wordpress.com/2011/03/04/astrological-and-other-deep-insights-from-ca/

Tue, 03/08/2011 - 14:16 | 1030246 TWORIVER
TWORIVER's picture

Head and Shoulders Top, Bitches.

Tue, 03/08/2011 - 14:25 | 1030278 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I had an idea about facebook taking over the entertainment market, or rather, vice versa.

Facebook will be bought by a Tech Giant:

http://lhmarketwatch.blogspot.com/2010/12/facebook-will-be-bought-by-tec...

 

Tue, 03/08/2011 - 14:44 | 1030340 tmftdoyle
tmftdoyle's picture

Facebook, or Amazon, Hulu, Walmart or any of the potential competive services do not have to become a "credible threat" to business of Netflix to tank Mr. Hasting's stock. Rather, all these services need do is accelerate the inevitible slowing in its subscriber growth. For once the "growth at any multiple monkeys" lose faith, the shortcomings of the business model will come to the fore: The subscriber economics of this business warrant a single digit earnings multiple. Four percent monthly subscriber churn, coupled with collapsing free cash flow per subscriber create one impenetrable brick wall for this stock.  

Tue, 03/08/2011 - 14:51 | 1030373 Al89
Al89's picture

Once again. Products on offer by NFLX et all are available free online. 

http://www.bringmovies.com/videos/1247/the-kings-speech-(2010)-part-01-videoweed.html Part 2 follows.

Took me a Google search to find that. Some films can be a little harder but not often. Stagevu also hosts a hell of a lot of films in DVD quality.

The high price FBOOK and Warner are charging might also be negative for NFLX if it is in anyway indicative of content prices they will have to pay once current deals expire. 

Tue, 03/08/2011 - 15:00 | 1030409 AndrewJackson
AndrewJackson's picture

Although I agree with Goldman on negative netflix outlook, this is obviously a pull to raise the POS facebook ipo as much as possible. Maybe now they can do a private placement for 1% of the company valuing fb at 100 billion. It will be interesting to see how long it takes for facebook to go below the ipo price. My guess is less than a month.

Tue, 03/08/2011 - 15:02 | 1030420 TruthInSunshine
TruthInSunshine's picture

Goldman has no conflict, of course, being that they have a front (if token) investment in Facebook, as they are the agent for taking it into a private offering to non-U.S. "lucky" investors.

Tue, 03/08/2011 - 15:05 | 1030431 Clarence BodDicker
Clarence BodDicker's picture

OPEN business model is next facebook target after streaming media is conquered. 

I don't want to root for facebook or GS, but if they can harness the networking capabilities, this will be the preeminent way an important demographic does business. 

There currently is a "facebook connect" application between facebook and OpenTable, but it is not difficult to see facebook cut the middle man out and it will be much better able to monetize the dining experiences. 

After that, PCLN perhaps?  The more you think about it, the more you see facebook having the opportunity of being the great aggregator.  People generally love bragging about spending money on crap on facebook whether they realized it or not (vacations, dinners, iCrap).  A fully aggregated facebook will further enable them to squander their capital and "compete" with their "friends." 

Tue, 03/08/2011 - 15:54 | 1030556 ghostfaceinvestah
ghostfaceinvestah's picture

And congrats to Whitney Tilson for top-ticking his short covering trades.

Tue, 03/08/2011 - 16:17 | 1030608 Can2001
Can2001's picture

look at this nice evening star in weekly candles and much divergences in uptrend. the big shorters had capitulated. see ya @ 100 in 2011. On a technical base( and not only this) this pig is death.

Wed, 03/09/2011 - 02:31 | 1032264 jmc8888
jmc8888's picture

ROFL.

Yes, the greatest propaganda tool potential of anything ever, facebook.  Or whatever replaces it, or the one after that.

Basically they have monkeys sitting around trying to figure out how 600 million people can be mobilized for profit.  Good luck with that. Hard to engineer manufuactured, viral business opportunities (and be fast enough to monetize it).  Although if you drop 1000 eggs off your roof, one might land in a way that doesn't crack it.  Of course with so many people, any lame idea has a chance to fool a million or so.

The fucking oprah effect is what they are going after.  The stretch of psychology of them thinking 'facebook' users consider themselves a part of a club like Oprah's book club would make even Freud blush.   Good luck controlling it, and see how long it lasts if achieved in any form.

Plus one can always google it.

 

 

Tue, 03/15/2011 - 11:57 | 1055914 lo574
lo574's picture

PT [price target] $200?  What?  When did GS lower that..........or is it a type-o?   Me thinks the later.  oops

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