Netflix Shares Plunged: What You Need to Know
Sep 2nd 2011 4:32PM
Updated Sep 2nd 2011 4:34PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Netflix (NAS: NFLX) fell more than 10% in early trading and should close down about the same. Starz announced yesterday that it wouldn't re-up the company's streaming deal when it expires next February.
So what: Starz's statement was anything but encouraging. CEO Chris Albrecht spoke of preserving "appropriate pricing" for his company's "valuable" content. The implication? Netflix low-balled in its negotiations with the Liberty Global (NAS: LBTYA) subsidiary.
Now what: Netflix CEO Reed Hastings was more gracious in explaining his company's decision to walk away, calling Starz a "great content partner" in comments published by Business Insider. He also pointed out the studio now accounts for just 8% of domestic traffic. This is what traders are selling into? A botched deal that spares Netflix from spending $300 million to preserve 8% of U.S. traffic? Hastings made the right call. Do you agree? Disagree? Please weigh in using the comments box below.
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At the time this article was published Fool contributorTim Beyers is a member of theMotley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdings andFoolish writings, or connect with him onGoogle+ or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.Motley Fool newsletter services have recommended buying shares of Netflix.Motley Fool newsletter services have recommended buying puts in Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.
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