Don’t Expect Netflix, Inc. (NFLX)’s Margin Improvement to Last Forever

The rise of competitors will have two impacts on Netflix’s business. First, customers will have more choices of where to get streaming content, which will put pressure on Netflix’s domestic streaming growth. Second, the competition for content between Netflix, Amazon, and the Coinstar-Verizon joint venture will drive up content costs. Both developments will put pressure on Netflix’s domestic streaming contribution margin.

A way out?
Netflix is turning to original content in hopes of finding a way out of its current dependence on third-party content owners. Netflix’s first original series, House of Cards, premieres this week, and a variety of other original series are scheduled to debut this year. This strategy may be Netflix’s last hope of creating a moat for itself in the streaming business. Success will depend heavily on the popularity of its original shows.

While the company’s first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have attracted rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why we’ve released a brand-new premium report on Netflix. Inside, you’ll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We’re also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.

The article Don’t Expect Netflix’s Margin Improvement to Last Forever originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Netflix and Amazon.com. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix.

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