House of Cards – A Sign That Netflix, Inc. (NFLX) Can Become a Content Creator

Regardless, we’re extremely excited about Netflix, Inc. (NASDAQ:NFLX)’s ability to make content, and the fact that this show is a hit gives the company credibility going forward. The fourth season of Arrested Development is the next Netflix, Inc. (NASDAQ:NFLX) produced show that will be released, and we think it will be a smashing success—perhaps bigger than House of Cards—because it already has an enormous built-in fan base. New shows may not receive the same acclaim as House of Cards, but we think Netflix’s credibility will help deter consumers from developing prejudice against the firm’s internal productions.

Of course, how popular and critically acclaimed the shows are is fairly irrelevant unless the company is able to drive subscription growth to cover the costs. Some say that CEO Reed Hastings paid $100 million for just two seasons of the show, so the strategy wasn’t without risk. Given the current cost of Netflix, Inc. (NASDAQ:NFLX) ($7.99/month), it would take 1,042,970 subscribers to generate $100 million in revenue. Will new shows drive such enormous amounts of subscribers? That remains unclear, but adding some competition to the content space could help content costs from ballooning, which is the biggest threat to the company’s business.

Even though content creation is a fundamental positive for Netflix, it will not change our valuation at this time, so we at Valuentum think shares look overvalued. House of Cards may be a winner for consumers, but it will take time to see it it’s a winner for Netflix, Inc. (NASDAQ:NFLX).

The article House of Cards – A Sign That Netflix Can Become a Content Creator originally appeared on Fool.com and is written by RJ Towner.

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