Netflix, Inc. (NASDAQ:NFLX) has been a blockbuster stock on the S&P 500 returning better than any other stock in 2015. Much of this performance was due to compelling programs which won handsome growth in subscription. Now that it has established itself with original content it now wants a big influx of real money to support its ambitious big budget $5 billion programming outlay.
The year was different for the on-demand video services provider from previous fiscals largely because of the originality in its programs. And investors have been positive about Netflix, Inc. (NASDAQ:NFLX) despite the low-bottom-line performance given the upside the CEO Reed Hastings has been marketing with the ambitious global expansion he is structuring in 2016.
2016 is going to be the turning-point in many ways because the highly-rated video streaming service provider is headed to emerging market segments with exclusive top-eyeballs gathering programming content. The market that Hastings is targeting to arrive in 2016 is across India, China, and Indonesia totaling over 100 new markets.
Gamble or Windfall
However, the very strategy to produce ‘exclusive, compelling’ programs with $5 billion budget is ‘starling,’ according to one analyst at eMarketer Inc. The analyst Paul Verna argues that the ‘amount of money budgeted’ for the programming spend is a ‘huge windfall’ but is ridden with risks or a ‘gamble.’
Nearly every analyst firm recommends investors to invest in Netflix, Inc. (NASDAQ:NFLX) shares given the huge valuation the company holds with its global expansion. The target, according to Hastings, was to have 6 million domestic viewers and over 11 million from across the globe.
The number of viewers that Netflix wants to have is 74.3 million, making it the first on-demand video streaming TV network.
But analysts also claim that the global expansion plan would come true only if Netflix is able to penetrate the Chinese market.
The closed-economy offers Netflix several challenges as the on-demand video streaming services already has a handful of key players. Additionally Netflix, like every other overseas business players can operate only through local companies. This would be a tough proposition for the US-based streaming service since already many such collaborations exist. The most significant of these is the now Alibaba Group Holding Ltd (NYSE:BABA) owned Chinese-youtube-like service, Youku Tudou. Additionally, Netflix, Inc. (NASDAQ:NFLX)will have to contend with two more streaming services run by Baidu Inc and Tencent Holdings Ltd.
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