Netflix Will Pay Twice As Much For Content In 2012

By Lisa Richwine for Reuters (published in The HuffingtonPost)

Netflix Inc probably would like nothing better than to put 2011 behind it. But 2012 may be no walk in the park either.

Investors, who have pushed Netflix shares up 50 percent since late November, believe the company that revolutionized the home video industry may have plugged a torrent of defections after a widely excoriated price hike and a bumbling attempt to hive off its DVD-mail business as “Qwikster.”

But it still faces a deluge of competition, a tarnished brand, and a costly expansion that will erode bottom lines, at least in the short term.

Netflix wants to steer customers away from DVDs and into its streaming business. To do so, it is writing hefty checks to add more movies and TV shows to its online service, and has warned that content costs will nearly double this year. At the same time, Netflix faces the loss of newer movies from Liberty Media Corp’s cable channel Starz at the end of February.

Netflix lost more than 800,000 U.S. customers in the third quarter of 2011 and warned that DVD-by-mail subscriptions would decline sharply in the final three months of the year, triggering the company’s largest single-day share price plunge since 2004. But the company said total U.S. subscribers, which includes customers who pay for the online streaming service, would be “slightly up” for the quarter.

Wall Street remains upbeat about its longer-term prospects – so long as it can navigate its costly international expansion and secure enough content to keep the likes of Apple Inc, Amazon.com Inc, and Dish Network Corp’s Blockbuster at bay.

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