Netflix is betting billions on its original shows and movies — but this analyst warns it’s a far riskier gamble than investors realize (NFLX) – Silicon Alley

The bull case for Netflix has a big flaw, argues Wedbush analyst Michael Pachter, a longtime skeptic of the company.
Optimists think the company's big investment in original content, which is sinking the company ever deeper in debt, will eventually pay off in lower costs, Pachter noted.
But that argument ignores the fact that Netflix licenses the vast majority of its content, including nearly all of its most popular "originals" — and licensing fees just keep going up.
One of the central pillars of the bull case for Netflix may be resting on shaky grounds.
Investors and analysts backing the stock have based their optimism, in part, on the company's growing investment in its "originals" — the shows and movies that are exclusive to Netflix. Although that investment is already costing the company billions of dollars, it should pay off in the long run, because the "originals" will help insulate it from rising costs of licensing other companies' content, the thinking goes. Over ...

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