Friday, January 05, 2007

Calls of Note Part 1

Cowen comments on Netflix (NASDAQ:NFLX) saying they expect a number of video downloading related announcements to occur at CES next week. Firm believes the announcements will focus on: 1) "download-to-own" video content and 2) revenue sharing deals between websites such as YouTube and content owners. While neither of these business models compete or overlap with Netflix, similar announcements at CES in 2005 put pressure on the shares. They continue to believe that mass market subscription-based video downloading is at least five years away. Firm would view a drop in Netflix shares due to downloading announcements from CES as a buying opportunity.

On Thursday, Sonic Solutions launched Qflix, a licensing and certification program approved by the studios, which will allow online retailers to sell movie downloads that can be burned onto DVDs. CinemaNow currently sells a limited number of download-to-burn movies (using a different technology) and iTunes sells movies for viewing on iPods and PCs/laptops -- both services price new release content at $15. Cowen expects downloadable movies to put a dent in traditional DVD retail sales over time.

Notablecalls: Chart looks like it may go down some more. My gut on the other hand tells me the worries are already priced in. When this happens, the stock usually gets hit early on but comes back with a vengeance. Especially one with NFLX's short interest.

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