How Binge-Viewing Could Rock Netflix Stock

Binge-viewing may lead to binge-spending at Netflix, which could eventually see the impact in its stock price. Netflix may need to accelerate spending initially deferred a few years down the road for originals like “House of Cards.”

While that wouldn’t represent an increase in the $150 million Netflix estimates it has spent to date on original series, an adjustment in its payment plan would lower its estimated earnings per share in the near term, according to Barton Crockett, an analyst with Lazard Capital Markets, and that metric has big implications on Wall Street. “It would create potential for price swings, given that this is a volatile stock, and accounting for content costs is a hotbutton issue,” he noted, emphasizing that the possible swing would have no impact on Netflix’s cash flow or valuation. Acknowledging “higher than initially expected” viewing in the disclosure is a vaguely euphemistic way of saying Netflix fears a zero-sum game may be at play; the elevated levels of viewing in the early going may be a sign that not as many will watch later in the window of availability.