) reportedly had a respite from the Securities and Exchange
Commission ("SEC") after the latter revised its disclosure rule
for companies called Regulation Fair Disclosure or Reg FD.
This change comes after the SEC investigated an announcement
by Netflix CEO, Reed Hastings, that the company had clocked 1
billion hours of viewing in June on his
) account, which violated the old Reg FD rule.
Though in the current situation the SEC did not enforce any
action against Netflix but stated that the company should
pre-announce the social networking address, so all its
shareholders are aware of the place where the announcements were
As per the revised guidelines, the SEC allowed the companies
to make corporate announcements over the social media, including
Facebook and Twitter, by providing relevant web addresses through
notifications on their company websites and press releases. This
change in rules comes as the SEC accepted the relevance and
participation of the social media in corporate
Notably, the new rule would strengthen Netflix's social
integration with Facebook. Very recently, Netflix had decided to
extend its social features to its U.S. subscribers. The streaming
services provider announced new features that will enable U.S.
subscribers to link their Netflix accounts to Facebook.
However, we believe that Netflix will not be the sole gainer
from the newly-amended rule. Every other company will be in the
race to utilize social media in their corporate
Nonetheless, the respite from SEC is a positive for Netflix.
Over the last 6 months, Netflix's shares have gained a staggering
We believe that more than anything else, Netflix's new
and exclusive content offerings to its subscribers are its
biggest USP improving its competitive position versus peers
) as well as the newly-launched services from cable and
media companies such as
We believe that an improving paid subscriber base,
international expansion, a diversified content portfolio and a
huge video library are the positives in the near term.
However, higher costs owing to international ventures and
licensing fees and continued subscriber losses in its DVD
business are near-term headwinds. Mounting losses from the
international business, due to higher content and marketing
costs, is another concern in the short term.
Currently, Netflix has a Zacks Rank #1 (Strong Buy).
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