Google Inc (NASDAQ:GOOGL) is so big and flush with resources that its strategy against Netflix, Inc. (NASDAQ:NFLX) and other companies in the premium pay-to-watch content space is perplexing at least to this analyst.
In a discussion on Bloomberg’s Market Makers, Pivotal Research Group Senior Analyst Brian Wieser says that Google Inc (NASDAQ:GOOGL)’s current position in the market – with its nearly $60 billion in cash and the dominant role YouTube has in video streaming – makes it a prime competitor to the likes of Netflix, Inc. (NASDAQ:NFLX). However, what the company is doing leaves many questions waiting to be answered, he hints.
The reaction comes as the Internet search and advertising giant is rumored to be planning a subscription service for its YouTube business.
“It’s go big or go home and you can contrast what they are doing with what Yahoo is doing. I feel like Yahoo is taking baby steps here. Having a couple programs isn’t much. There is no scale. But if you actually committed a billion dollars, then you can have a real business and Google is one of the few companies that actually has the resources if they have the will,” Wieser says.
To fight Netflix, Inc. (NASDAQ:NFLX) and other companies in this industry, Google Inc (NASDAQ:GOOGL) can just buy a platform, Wieser agrees. Google bought YouTube in 2006 for $1.65 billion.
“That is one approach they can take. Again, it is perplexing to me, given the position that they have had [and] the resources they have, that they have not done something,” Wieser tells Bloomberg.
However, Wieser acknowledges that Google Inc (NASDAQ:GOOGL)’s reluctance to pour money into its businesses like YouTube to compete with Netflix, Inc. (NASDAQ:NFLX) leads him to believe that the tech giant may have a reason. He says, however, that he does not pretend to know the reason why Google is taking this strategy.
Given this, Wieser says that if Google were to spend $1 billion on a business development program, he thinks they could spend that money on building a better video advertisement business to more legitimately compete with networks and cable.
Boykin Curry’s Eagle Capital Management owned 774,750 Class A Google Inc (NASDAQ:GOOGL) shares by the end of the October to December quarter. By the end of the same period, David E. Shaw’s D.E. Shaw & Co., L.P. owned 958,731 Netflix, Inc. (NASDAQ:NFLX) shares.
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