Winners and Losers: Men's Wearhouse Errs; Netflix Expands DreamWorks Deal

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Companies are like the rest of us: They intend to do well, but there are times when things don't work out quite as planned. From the surprising ouster of a retailer's iconic founder to a premium radio leader teaming up with an automaker to make its music more accessible, here's a rundown of the week's smartest moves and worst performers in the business world.

Men's Wearhouse (MW) -- Loser

"You're going to like the way you look," Men's Wearhouse founder George Zimmer has been saying for years in the suit seller's ads. "I guarantee it." Well, Zimmer was let go as executive chairman of the retailer after clashing with its board. In a statement, Zimmer conceded that he was forced out because he didn't agree with the board's vision for the retailer's future. However, the board was surprisingly mum on the situation.

Really? A beloved icon of the chain -- the face of Men's Wearhouse ads for decades -- is let go, and the company's board thinks that shoppers will be cool with that? Don't be surprised if same-store sales slip in the coming quarters.

Sirius XM Radio (SIRI) -- Winner

Sirius XM may have a monopoly when it comes to satellite radio, but it's a more competitive market is the streaming audio space. Sirius XM and Ford (F) are making it easier for the satellite radio provider's Web-based applications to get heard, announcing that the million drivers with Ford vehicles equipped with SYNC AppLink will now be able to access Sirius XM's Internet on demand and personalized radio offerings.

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SYNC AppLink-equipped cars will offer access to Sirius XM's Internet radio features using a car's voice commands, steering wheel, or radio controls. Wise more: These days, having a smartphone with Bluetooth connectivity is becoming as indispensable on a long road trip as snacks and bathroom breaks.

Facebook (FB) -- Winner

Twitter's video-sharing platform Vine is starting to gain traction, and Facebook wants in on the action. Facebook-owned Instagram introduced the ability for its 130 million active users to start uploading short video clips on Thursday.

In line with Instagram's popular photo-sharing application, there will be several different filters that users can use to dress up their uploads. The clips are limited to a mere 15 seconds, but that's more than Vine's 6-second cap. Facebook itself already allows for longer videos, so it's doing the right thing by introducing this through its Instagram subsidiary.

Ebix (EBIX) -- Loser

Thursday's biggest loser was Ebix after a deal to take the insurance industry software provider private collapsed in brutal fashion. Goldman Sachs (GS) was set to acquire the company in a $820 million deal, but the investment bank broke things off after it was disclosed that a U.S. criminal probe into Ebix's accounting practices was under way. Ebix shares plunged 44 percent on Thursday.

Netflix (NFLX) -- Winner

Netflix's Facebook page is loaded with complaints of subscribers lamenting that "South Park," "SpongeBob SquarePants" and "Dora the Explorer" left the service's digital vault last month. Well, Netflix doesn't have a "South Park" replacement, but it does have something else in the works for its younger viewers.

The leading video service is building on its content deal with DreamWorks Animation (DWA), forming a partnership that will deliver 300 hours of original programming -- based on DreamWorks Animation's popular movie characters -- as soon as next year. Content is king, and Netflix knows that proprietary content and offering video that suits all tastes are the keys to retaining its more than 36 million global streaming subscribers.

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Winners and Losers: Men's Wearhouse Errs; Netflix Expands DreamWorks Deal

There are now 36.3 million streaming subscribers worldwide, and a big reason for Netflix's success is that the value proposition of $7.99 a month for an unlimited buffet of video titles is too juicy to let go.

Netflix points out that it served up 4 billion hours of content to its streaming customers during the first three months of the year. Divide that by the midpoint of the 33.2 million streaming accounts that Netflix had when the year began and the 36.3 million that it had three months later and you get an average of 115 hours of content per member during the quarter -- or roughly an hour a day.

Yes, Netflix is that magnetic. Worrywarts arguing a couple of years ago that premium entertainment services have a history of peaking around 25 million don't realize that Netflix is rewriting the rules.

"Hemlock Grove" -- Netflix's latest exclusive series -- began streaming late last week.

The reviews have been mixed, and that's a far cry from the consistent raves that its licensed "House of Cards" series received two months ago. However, Netflix revealed that "Hemlock Grove" attracted more viewers during this past debut weekend than "House of Cards" did in its first weekend back in February.

Netflix points out that the creepy Eli Roth-helmed series is faring well with young adults, and that's a jaded group that probably ignores the reviews of older critics. We still don't know if folks will stick to the series the way that many did as they went through all 13 episodes of "House of Cards," but it's a good start.

In a surprising move, Netflix revealed that it begin offering a streaming plan that allows as many as four members to be online at the same time for 50 percent more than the current plan, which only allows for two simultaneous streams.

Netflix isn't banking on the new $11.99 a month plan to move the needle. It emphasized twice during its call that it doesn't expect more than 1 percent of its subscribers to upgrade to the new offering. However, as large families lean on Netflix across a growing number of supported devices, upgrading to four simultaneous streams will be an easy sell.

More importantly, this is the first time that Netflix has added a new option to the $7.99 a month streaming plan it introduced in 2010. It could be a taste of more customized plans in the future.

 

Netflix has made no bones about the future of its DVD rental business. CEO Reed Hastings has argued that it's DVD-based mail-order accounts will continue to shrink with every passing quarter. Netflix closed out the quarter with 7.98 million DVD subscribers at the end of March, 240,000 fewer than it had three months earlier.

Netflix has routinely provided subscriber, revenue, and contribution profit guidance for its streaming and DVD businesses. On Monday, it only provided contribution profit guidance for its DVD business. Netflix expects this to be the case in the future, as the number of DVD customers and the dwindling revenue they generate continues to shrink.

Photo: Michael C. Rael, Flickr.com

As Netflix families will attest, a problem with sharing a Netflix streaming account in an immediate family is that Netflix doesn't distinguish between viewers. It offers recommendations based on what the accounts are watching, and that's a problem for the quality of the suggestions.

Netflix is addressing that by testing individual settings. The new Profiles feature will ideally begin producing better recommendations so your toddler can watch "Yo Gabba Gabba!" and your spouse can catch "How I Met Your Mother" without getting in the way of your affinity for "Breaking Bad."

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Motley Fool contributor Rick Munarriz owns shares of Netflix, Ford, and Ebix. The Motley Fool recommends DreamWorks Animation, Ebix, Facebook, Ford, Goldman Sachs, and Netflix. The Motley Fool owns shares of Facebook, Ford, and Netflix. Try any of our newsletter services free for 30 days.
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