Netflix Brings Home a Modest Haul From the Emmys


Netflix made a big splash earlier this year when it was nominated for 14 Emmy Awards, including five for major categories. House of Cards co-stars Kevin Spacey and Robin Wright were nominated for acting, as was Arrested Development star Jason Bateman. House of Cards was also nominated for outstanding drama series and director David Fincher was nominated for his work with the series as well.

But when the Emmy Awards ceremony ended Sunday, Netflix had to content itself with a much more modest haul: It only won one of the major categories, for Fincher's directing on House of Cards, which also won two less prestigious awards, for casting and for cinematography.

A good start
As many news outlets have pointed out, Netflix's Emmy victories made history. Internet video is the newest frontier of the television world -- with Netflix as the leading player. And the Emmy wins helped validate Internet video (and Netflix specifically) as a "respectable" alternative to linear TV.

Considering this was Netflix's first full batch of original programming, the company clearly deserves credit for picking high-quality shows. Furthermore, Orange Is the New Black, which premiered in July, has received very positive reviews and seems likely to receive a number of nominations next year. Netflix has also renewed most of this year's slate of original shows, so it will likely get a second crack at many of the awards categories in which it did not win.

Some perspective
Still, the media and some analysts have had a tendency to make the Netflix-Emmy storyline into a Cinderella drama, which it really is not. When Netflix first decided to bet on original content, it might have been a legitimate underdog, but today it's an $18 billion media giant. With that valuation, Netflix should be rivaling every other major network.

In comparison to Netflix, AMC Networks looks like a real underdog. Its market cap sits at less than $5 billion: a small fraction of competitors' valuations. Despite being a small upstart -- even in comparison to Netflix -- it took home the best drama Emmy on Sunday with Breaking Bad.

The only reason Netflix seems like an underdog compared to AMC is that the latter has been so consistent in churning out top-notch original programming for the past six years or so. In fact, Mad Men -- AMC's first big foray into original programming -- won the best drama Emmy for four consecutive years (2008-2011).

Put up or shut up
While Netflix should be happy it got into the Emmy action this year, winning three awards is no guarantee of massive financial success. AMC has pulled in a far more impressive set of Emmy Awards over the past six years and has had higher earnings than Netflix recently, but is still worth far less than Netflix's $18 billion market cap.

AMCX Net Income TTM Chart
AMCX Net Income TTM Chart

Net Income (AMC vs. Netflix), data by YCharts.

While Netflix is growing faster than AMC, it's still questionable whether that justifies its much higher valuation. In terms of quality of original programming, AMC is still ahead (as are other networks such as HBO). AMC also has a much higher profit margin. To prove itself worthy of its massive valuation, Netflix will need to do much better at the Emmys in the future. Then it will need to turn that achievement into vastly more Netflix subscribers.

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Fool contributor Adam Levine-Weinberg is short shares of Netflix and long December 2013 $275 puts on Netflix. The Motley Fool recommends AMC Networks and Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published