Analyst says Netflix profits from shows limited

Wedbush analyst says Netflix profit potential from original programing is limited

NEW YORK (AP) -- A Wedbush analyst said Thursday that it's unclear how profitable original programing is going to be for Netflix Inc. since other companies hold most of the DVD and syndication rights for the shows.

THE OPINION: Michael Pachter, who backed his "Underperform" rating and $55 price target for the stock, noted that the first season of "House of Cards," Netflix's first original series recently went on sale on DVD and Blu-ray.

Media Rights Capital, not Netflix, holds the DVD rights for the show and is using Sony Pictures Entertainment to distribute it.

"Although Netflix's ownership of only partial rights is not a new disclosure, we believe that in recent months, Netflix's share price appreciation has been driven in part by the perceived potential upside for the company from 'House of Cards" success," Pachter wrote in a note to investors.

Pachter says many investors think that Netflix' original shows could put it on par with HBO, which has nearly 40 original shows. But unlike HBO, Netflix's profits are mainly limited to what it gets from streaming.

Netflix CEO Wilmot Reed Hastings said in a January conference call with investors that like HBO it may experiment with things like DVDs and syndication rights down the road to find what works best. In the meantime the company is focused on monetizing its streaming platform.

Netflix officials didn't immediately return an email seeking comment.

THE SHARES: Down $3.09 to $166.65 in afternoon trading. Over the past 52 weeks the company's shares have traded between $52.81 and $197.62. Since the beginning of the year, Netflix shares have gained about 83 percent.