We added to our long-term Netflix, Inc. (NFLX, Financial) position during the quarter, at what we believed was an attractive price, as the stock fell on weaker-than-expected second quarter net subscriber adds. We have followed and/or been an investor in Netflix since its IPO, and have witnessed that its quarterly subscriber metrics are very difficult to predict and fluctuate for many reasons, including things like the Olympics, price increases and the timing of exciting content going live. We retain high conviction in our thesis that the way people watch TV is undergoing a major disruption from legacy time-based networks to on-demand streaming, and that Netflix will be a winner in this shift. Here is a quote from the CEO of one of the world’s most valuable media companies: “We are seeing change in media, and it’s mostly powered by technology. It’s powered by the shift that technology has created away from the distributor and the producer to the consumer. The consumer has much more authority than ever before to decide what they want to watch, when they want to watch, where they want to watch it; even how much they pay for it. We are already seeing that in so many other ways. Just think about Amazon and … Netflix as another example. It’s just a changing world and … We are not going to be able to stop it.” Guess who said it? Bob Iger, Chairman and CEO of Disney, at Fortune’s Brainstorm Tech conference earlier this year. We agree with Bob.
From Baron Opportunity Fund third-quarter 2016 commentary.
