The 'BB' corporate credit rating and negative outlook on Los Gatos, Calif.-based home entertainment provider Netflix Inc. reflect our expectation that increased investments for the company's international expansion, likely subscriber declines in the third and fourth quarter of 2011, and escalating content commitments will lower profitability over the near term. While acknowledging Netflix' growing programming commitments, we view the company as likely to maintain moderate debt usage while expanding into international markets and investing in new technology and content to grow market share. We view the company's business risk profile as "fair" (as our criteria define the term), reflecting: Its leading position in the highly competitive and rapidly evolving domestic video rental industry, A large subscriber base, Its dependence on
