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By Jason Stipp and Jeremy Glaser | 12-06-2012 03:00 PM

Paying Up and Paying Out

News this week showed market players paying up for media assets, paying out for tax relief, and more.

Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to The Friday Five.

We saw a lot of parties paying out and paying up this week. Here to offer the details is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: Jason, glad to be here.

Stipp: What do you have for The Friday Five this week?

Glaser: We're going to talk about Netflix, Apple, auto sales, dividends and finally Deutsche Bank.

Stipp: So Netflix was paying up for some Disney content. What does that deal mean for the somewhat troubled online-video operator?

Glaser: Netflix is going to spend a considerable amount of money. They didn't release the exact financial terms, but our analyst Michael Corty thinks it's around $300 million in order to license Disney theatrical movies for use on Netflix. These will show up on Netflix starting 2016 right after the DVD window. So basically they'll be in the theater, then on DVD, and then when traditionally they would go to, let's say, HBO or Showtime or Starz, instead those movies are going to come to Netflix.

The market seemed pretty excited about this deal. Netflix shares rallied pretty heavily on the news that they had inked this deal, but we're a little bit less excited. If I had $300 million lying around, I too could be streaming Disney movies. The reason they were able to get this deal done is they were going to pay the most. They outbid any other rivals who might want to carry this content. I think the fact that Disney did it now for a 2016 timeframe means that they just thought it was an offer that was just too good to refuse that they were getting from the video-streaming company.

So I think it's probably not the case that Netflix got a big steal on this. They just are hoping they're going to be able to increase their subscriber count enough to make investments in content like this really worth it. We just think in the long term, this isn't a game that Netflix is going to be able to win, or one that they are going to be able to turn into a true, sustainable business model. There are just too many other competitors out there. The content holders just hold too many of the cards for them to really turn it around.

We still view [Netflix] shares as fairly overvalued. There's been some talk that maybe there will be a buyout. We just don't see that as something that's going to come anytime soon. Certainly it's possible, but buying the shares and just hoping for someone else to come up and pay more isn't a great investment strategy.

Stipp: We learned this week that Apple is going to be moving some manufacturing back here to the U.S. and paying up a bit to do that. This is just one piece of news, though, for the giant company. They've had a bumpy few days here.

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