Studios once owned Netflix, bailed too soon

The Wrap reminds us that the studios owned pre-IPO stock in Netflix but didn't hold on to it.

What would have happened had the studios held on to the Netflix stock they once owned?

The major Hollywood studios didn't see all of Netflix's big market run coming.

The Wrap, a blog that covers Hollywood, reminded us in a story today that in the 1990s Warner Bros. was looking for leverage in negotiations with video rental chain Blockbuster. The studio took small ownership stakes in Netflix prior to the company's initial public offering in 2002.

The other major studios followed but all of them unloaded their shares a year after the IPO.

They weren't the only ones who were wrong about Netflix. Jim Cramer, the high-volume host of the cable investing show "Mad Money," advised his viewers to sell Netflix at $19 and then at $20.

It's impossible to say whether Netflix would have still gone on to snatch the video rental market away from Blockbuster, help send that company into bankruptcy , and forge a path in streaming-video distribution.

But had the studios held on to their stakes and not interfered, enabling Netflix to achieve those things, they might have made a bundle on their stock.

On May 23, 2002, Netflix's stock began trading at $15. As of this afternoon, Netflix's shares were trading for about $150.

 

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