Show us more money.

Wall Street analysts at Morgan Stanley are upset Netflix spends 62% of its revenue on content for customers, instead of setting more money aside for profits.

Morgan Stanley analysts Benjamin Swinburne, Scott Devitt, Ryan Fiftal, Hersh Khadilkar and Andrew Ruud sent a research note to investors this morning telling them Netflix is just too cheap. They want Netflix to up prices, even if it costs them new customers.

“We believe the profit-maximizing strategy is to raise rates rather than go for sub growth,” reads the research note.

The analysts suggest Netflix should model itself closer to cable networks, which spend far less of their money on programming (and it shows).

In comparison, HBO and Cinemax spend only 48% of your subscription dollar on content. Showtime puts up even less — just 35%. Basic cable, ad-supported networks are a revenue goldmine because they often spend a pittance, mostly on cheaply-produced or acquired programming. AMC invested just over one-third of the money it collects from every cable subscriber on programming. Discovery spends 25% across all of its networks and runs loads of repeats to fill the gaps.

The only answer to this investor conundrum is to raise rates on streaming customers so Netflix can put that money in the bank or return it to investors.

But if Netflix follows Morgan Stanley’s advice, they face crushing competition from the forthcoming DVD rental and streaming service from Verizon and Redbox, anticipated to launch before Christmas.

Other Wall Street analysts expect Verizon will launch the service at a price point designed to undercut Netflix. Some predict a combined DVD rental/streaming service will cost customers under $10 a month.

Other stories of interest:

1. Verizon to Compete With Netflix With Standalone Streaming Video Service
2. Analysts Predict Netflix Will Sell Streaming Service to Amazon.com or Google
3. Netflix Introduces Streaming-Only for $7.99, Rate Hikes for Traditional DVD Rentals
4. Netflix: We Actually Thought More Of You Would Be Mad At Us, But We Know You Still Won’t Cancel
5. Netflix Raises Prices for Unlimited Streaming + DVD-by-Mail Service