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Netflix, Inc. Message Board

  • Younessi Younessi Nov 19, 2003 9:22 AM Flag

    Questions and facts for long

    1) Netflix only had profit in the past qtr because it has reduced the marketing expense. Even so, the gross profit margin was lower by one percentage.

    2)$20 a month is about 60 movies a year from blockbuster, maybe more if one uses the reward program. What % of us household that have dvds and have acess to VOD, premium channal like HBO from cabel or satelite or watch movies in the theater, would need to use netflix?

    3)The answer to above question raises another important fact. If netflix will be used primary by heavy users, will the company make any profit on those members? Remember, the light users could easily switch to walmart dvd rental and save money.

    4)If Blockbuster feels that netflix is a danger to its business model, couldn't they reduce their price on thier monthly membership or join forces with walmart to destory netflix. For example, what if they offer their monthly program for $12 a month. They will not make money from the dvd rental, but will remove Netflix from business.

    "Netflix has a great business model; our biggest concern is that a deep-pocketed competitor throws a lot of capital into a competing product and stunts its growth. Disruptive technologies, like video on demand, are also a risk."

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    • >So imagine what would happen when they really >start advertising. Do you want to take that >risk or take profit now?

      There'd be plenty of warning before that happens becuase WMT would have to fire the incompetent WMT online team in California and hire folks who actually know what they're doing. =)

    • So imagine what would happen when they really start advertising. Do you want to take that risk or take profit now?

    • Point by point, what I think:


      1) Netflix only had profit in the past qtr because it has reduced the marketing expense. Even so, the gross profit margin was lower by one percentage.

      not sure what you're saying here, profits are profits (in other words, reduced marketing expenses in the face of exploding sbscribership is only good news)

      2)$20 a month is about 60 movies a year from blockbuster, maybe more if one uses the reward program. What % of us household that have dvds and have acess to VOD, premium channal like HBO from cabel or satelite or watch movies in the theater, would need to use netflix?

      your kidding, right. That amounts to a paltry 5 movies per month. i.) I am averaging over twice that amount, ii) I never have to hop in my car to return a movie, and iii.) I never pay late fees. It's a no-brainer. VOD is equally unattractive home economics.

      3)The answer to above question raises another important fact. If netflix will be used primary by heavy users, will the company make any profit on those members? Remember, the light users could easily switch to walmart dvd rental and save money.

      this is a fair question, but I think there is a sizeable population of users out there. you can also say that the service will also be used by persons who want the convenience of working thru their mailbox instead of fighting traffic for their movies.

      4)If Blockbuster feels that netflix is a danger to its business model, couldn't they reduce their price on thier monthly membership or join forces with walmart to destory netflix. For example, what if they offer their monthly program for $12 a month. They will not make money from the dvd rental, but will remove Netflix from business.

      Blockbuster makes $40 of their profit from late returns. Trying to outdo NetFlix using NetFlix's business model is a sure formula for bankruptcy.

      "Netflix has a great business model; our biggest concern is that a deep-pocketed competitor throws a lot of capital into a competing product and stunts its growth. Disruptive technologies, like video on demand, are also a risk."

      Historically, deep-pocket competitors have a history of failure when they enter the market late. I do not see blockbuster nor walmart accelerating towards movies-in-the-mail. Walmart is likely to abandon this effort for other, more lucrative opportunities (e.g. expansion). Blockbuster is in trouble, plain and simple.

    • Your point is well taken. Long term = sell.

    • WHAT IF you are wrong? Your sampling and arithmetic are faulty. That they may not reach five million subs in five years does not detract from the huge cash volume they are doing with minimal overhead. Wal-Mart and BBI can slow up growth at the expense of their own profits, not a likely proposition at any Board meeting that I have attended in the business world. Retired and loving it.

 
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