Basically, I took three things away from that call, which I listened to all 4.5 hours of.
1. The Netflix management team is comprehensively compentent, and extraordinarily quantitative, in their approach to the entire business. I don't think any analyst will doubt that Reed has one of the most impressive executive teams working in any high growth company. Do you trust this team? After that presentation, I absolutely do.
2. Netflix's business is in true "hypergrowth" and is accelerating the accumulation of cash flow faster than anyone every thought, including the executives themselves. They've hit on a product and business model of startling cash efficiency and mass popularity. They could become a true brand name on the order of Amazon, and could reach many billions in revenues over the life of the company. We know they're going to hit $1B as soon as 2006. More importantly, there is little risk that the lowered earnings are not going to pay of in accelerating cash flows and earnings in a short couple years, because they have a strong way to manage marketing costs, and are not going a "grow at any cost" mode. In contrast, they have stuck strongly to their "grow at $35/customer" marketing model, and it's just proven to be far more successful gaining customers than anyone could have predicted. Do you believe this company will grow a lot more, and that hypergrowth with controlled marketing spend is exactly the right decision? After that presentation, I absolutely do.
3. The CFO and Reed were truly amazed, and not a little pissed, at the market's reaction to their Tuesday release, which they considered to be one of the 3 most important releases in the history of the company -- one which finally demostrated that they FUD of the shorts about whether the Netflix model was somehow fatally flawed, had been conclusively proven absolutely wrong. They used very plain language to explain precisely how the short arguments were frankly inaccurate, and addressed Barron's, that crazy analyst's report last night, and theStreet.com directly in their talk. Their entire attitude has completely changed from a year ago, in which they were very very cautious about making sweeping statements, not sure themselves about what the long-feared Wal-mart and BBI would or could do. Today, the message was one of straightforward confidence that Netflix is becoming the undisputed 800-pound gorilla in this market, and could become one of the largest entertainment companies out there. Do you have the same confidence in Netflix that Netflix management does? After that presentation, I absolutely do.
The analysts are going to upgrade. Netflix is on fire.
Not quite xss.
In actuality he's a burned investor in vapor-stocks from 1999 that now thinks all stocks with a website as part of the business model is doomed.
Its a classic psychological concept---for example, if you are bitten by a dog as a child you are irrationally afraid of all dogs.
Only problem is, this stock is NOT a dog---it may have LOOKED like one before it started generating MILLIONS per quarter in free cash flow, and that's when this guy formed his public opinion, and he doesn't have the strength of character to admit a change of facts and then change his stance, or the brainpower to see the differences between this company and, say, Kosmo.com or Webvan.
The other answer is simpler: he's a hedge-fund-paid basher.
Now I understand... you're a spurned indie video store owner -- put out of business by BBI.
Those concessions have been a moving target for several years (intro. of rev. share, modifications of rev. share, etc.).
NFLX was the first to get discs for (virtually) dupe cost and a rev share.
BBI can, of course, extract substantial concessions from the studios (they are the studios' largest customer, worldwide).
So... what's your point?
Mine was that the studios will not frown upon a MovieLink acquisition by NFLX.
<<...But in the next couple of years VOD will take off and start be a serious competition to DVD rental... And especially!! to the DVD by internet order and us mail. I can come up with more arguments, but of course with no proof. Do you question VOD happening and competing with nflx, or do you question timing of it? I question the huge growth of nflx during next 5-7 years ad their stock implies, in face of this coming competition.>>
I just question the timing. I don't think VOD will be "serious" competition to DVD rental in 2 years. I do think VOD will be available as an option, but DVD is a massive industry trend, like VHS was. It's not going anywhere any time soon.
Remember... while VHS was still in its growth phase in the 80s, people were predicting its doom from the high-quality Digital Laser Discs. I have a copy of Gone With The Wind on LaserDisc, but I'll be damned if I can find anywhere to play it. It took more than a decade for the industry to get Laser Disc technology cheap enough and packaged correctly to become the DVD revolution. Maybe VOD will happen faster than that, but I doubt it.
It really depends on how quickly you think HDTV will grow as well. If HD really takes off, all the VOD solutions will be set back years, because the bandwidth required to ship HD bits is nearly 10X regular television. Contrarywise, there's nothing to stop HD DVDs from being adopted immediately, and shipped by Netflix just as easily as our 540i or 720p DVDs.
I also listened to the conference call and I didn't hear confidence, I heard fear. I think the management is scared and are demonstrating it. As they say bull$hit walks and money talks. They are dumping shares as quickly as they can:
<<I also listened to the conference call and I didn't hear confidence, I heard fear. I think the management is scared and are demonstrating it. As they say bull$hit walks and money talks. They are dumping shares as quickly as they can: http://finance.yahoo.com/q/it?s=NFLX>>
Do you believe executives should be allowed to adopt automatic planned sale programs that diversify their holdings over time, regardless of the stock price?
Do you believe executives should ever be allowed to sell their shares?
If what you heard today was Netflix management showing fear, then we're all in good hands, because they can only get more confident than today's rock-solid presentation.
Have you seen the commercials for Comcast attacking Dish owners? Can you imagine what they will do to Netflix? VOD is here on channel 1 with Comcast and is not like DOD (download on demand), it is a different technology. I can�t imagine Comcast not firing a cannon at Netflix�s dingy if they even think Netflix will use Comcast�s network to download movies to compete with VOD, can you. Sounds terminal. Comcast will just laugh them out of the water.
To keep the title of a "reasonable person" I have to first clarify that I never wrote nor think VOD will replace DVD in a couple of years. This will take much longer (And much less than e-books taking over paper).
But in the next couple of years VOD will take off and start be a serious competition to DVD rental.
And especially!! to the DVD by internet order and us mail.
NFLX customers are what is called early new technology embracers. They will have no problem using the new technology. Additionally this new one may be simpler to use for people who don't know a PC from an Amiga. (Hope the VOD providers will still allow for nflx internet model access as an option)
The technology itself exists already. And a few companies stted to put it together and use. It will take another half a year before it starts to grow and advertise.
I assume TV advertising and customer acquisition costs for cable and satellite industry will be cheaper than for NFLX. They are already in your home, they already mail you a monthly envelope, etc....
I can come up with more arguments, but of course with no proof. Do you question VOD happening and competing with nflx, or do you question timing of it?
I question the huge growth of nflx during next 5-7 years ad their stock implies, in face of this coming competition.
<<> I think that if they wanted Netflix's business, they'd buy them.
No way at this price. The biggest reason for them to stay away is the coming VOD competition.
VOD will replace DVD looong before e-books will replace paper books.>>
Okay, where is this VOD mania coming from? I'm more than open to hearing a reasoned explanation with good evidence that VOD is going to take over and replace the DVD platform in a couple years, surprising the whole industry. But I haven't seen any real arguments. You seem like a reasonable person. What are your arguments for this happening?