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Netflix, Inc. (NFLX) Message Board

  • schweitz31 schweitz31 Jul 13, 2011 11:43 PM Flag

    Subscriber revenue has been declining

    .....pay close attention to the subscriber revenue at earnings, not just the subscription numbers.

    One of the big problems that the Netflix bears point out is that the average revenue per user has been declining. In the first quarter of 2006 the average revenue per user was $17.06. At the end of the first quarter of 2011 this number fell to $11.94. The introduction of the $7.99 unlimited streaming plan may put further pressure on the average revenue per user in the coming quarters.

    http://seekingalpha.com/article/278627-n...

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    • BIG_$_CRASH_$_CRASH_$_CRASH_$_CRASH_$_CRASH

    • insight!CRASHtoday???

    • I prefer to stay short with NFLX for a variety of reasons. NFLX fundamentals are not impressive from a value perspective. There is limited growth potential compared to the risks of downside.
      Let's look at the fundamentals. NFLX had an impressive run. In close to 1 year (July 30, 2010) Netflix has jumped 73% from where it was at 102.55. In 6 months, NFLX jumped 34 % from 189.09. PE is a beefy 82.51. Book value is 6.00.

      Clearly, NFLX is expensive relative to its earnings. And NFLX has plenty of competition. They are not the only company that streams video. Appl, Googl, Amazon, Comcast, Dish-Blockbuster, HULU, HBO are all directly competiting against NFLX. Content renewal costs from the studios are growing much higher (x 10) and NFLX can't afford to pay for it. International expansion into Canada has not been as robust as expected and nearly 70 million in debts are coming. Latin America is costly and risky. There is no broadband infrasturure in Mexico, the 2nd largest country in Latin America. Lovefilm-Amazon has a major advantage in Europe. I doubt that NFLX will keep growing at a high pace and with expenses increasing, their margins are under serious pressure. I highly doubt that NFLX will grow another 73% in 1 yr of 34 % in 6 months. There are better values in the market to be invested with and NFLX is not my pick. IMO- NFLX is a risky hold.

      • 2 Replies to schweitz31
      • Schweitz:

        A little more context. NFLX moved into streaming because it realized RedBox was eating into its opportunity. NFLX killed BB and RedBox was starting to erode NFLX. It wanted to leverage its leadership position into the dominant streaming position. Reed did about as well as one could. But, fundamentally speaking, the capabilities required to dominate streaming are entirely different than DVDs. NFLX tried to create a monopoly by pricing below cost (if any two companies should be reviewed by DOJ it would be NFLX and Facebook), but it had to raise prices because its claims to studios (almost all our subscribers are primarily DVD so we should pay less for streaming) didn't sync with the message to the Street (we are growing the scalable streaming business like wildfire), so the studios want more money than they have.

        In the process, they killed the one truly distinctive asset they had, a world class brand. That's what should scare investors to death. The have a weakened brand, no real cash and a world of competitors....

        It loses money on streaming. The physical cost structure has not gone away. Its subscriber base is tiny compared to YouTube or AmazonPrime. I cannot wait for the earnings release and subsequent scrutiny of the books...

      • Nice post...

        What makes me wonder is every other sane stock I have seen (say QCOM) factors in competition....

        This is the only stock where I have seen that no analyst considers competition...Now would they do that without any benefits!!!!

    • At earnings call next Monday, the subscription revenues do matter. It is not just about the subscription #'s.

      The average revenue per user has been steadily declining. In the first quarter of 2006 the average revenue per user was $17.06. At the end of the first quarter of 2011 this number fell to $11.94.

      It should be interesting to see what this earnings brings.

 
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