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Netflix, Inc. Message Board

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  • techstrategy techstrategy Jul 19, 2011 11:08 PM Flag

    Subscriber revenue has been declining

    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...

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    • Techstrategy,

      lets do simple math....$1B owed to studios & 23 Million customers.
      NFLX needs $43 per customer to settle this amount....

      Their current price/sub is $7.99 for streaming...seems long shot....

      Oh BTW we need to factor in only 11M customers as likely 12M will go with DVD only plan...in which NFLX will pay USPS anyway...

      So, per customer NFLX needs $86 to pay studios....

      Oh! BTW that amount is > 1B....more like $2B....

    • techstrategist: Thanks for your context. NFLX has leveraged everything including the kitchen sink on their lofty hopes of doubling domestic subscriptions year over year. In reality, NFLX won't continue to double subscriptions each year. Meanwhile, the content providers understand that NFLX has profitted immensely from their cheap streamed conent and they won't keep allowing NFLX to get it for cheap. NFLX has no other choice but to pay up but they truly don't have enough capital to afford their renewal increases.

      HULU should be acquired soon. Yesterday, HULU clarified that their content providers are on board for another 5 yrs, a necessary requirement to get acquired. Once the acquisition occurs, I am expecting NFLX to drop at least 10 % especially if the acquiring company has deep pockets to purchase content.

 
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