I am surely over-simpifying this. So please tell me where this logic is flawed.
Content costs for NFLX are about $2.5 billion per year. Let's round up to $3.0 billion to account for some additional content cost growth and all the administrative expenses.
NFLX will soon be at 40 million subs worldwide. Maybe by the end of the year. 40 million net paying customers * $96 per year per customer = nearly $4 billion in revenue, not counting DVD stuff, so let's say conservatively $4 billion in annual revenue.
That's $1 billion in profit ($4 billion minus $3 billion) and a PE of 10. That assumes no additional revenue streams. That assumes no growth after 40 million subs. That assumes no price increases.
The beauty of this business model is that the marginal sub adds more and more to the bottom line. Explosive profit growth as the subs grow.
NFLX will surely find additional ways to eventually, directly or indirectly, make money of such a massive customer base, right? Tens of million of customers means power.
OK, this is simplistic. Rough math. I am sure I missed a lot. Please educate me.
Lastly, you forgot to factor in the money they spend on never ending advertisement, $100,000 million on House of Cards, and the subscriber numbers you referenced are not legit. They like the count all of the free subs. Some will cancel with out paying, and those that stay still paid for 11 months rather than 12. Many cancel and sign up for another free month, etc. That is why simple math simply won't do.
I believe that you also forgot the infrastructure cost to be able to provide streaming content to 40 million subs worldwide. This isn't like ITUNE's, all these HD Movies and shows take up a LOT of storage, the lastest equipment/software and an IT department to keep it all running and keep it fast... and that isn't cheap. I wouldn't be surprised at all if thier IT budget was a billion a year.
Our total international contribution loss of $105 million in Q4 was, as expected, higher than the prior
quarter international loss of $92 million, owing to the incremental costs associated with our launch in
the Nordic countries. The Q4 loss was lower, however, than our guidance midpoint of a $113 million
loss, due primarily to the higher than expected growth of international subscriptions and revenue.