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Netflix, Inc. (NFLX) Message Board

  • alinastein alinastein Apr 25, 2013 7:26 AM Flag

    Shorts really believe nflx can't raise prices, even as content improves!

    You give customers more, then you ask for a little more.
    Different from sbux where you pay $2-3 for a regular coffee, the price goes up, and you get the same coffee.
    What's so difficult to understand about this?

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    • Netflix does not want to raise prices right now. They can improve revenue/subscription count by tightening down on free 'more than two machine' viewers as they are doing. They can tweek indirect advertizing with partners. Maybe offer Pay-On-Demand of more current movies as a supplemental service for those who want it, adding hugely to EPS? Netflix is a high fixed cost/low variable cost business. There are many ways to skin this cat.

    • 3 reasons why they will not raise prices:
      1 - CEO says he won't every time he opens his mouth. There is no way he will go back on that, as he has lost all cover already on this
      2 - they tried it last year, and the stock went from 300 to 55, and they lost a massive amount of subs (and almost went bankrupt). The brand has finally recovered, and you want to nail it again???
      3 - simple supply vs demand. Reed knows that to hit 60M US households (2x today) he needs a very low price (in fact I would argue that $7.99/mth may already be too high).

      If the rate of growth in subs slows agin, NFLX will be back at $55. He has chosen correctly to increase profits by increasing contribution margin per sub by cutting content and mkt expense per sub, not raising price.

      Bulls should focus on their ability to cut costs/sub, not on price increases - you are wasting your time.

      • 1 Reply to once_on
      • Certainly not this year.
        But when Disney, Star Wars content hits in 2016, it's certainly reasonable to ask for a measly buck more a month, if telegraphed well in advance. If not before then.
        They not only tried hiking in 2011, they did it by splitting streaming from DVD.
        But doing it in such a heavy handed way #$%$ off a lot of people.
        That's also not what caused the stock to crater.
        That was caused by Reed completely disrupting the old business model that was very profitable thru the DVD service. Streaming was an add on with very little content.
        When Reed made clear he wanted to remake nflx into a streaming service with dramatically higher content costs, that completely upset the apple cart. Stock was already overvalued, and shorts piled on big time.

 
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