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Netflix, Inc. Message Board

  • satrasal satrasal Jul 13, 2011 11:35 AM Flag

    street cancellation poll- nflx future revs

    11% will pay more
    38% will opt for just streaming or just dvd
    51 % will cancel nflx

    How many of the 24 mil users might be affected?

    We know their retention for hybrid (streaming+dvd) was higher than streaming only which was higher than dvd only.
    We know arpu was $12.
    We know the "vast majority" of subs were streaming only at $8 or streaming + 1 dvd $10.

    Assuming 30% were stream only ($8), 50% were stream + 1 dvd ($10), and 20% were stream + 2/3/4 dvds (avg $18) we get an arpu of $12.

    The new model doesn't affect streamers only since their price remains the same.
    It doesn't affect the 20% who presumably didn't care about streaming except to lower their prices from an avg of $18 to an avg of $15 and impacts nflx by lower revs of $150 mil a year.

    So the question is what happens to the 12 mil susb who do the stream + 1 dvd and are upset about the hike.

    If half (6 mil subs) cancel altogether, nflx loses 720 mil revs/yr.
    40% (5 mil subs) opt for just stream or just dvd- nflx loses 120 mil /yr

    10% (1 mil subs) pay the extra $6 adding 72 mil revs a year.

    Net net, nflx loses 920 mil revs/yr- and does 2.5 instead of 3.4 billion revs.

    So we see a minimum 25% eps hit from what analysts currently model- 3.25 billion revs and $4.5 per share eps

    Also, nflx should see a deceleration of new adds to 75% of what it would have otherwise seen given that 50% of the hybrid plan folks would want to leave/not join.

    And if we see a spiral of desertion from nflx motivated by the social networking factor which was likely the reason why nflx saw explosive growth the last year, we could see a lot more that 25% deceleration. So why is the stock going up?

    Because nflx stock price had little to do with reality anyway?

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