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  • Netflix Shares Soar Tuesday and Site Goes Down [View article]
    Using Bilton's quote - "Netflix brand is to deliver content to subscribers on demand 24/7 whether by mail or streaming. "

    Bottom line in the battle between the "Glorificators of Gloom" and the Prognosticators of endless Profit who dispute each others projections of future $NFLX cash flows -

    Can subscriber revenue (net paying subscribers X declining rev/subscriber, declining on the migration from DVD to streaming plans) grow faster than the increasing costs of renewing existing content and acquiring new content (both of which are greatly increasing) and the costs of delivering that content (declining from migration to streaming from DVD but somewhat offset by new infrastructure buildout demands)?

    Based on current valuations and pie-in-the-sky prognostications of profit, I have to side with the gloomy guys right now.
    Mar 31, 2011. 11:41 AM | Likes Like |Link to Comment
  • Netflix Shares Soar Tuesday and Site Goes Down [View article]
    "glorificators of gloom" - quite a mouthful. :>)
    Mar 31, 2011. 11:24 AM | Likes Like |Link to Comment
  • Netflix Shares Soar Tuesday and Site Goes Down [View article]
    What makes matters worse on this issue is that utter lack of transparency that exists by Netflix' failure to host a live conf call where mgmt can be subjected to interactive questioning to elaborate on what the cost was and where it is buried on the books.
    Mar 31, 2011. 11:21 AM | Likes Like |Link to Comment
  • Reading International: There's More Popping Than Just Corn [View article]
    Tony - While theater exhibition is a mature business and Reading mgmt agrees (see 10-K page 2 excerpt, below) its competition is not from Netflix. NFLX is quite different from the movie theater experience of seeing newly released movies out-of-the-home and on the big screen in an auditorium with others and with big sound, etc. The most popular and primarily watched movies on Netflix are REPLAYS of old product that wouldn't even be known about or sought after unless it previously succeeded on the big screen. In fact, with the studios (concerned with the profit degradation from Netflix's all-you-can-eat buffet) increasingly stretching and delaying the window when Netflix gets product, this differentiation of home video from cinema exhibition is further widened. On the other hand, the studios are seeking to insert a higher margin (to them/cost to viewers) premium VOD window of movie product into the mix sooner after cinema box office release than historical patterns. This is a greater threat to cinema profits and movie runs than Netflix. How much of a threat is yet to be seen as studios do not want to kill box office - the goose that lays the golden egg. Without the media buzz that accompanies a 'box office hit', there is no "premium" in "premium VOD" or even as much value in the entire back end chain on distribution and sales of a movie.

    Also, the following excerpt Reading's 10-K illustrates mgmt.'s view on its cinema segment's unique role in the growth of overall Reading, which is one of providing recession resilient steady cash flow to fund both the development/value-add on its substantial owned real estate or acquire, at attractive multiples and returns, other existing cinemas, which would be synergistic in many ways. Even their recent acquisitions of real estate were all bolt-on pieces to their existing parcels to add value to an overall project.

    From page 2 of Reading 2010 10-K at

    "While we do not believe the cinema exhibition business to be a growth business, we do believe it to be a business that will likely continue to generate fairly consistent cash flows in the years ahead even in recessionary or inflationary environment. This is based on our belief that people will continue to spend some reasonable portion of their entertainment dollar on entertainment outside of the home and that, when compared to other forms of outside the home entertainment, movies continue to be a popular, and competitively priced option. However, since we believe the cinema exhibition business to be a mature business with most markets either adequately screened or over-screened, we see our future asset growth coming more from our real estate development activities and from the acquisition of existing cinemas rather than from the development of new cinemas. Over time, we anticipate that our cinema operations will become increasingly a source of cash flow to support our real estate oriented activities, rather than a focus of growth, and that our real estate activities will, again, over time become the principal thrust of our business. "
    Mar 31, 2011. 11:14 AM | 1 Like Like |Link to Comment
  • Netflix: Analyst Alchemy [View article]
    before you do that note- do one on Creidt Suisse "call and raise" report on NFLX.

    US market saturation that NFLX will inevitably run into is exactly why NFLX is unlikely to achieve CS ridiculously high expected subscriber growth without huge influx of int'l subscribers. It seems the bankers now at least acknowledge this as they have increasingly turned to projecting int'l growth.

    However, Int'l subscribers won't come as easily as US subscribers migrated from existing base or fleeing from video stores. They certainly aren't joining this subscription service as cheaply for the following reasons:
    1) NFLX has little brand equity in int'l markets. Maybe a little in Canada but go across the ocean and there is nada. So Credit Suisse and Goldman Sachs projecting their int'l 'hockey stick' from an initial growth rate in Canada that starts from from a 0 base and with many on free subscription is a farce.
    2) Unlike in the US, overseas Netflix has zero mkt share and there is competition with existing market share providing a real leg up on Netflix in Int'l markets (for example, in Europe, its Lovefilm - soon to be Amazon; and in Aussie its Quickflix);
    3) Netflix hasn't purchased the content for int'l yet. NFLX content for Canada isn't even the same as it offers digitally in US. (The recent purchase of Paramount content is an added cost to what NFLX already paid for domestically) These are all incremental content costs where competitors and THEIR subscriber base hold the cost advantage touted as Netflix's in US.
    4) Probably most important and likely to cause churn in Canada and intl markets to much greater extent and sooner than US . - There is no net neutrality internationally so video streaming and bandwidth hogging will cost either the service or the subscriber additional money; It is happening in Canada already with less than 1MM subscribers. Netflix has had to roll out tiered product to reduced bandwidth usage. You won't even see 1/2 of GS or CS int'l subscriber levels before there is mayhem in the int'l broadband markets on this issue.

    Now if NFLX can't achieve the Int'l growth GS and CS are projecting, where does that put NFLX stock valuation?
    Mar 29, 2011. 02:35 PM | 1 Like Like |Link to Comment
  • Netflix: Analyst Alchemy [View article]
    EXACTLY on point Bilton!
    Mar 29, 2011. 02:25 PM | Likes Like |Link to Comment
  • Netflix: Analyst Alchemy [View article]
    Check out some detail on content cost commitments listed as of 12/31/10 in NFLX 10-K at

    Note this is before some of the more recent content purchases of "House of Cards", Paramount-Canada, rumored Miramax and necessary Starz renewal (to maintain existing content.)

    "As of December 31, 2010, we had over $1.2 billion in such contractual commitments covering payments due over the next several years."

    Contractual obligations (in thousands):
    Payments due by Period
    Content obligations
    Less than 1 year: $530,878
    1-3 years: $ 531,698
    3-5 years: $236,600
    Total: $1,299,176

    Note NFLX calls this total "over $1.2 Billion" rather than what would have been more honest disclosure 'almost $1.3 Billion'.
    Mar 29, 2011. 02:23 PM | Likes Like |Link to Comment
  • Netflix: Analyst Alchemy [View article]
    The Goldman analyst was "worried about competition in January and then stopped worrying about it in March" because they want the underwriting assignment for NFLX's inevitable secondary stock issuance to provide the capital necessary for content and infrastructure to enable growth towards these numbers.
    Mar 29, 2011. 01:52 PM | 2 Likes Like |Link to Comment
  • Netflix: New Competition a Threat to the Multiple, Not the Business [View article]
    According to industry articles - The 'details' of the rumored deal appear to be library of around 700 old (but some formerly big hit) movies for 5 years for $100MM. The company has not acknowledged the deal and thus any terms including how much it actually costs as yet.

    However, NFLX did confirm the purchase of 350 movies from Paramount for the Candian market for 5 years. Its not clear but these may be movies NFLX already has in its domestic streaming library. This purchase would be for their use to enhance NFLX small canadian offering.
    Mar 28, 2011. 10:46 AM | Likes Like |Link to Comment
  • Goldman Sachs isn't too worried about Starz delaying some content delivery to Netflix (NFLX), but it's not denying that we should see more providers "flex their muscles" even if there's not a "worthy competitor" to the video service yet.  [View news story]
    Spot on bilton. - The competition is between Goldman Sachs and Credit Suisse as to who can top the other in subscriber growth projections.
    Mar 25, 2011. 02:33 PM | 1 Like Like |Link to Comment
  • Movie Theaters: Predictable Businesses, Favorable Outlook, Reliable Yield, Cheap Stocks [View article]
    Actually its not ticket prices but box office revenues are down in Q1 yoy. Average prices, other than further increased impacts of growing number of 3D and other premium screen offerings, keep pace with inflation and grow each year.

    Note with slightly higher prices, admissions are actually down Q1 yoy >20%. This is primarily a function of popular product this qtr primarily being from Oscar season that is not 3D nor concession friendly (kids consume more concessions but don't see the King's Speech or Black Swan) versus last year not only the highest grossing movie of ALL TIME in Avatar and a high grossing Alice in Wonderland, but both of those movies last year were 3D and concession friendly. Improved slate of very popular sequels to franchise/tentpole films come out starting in Q2 that will likely outperform 2010 and close YOY gap and maybe YTD gap.

    hope this helps
    Mar 25, 2011. 09:14 AM | 1 Like Like |Link to Comment
  • Netflix Original Content: More Than Just a Strategy Shift [View article]
    510 and others.

    No typo- CS projects a ridiculous ("optimistic" is way too kind) 69MM subscribers by end of 2016 and in the current 2011 year, 65%% growth from 20MM subscribers at 12/31/10 to 33MM at end of 2011.

    I am not knocking the Netflix service or product. Furthermore, Netflix mgmt has 'internal' goals for Canadian subscriber trials that I'll accept are being exceeded. However, mgmt will never disclose to investors (who choose to overvalue the situation) what those 'internal' continuing subscriber goals are. But those undisclosed internal numbers are a totally different animal than what Credit Suisse is spouting.

    I don't agree with you that the CS "analysis" is "reasonable" by any stretch.

    To assume that Canadian growth will continue on a hockey stick at the same pace it has "jumped" from 0, especially when much of the subscriber number was free trials whose real churn numbers haven't been provided nor are calculable yet is irresponsible. To project that all foreign markets to be entered post-Canada will experience this same Canadian 'growth' is reckless, maybe criminal. Oh for the day of the those old SEC prosecutions of the dot com analysts.

    Whatever markets Netflix enters after Canada are overseas or don't have English as their primary language. Canada doesn't yet have any real desirable content offerings and these other markets will have scant options too. Having an affordable, accessible and easy to use platform is worth nothing if there is no desirable content. That certainly then isn't a real value proposition (even before dealing with broadband overuse charges).

    Lastly, repeating my #4 from above regarding any of these incremental markets John Blackledge at CS thinks Netflix will enter every year: There is no net neutrality internationally so video streaming and bandwidth hogging will cost either the service or the subscriber additional money. It is happening in Canada already with less than 1MM subscribers. You won't even see 1/2 of Goldman Sach's let alone Credit Suisse's estimate of int'l subscriber levels before there is mayhem in the int'l broadband markets from overuse.

    Be realistic - these bankers are pimping for a piece of the inevitable secondary stock issuance Netflix will have to do - ought to do - to pay for its necessary content purchases.

    As to your last point - I know Facebook, Facebook is a friend of mine, and Netflix is no Facebook. Totally different business model.
    Mar 24, 2011. 08:36 PM | 1 Like Like |Link to Comment
  • Netflix Original Content: More Than Just a Strategy Shift [View article]
    This just off the press-

    Starz tightens Netflix windows - Cabler to impose 90-day delay for streaming of series next week; movies later when contract expires.
    Mar 24, 2011. 08:03 PM | 3 Likes Like |Link to Comment
  • Netflix Original Content: More Than Just a Strategy Shift [View article]
    Here is some applicable text from new Hollywood Reporter article "Hollywood's Feelings About Netflix's $100 Million 'House of Cards' Deal"

    "In fact, some analysts figure that Netflix outbidding HBO and others signals less of an overall shift in strategy than a shot across the bow of the pay cabler, which has refused to license its content. If HBO won’t strike a deal, the thinking goes, Netflix will just bid against it for A-list content. Will HBO budge?
    'HBO has no plans to sell its content to Netflix because we believe in high-quality, exclusive content,' network spokesman Jeff Cusson tells THR."
    Mar 24, 2011. 03:22 PM | 3 Likes Like |Link to Comment
  • Netflix Shares Soar Tuesday and Site Goes Down [View article]
    I wonder outages and rebates like these provide cover for an earnings miss and are implied by mgmt to be "non-recurring". Such outages and costs seem to be normal course (and likely referred to as such with subscribers) and should be considered normal part of costs of doing business by investors.
    Mar 24, 2011. 09:40 AM | Likes Like |Link to Comment