Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
Sakelaris,
You are right on that the decline is slowing and we may see some stabilization at some level.
I do not bad mouth DVD either, sometimes tone is hard to get a handle on with the comments. I just think that there are fundamental shifts occurring and it will be very hard to predict how this plays out in the next 5 years, let alone longer periods.
Thanks for adding you views Sakelaris, it made me think some more about this topic.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
The useful life of DVD is definitely uncertain. Netflix's DVD members have decreased somewhere around 50% over the past 3-4 years.
It's a preference choice. Movie lovers always are the strongest critics against streaming.
The movie industry has become severely saturated (movies come out regularly every month) and as a result, movie plots have significantly worsened and overall quality is down.
This has led to the rise to a couple things, independent and foreign films and a wide variety of shows and other programs including reality, do-it-yourself, non fiction, history, nature etc.
In my opinion, the balance has shifted towards these other programs rather than movies, and this is why we are seeing such strong trends in streaming demand. Why would I go see Iron Man 3, when it is the same as the first one??
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
No problem Sakelaris,
Again, I have not covered this industry focused on streaming in a while, but I would suspect that if infrastructure and technology are able to continue to create capacity for growth in streaming, that access to content will be expanded over time.
It is kind of difficult to think about the next 5-10 years, and how this could possibly look. There are a variety of hardware (Xbox, Roku, other set-top boxes) which will allow streaming, as well as a simple DSL or cable connections.
If Disney acquired 4-7 companies in the next 5-10 years, including movie producers, they could in theory have a more diversified streaming product. Ultimately, I would assume that consumers would still want to own 2-4 streaming subscriptions for a wider variety of content. Ultimately, a temporary streaming version of a la carte, could morph back into a bundled deal (it's pretty hard to get away from it quite frankly).
As I am interpreting your point, there may be impacts to the supply of content and its availability at an ideal price as it currently is based on the DVD model. I am assuming that over time, access will improve from the streaming side.
I will be heading out soon, but could you maybe provide examples of how access could be endangered, maybe I'm not fully understanding this point.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
I'm not going to argue against consumer preference. However, there are significant preference gaps between generations, and for the most part, any generation younger than the baby boomers is more likely to progress to streaming and newer technologies. There are even many baby boomers too who are progressing to mobile devices and streaming services.
DVDs and Blu-ray will probably have a useful life still, and I have no idea how long it will be. Long-term growth drivers are mobile devices, and newer desktop related devices, multi-use console platforms, and smart TVs, etc. These and future devices will continue to generate more streaming demand for content.
Just take a look at what Netflix is doing. Netflix is the pioneer of DVD rentals, the pioneer of subscription-based streaming, and will attempt to be the pioneer for digital-developed programming. The company has made drastic changes over a roughly 10-year period because they are not focused on the present or past, which is DVD. And technology is rapidly providing more flexibility for the company to adjust its business models.
I used to cover the stock more closely, but if you just compare the domestic and international streaming segments' paid members (34.2 million) against the domestic DVD segment paid members (7.8 million), and compare the growth trends from the DVD segment peak, it is quite easy to see this significant adjustment. I don't know the year and peak off the top of my head, but we do know that it is definitely double where they are now.
And just to clarify, when something becomes obsolete from mainstream, it doesn't necessarily mean it is completely gone. So DVDs may have a useful life for 30 years or more. It will just be uncommon for the average household to consume the product. Not many households buy records anymore, but there is still a market and there are still record players.
Moving forward for Netflix, their business margins are not as lucrative as with the DVD model, and for this reason, I believe they will continue to attempt to develop their own digital programming and content.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
In my opinion dvds are already near-term obsolete technology. This is clearly why Netflix is letting go of this business model (their most profitable stream).
Hulu was founded as a purely streaming service. The dvd model will just go to lower and lower level companies still willing to take short-term profits.
Even Coinstar (Redbox) is transitioning to streaming with Verizon.
Content is the most valuable commodity with respect to program distribution (infrastructure is also valuable). Netflix, Amazon, and Hulu will need to transition their business to develop programs (House of Cards, Arrested Development, etc.) because a la carte will threaten their platform distinction in the long-term.
Right now I can pay less than $65/month for DSL, Hulu, Netflix, and NBA.com (5 teams all home/away games, HD live). Eventually I will be able to pay for NFL too, and ultimately I will be able to create my own packages. At that point, Netflix/Hulu will be obsolete, unless they can develop their own content (Netflix's next big foray).
This is also why I don't think anyone acquired Netflix when they were so cheap. Long-term, large media companies know that they can create their own direct streaming services and if a la carte comes that's the next step.
We have seen the transition with Comcast buying NBCUniversal, and we will continue to see Netflix and Amazon, and Hulu create exclusive content. All major models know one thing, that they need content to survive.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
The synergies of Hulu could be stated the same for Netflix if they were to be acquired too.
There are many things occurring lately related to streaming; Netflix/Hulu, Microsoft creating a one-stop xbox with streaming capabilities, Roku, cable, satellite and streaming services requiring subscriptions or not, etc.
Netflix and other streaming services may be able to create long-term value if they are able to produce web-based content. I think that this is the route Netflix will attempt to take. If you think about progression, they started with DVD mail, then transitioned to streaming, I think the next step is becoming a web-based media company creating content. This will probably occur regardless if Netflix is ultimately successful or not.
I think if streaming continues to be the primary focus and a la carte eventually unfolds, there will be a massive race from companies like Discovery, Comcast, Disney, CBS, Newscorp, Time Warner, etc. to consolidate as much as possible (AMC, Starzs, Scripps Networks Lions Gate, Dreamworks, etc. being acquisition targets). Eventually, this will lead to separate subscription-based streaming services, possibly significantly impacting cable, satellite, and Netflix/Hulu.
Advertising still has a lot of room to grow digitally, and as this shift continues to occur, it will only be a matter of time for media to become more established via the web and mobile.
Sports is also progressing quite rapidly to the web and mobile. A la carte will ultimately hurt streaming platforms such as Netflix and Hulu if they stay as stand alone entities.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
Hulu's model is more of a realistic long-term streaming product.
One of the big factors which will impact the shift to streaming even more so will be the connection with advertising. Advertising is synonymous with programming/distribution (a major weakness for Netflix).
Hulu is ahead with creative and engaging streaming advertising. This will be extremely important for all media content developers over the long-term.
Millennial Media Heading Back To Previous Highs [View article]
Thanks for the reply.
The theory is well taken. I bought Zipcar down to the $6 level and reaped the benefit of the Avis buyout. Zipcar was improving financially and this was the primary reason why I remained long with my investment position. Additionally, the car sharing market was growing significantly (still is). Also, Zipcar had scale and the competitive landscape was prime for Avis to look to acquire Zipcar as Hertz and Enterprise were developing internal programs in the U.S.; and Daimler AG, BMW and Sixt, Volkswagen were all developing car sharing programs too.
However, I still think that company fundamentals and financial strength is the superior factor. If Pandora is going to continue to trade 30xs book value, fine by me.
I like the progress that is occurring with Millennial and if the company is able to grow into consistent profitability and free cash flow generation, we are probably looking at a price increase much higher than the teens.
Zipcar was punished severely for missing estimates by a penny a share and revenues off by $1 million or so. MercadoLibre and Liquidity Services are a couple other companies that have been punished in the past for missing targets.
The key for these companies and why I have bought on significant dips is that they are still growing strongly, much more so than many other companies. Combine growth with earnings and free cash flow and these companies will eventually be valued higher. MercadoLibre and Liquidity already have been and Zipcar as we know was acquired.
I think that if the team at Millennial continues on their current track, that the company will see much better days.
Millennial Media Heading Back To Previous Highs [View article]
SFC,
While I don't disagree with Millennial's potential, we should clarify that growing margins is not a core focus of the business. Management has been firm that their objective is the 40-42% range.
Also, while Millennial's financial position remains strong, we still need to see the company become profitable and more importantly, generate positive free cash flow.
Operating cash flow is positive ytd (first time over the previous 4 years), so this is good progress.
Millennial is the clear leader to this point between the three publicly listed third-party companies; Augme Technologies and Velti being the other two. This leadership will be based on revenue as a result of Velti's restructuring and transition of its business for 2013.
International revenue growth for Millennial has remained robust, especially over the last four quarters. I think that there is some excitement related to the geography's continued potential.
Millennial Media (MM +8.5%) is now up 12% over the last two days. Yesterday, Millennial announced the launch of a Japanese unit - the Japanese mobile content market hasn't been easy for foreign firms to crack. Millennial's gains come as mobile ad peer Velti (VELT -9.5%) dives after announcing another revenue miss and bleak guidance (as well as a COO change). On its earnings call, Velti stated days sales outstanding was still a whopping 309 days at the end of Q1, but promised full-year DSO would be under 100 days. The cash-strapped company expects free cash flow to be around -$8M to -$12M in Q2, before "a significant amount of cash flow" is produced in Q3. [View news story]
The 100 days is not expected at year-end comprehensively. The full-year statement is misquoted. There was no guidance for full year-end DSO.
The 100 days relates to new customer contracts in 2013.
Mr. Ross, "In terms of comprehensive DSOs, as outlined in the earnings deck, DSO ended the quarter at 309 days, which is down slightly from year end. While we will not be giving out specific DSO guidance, we continue to expect DSOs on revenue generated in 2013 to be under 100 days and overall DSOs to improve gradually as older receivables are collected."
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
You are right on that the decline is slowing and we may see some stabilization at some level.
I do not bad mouth DVD either, sometimes tone is hard to get a handle on with the comments. I just think that there are fundamental shifts occurring and it will be very hard to predict how this plays out in the next 5 years, let alone longer periods.
Thanks for adding you views Sakelaris, it made me think some more about this topic.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
We are talking about households, not "going to the movies".
The discussion is about how the movie gets viewed after the theater.
All emotionally charged comments are welcomed very much so Gary.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
It's a preference choice. Movie lovers always are the strongest critics against streaming.
The movie industry has become severely saturated (movies come out regularly every month) and as a result, movie plots have significantly worsened and overall quality is down.
This has led to the rise to a couple things, independent and foreign films and a wide variety of shows and other programs including reality, do-it-yourself, non fiction, history, nature etc.
In my opinion, the balance has shifted towards these other programs rather than movies, and this is why we are seeing such strong trends in streaming demand. Why would I go see Iron Man 3, when it is the same as the first one??
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
Again, I have not covered this industry focused on streaming in a while, but I would suspect that if infrastructure and technology are able to continue to create capacity for growth in streaming, that access to content will be expanded over time.
It is kind of difficult to think about the next 5-10 years, and how this could possibly look. There are a variety of hardware (Xbox, Roku, other set-top boxes) which will allow streaming, as well as a simple DSL or cable connections.
If Disney acquired 4-7 companies in the next 5-10 years, including movie producers, they could in theory have a more diversified streaming product. Ultimately, I would assume that consumers would still want to own 2-4 streaming subscriptions for a wider variety of content. Ultimately, a temporary streaming version of a la carte, could morph back into a bundled deal (it's pretty hard to get away from it quite frankly).
As I am interpreting your point, there may be impacts to the supply of content and its availability at an ideal price as it currently is based on the DVD model. I am assuming that over time, access will improve from the streaming side.
I will be heading out soon, but could you maybe provide examples of how access could be endangered, maybe I'm not fully understanding this point.
Data Dump - More Weak Economic Data [View article]
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
DVDs and Blu-ray will probably have a useful life still, and I have no idea how long it will be. Long-term growth drivers are mobile devices, and newer desktop related devices, multi-use console platforms, and smart TVs, etc. These and future devices will continue to generate more streaming demand for content.
Just take a look at what Netflix is doing. Netflix is the pioneer of DVD rentals, the pioneer of subscription-based streaming, and will attempt to be the pioneer for digital-developed programming. The company has made drastic changes over a roughly 10-year period because they are not focused on the present or past, which is DVD. And technology is rapidly providing more flexibility for the company to adjust its business models.
I used to cover the stock more closely, but if you just compare the domestic and international streaming segments' paid members (34.2 million) against the domestic DVD segment paid members (7.8 million), and compare the growth trends from the DVD segment peak, it is quite easy to see this significant adjustment. I don't know the year and peak off the top of my head, but we do know that it is definitely double where they are now.
And just to clarify, when something becomes obsolete from mainstream, it doesn't necessarily mean it is completely gone. So DVDs may have a useful life for 30 years or more. It will just be uncommon for the average household to consume the product. Not many households buy records anymore, but there is still a market and there are still record players.
Moving forward for Netflix, their business margins are not as lucrative as with the DVD model, and for this reason, I believe they will continue to attempt to develop their own digital programming and content.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
Hulu was founded as a purely streaming service. The dvd model will just go to lower and lower level companies still willing to take short-term profits.
Even Coinstar (Redbox) is transitioning to streaming with Verizon.
Content is the most valuable commodity with respect to program distribution (infrastructure is also valuable). Netflix, Amazon, and Hulu will need to transition their business to develop programs (House of Cards, Arrested Development, etc.) because a la carte will threaten their platform distinction in the long-term.
Right now I can pay less than $65/month for DSL, Hulu, Netflix, and NBA.com (5 teams all home/away games, HD live). Eventually I will be able to pay for NFL too, and ultimately I will be able to create my own packages. At that point, Netflix/Hulu will be obsolete, unless they can develop their own content (Netflix's next big foray).
This is also why I don't think anyone acquired Netflix when they were so cheap. Long-term, large media companies know that they can create their own direct streaming services and if a la carte comes that's the next step.
We have seen the transition with Comcast buying NBCUniversal, and we will continue to see Netflix and Amazon, and Hulu create exclusive content. All major models know one thing, that they need content to survive.
Data Dump - More Weak Economic Data [View article]
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
There are many things occurring lately related to streaming; Netflix/Hulu, Microsoft creating a one-stop xbox with streaming capabilities, Roku, cable, satellite and streaming services requiring subscriptions or not, etc.
Netflix and other streaming services may be able to create long-term value if they are able to produce web-based content. I think that this is the route Netflix will attempt to take. If you think about progression, they started with DVD mail, then transitioned to streaming, I think the next step is becoming a web-based media company creating content. This will probably occur regardless if Netflix is ultimately successful or not.
I think if streaming continues to be the primary focus and a la carte eventually unfolds, there will be a massive race from companies like Discovery, Comcast, Disney, CBS, Newscorp, Time Warner, etc. to consolidate as much as possible (AMC, Starzs, Scripps Networks Lions Gate, Dreamworks, etc. being acquisition targets). Eventually, this will lead to separate subscription-based streaming services, possibly significantly impacting cable, satellite, and Netflix/Hulu.
Advertising still has a lot of room to grow digitally, and as this shift continues to occur, it will only be a matter of time for media to become more established via the web and mobile.
Sports is also progressing quite rapidly to the web and mobile. A la carte will ultimately hurt streaming platforms such as Netflix and Hulu if they stay as stand alone entities.
Hulu In The Hands Of The Cable Companies Would Negatively Impact Netflix [View article]
One of the big factors which will impact the shift to streaming even more so will be the connection with advertising. Advertising is synonymous with programming/distribution (a major weakness for Netflix).
Hulu is ahead with creative and engaging streaming advertising. This will be extremely important for all media content developers over the long-term.
Millennial Media Heading Back To Previous Highs [View article]
The theory is well taken. I bought Zipcar down to the $6 level and reaped the benefit of the Avis buyout. Zipcar was improving financially and this was the primary reason why I remained long with my investment position. Additionally, the car sharing market was growing significantly (still is). Also, Zipcar had scale and the competitive landscape was prime for Avis to look to acquire Zipcar as Hertz and Enterprise were developing internal programs in the U.S.; and Daimler AG, BMW and Sixt, Volkswagen were all developing car sharing programs too.
However, I still think that company fundamentals and financial strength is the superior factor. If Pandora is going to continue to trade 30xs book value, fine by me.
I like the progress that is occurring with Millennial and if the company is able to grow into consistent profitability and free cash flow generation, we are probably looking at a price increase much higher than the teens.
Zipcar was punished severely for missing estimates by a penny a share and revenues off by $1 million or so. MercadoLibre and Liquidity Services are a couple other companies that have been punished in the past for missing targets.
The key for these companies and why I have bought on significant dips is that they are still growing strongly, much more so than many other companies. Combine growth with earnings and free cash flow and these companies will eventually be valued higher. MercadoLibre and Liquidity already have been and Zipcar as we know was acquired.
I think that if the team at Millennial continues on their current track, that the company will see much better days.
Millennial Media Heading Back To Previous Highs [View article]
While I don't disagree with Millennial's potential, we should clarify that growing margins is not a core focus of the business. Management has been firm that their objective is the 40-42% range.
Also, while Millennial's financial position remains strong, we still need to see the company become profitable and more importantly, generate positive free cash flow.
Operating cash flow is positive ytd (first time over the previous 4 years), so this is good progress.
Millennial is the clear leader to this point between the three publicly listed third-party companies; Augme Technologies and Velti being the other two. This leadership will be based on revenue as a result of Velti's restructuring and transition of its business for 2013.
International revenue growth for Millennial has remained robust, especially over the last four quarters. I think that there is some excitement related to the geography's continued potential.
Key Items To Consider For Velti's May 13, 2013 Earnings Report [View article]
Premarket gainers: PDII +33%. ECTY +20%. NSPH +18%. SNE +9%. WPX +8%. TTWO +6%. TSLA +6%. RENN +5%.
Losers: TRMD -15%. MOSY -13%. PT -11%. VELT -10%. SCTY -10%. TSL -6%. NBG -6%. [View news story]
Millennial Media (MM +8.5%) is now up 12% over the last two days. Yesterday, Millennial announced the launch of a Japanese unit - the Japanese mobile content market hasn't been easy for foreign firms to crack. Millennial's gains come as mobile ad peer Velti (VELT -9.5%) dives after announcing another revenue miss and bleak guidance (as well as a COO change). On its earnings call, Velti stated days sales outstanding was still a whopping 309 days at the end of Q1, but promised full-year DSO would be under 100 days. The cash-strapped company expects free cash flow to be around -$8M to -$12M in Q2, before "a significant amount of cash flow" is produced in Q3. [View news story]
The 100 days relates to new customer contracts in 2013.
Mr. Ross, "In terms of comprehensive DSOs, as outlined in the earnings deck, DSO ended the quarter at 309 days, which is down slightly from year end. While we will not be giving out specific DSO guidance, we continue to expect DSOs on revenue generated in 2013 to be under 100 days and overall DSOs to improve gradually as older receivables are collected."