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  • Multiple Cable Operators Say They Are Not In Talks With Netflix To Bundle Services [View article]
    Exactly and what does it say about the prospects for Netflix business that Hastings stooped to spreading this rumor?
    Mar 10 09:10 AM | 3 Likes Like |Link to Comment
  • An Alliance With Cable Is What Netflix Needs To Survive [View article]
    What a bunch of horse sh*it. With ~25% of the U.S. addressable market already signed up as Netflix streaming subs this business is not profitable. How the hell is cutting the cable companies in for a significant piece of the pie going to fix this? Why the hell would the cable companies want to pay Netflix for programming they already largely provide and could provide the rest without Netflix.

    This is a planted rumor from Hastings to prop up interest in this unsustainable business long enough to dump it on someone else. How dumb is Steve Ballmer? That's the million dollar question anyone investing in Netflix needs to be asking.
    Mar 7 09:12 AM | 3 Likes Like |Link to Comment
  • Netflix: Being Right For All The Wrong Reasons [View article]
    In the end this is simple they are selling an $8.00/ month subscription to all the tv re-runs and ancient movies you can eat. Meanwhile the cable companies are increasingly giving the same thing away and eventually will give it all away. The bull case is basically buying into Hastings lie that their content costs are fixed and re-newed sub growth will eventually translate to higher quality new content that will enable them to become a replacement for cable. The reality is they don't make money with 23M domestic streaming subs as it is and Hastings is freakin liar. Their content costs are not fixed, they may not scale directly with sub growth but they at least stair step with it. Hastings does try to instill some reality in telling the street they aren't a replacement for cable and they love tv re-runs. The street just keeps pretending they didn't hear that.
    Feb 2 09:49 AM | 3 Likes Like |Link to Comment
  • At Least Not Every Netflix Analyst Is Certifiably Insane [View article]
    Rocco,

    I missed this article last night but I'd like to say what Pachter can't really say about the fixed content costs. They aren't niave or misinformed they are freaking LYING! I would bet my house that there are sub thresholds built into the recent contracts that have price increases or cut backs in content when those thresholds are crossed and while content cost don't vary directly with sub growth they stair step with sub growth. The loss of Sony content due to tripping a sub threshold is proof they do exist and they are lying about costs being fixed.

    I posted about the Aztec Two Step on contribution margin on your latest article but this is one of many times we can actually prove they are issuing intentionally misleading statements about their operations at best and more realistically they are lying.
    Jan 27 12:40 PM | 3 Likes Like |Link to Comment
  • Is Netflix On A Suicide Mission? [View article]
    My take is they did less worse than I figured on my metric of choice subscribers, but it just means this thing gets drawn out a little longer not that they are on a sustainable track. Gross additions were fairly strong but this is also a seasonally strong quarter I don't remember the exact number but it was about the same as last years 5.2M. Defections were not as bad as I thought based on the early trends in the quarter but at something like 4.6M they came in at about where they should based on the long term trends of defections about equal to the previous years gross additions.

    Bottom line the long term subscriber trend did not end with this report. They have been on a pace of over 20M gross additions/ year for about a year now or about 1/3 of their addressable market. Common sense tells you that's not a long term sustainable trend and that number has to come back to earth at some point. The take away from the latest report is that growth in gross adds has stopped but not gone backwards yet. Meanwhile defections continue to march higher and are about even with gross additions.

    We will get to a point where these two cross and there are growing net losses in domestic subs. With the 43 third world country boondoggle and now U.K. and Ireland they will be getting an artificial boost to their net sub number for a couple more quarters as there are no existing subs to defect to offset gross additions in these market. This will muddy the only metric Hastings will report anymore net subs additions or losses which I would bet money is his desired effect. Not being able to see gross additions and defections will leave his critics and investors blind to the trend to net losses and at the mercy of his spin on what's behind the numbers.

    BTW it looks like he set his critics up with the "over 20M streaming subs in the America's, U.K. and Ireland". Did you notice that number changed to "over 23M" with the earnings release. This guy is obsessed with managing perception and scoring petty points against his critics. If he had a real business he wouldn't have to do this as the business would speak for itself.
    Jan 27 09:50 AM | 3 Likes Like |Link to Comment
  • How A Real Value Investor Evaluates Netflix [View article]
    How much do you really think NFLX can charge for tv re-runs? Nobody is standing around right now, there is plenty of activity in streaming a la carte because it's a sustainable model. The studios get a fair price per sub and the providers can match content costs to revenues. Didn't you ever wonder why a no moat company like NFLX has no competitors copying it's model? Particularly when the most obvious competitors can blow NFLX out of the water on ability to purchase content.
    Nov 2 08:57 AM | 3 Likes Like |Link to Comment
  • Still In Love With U.S.-Listed China Stocks? [View article]
    Good god another China RTO apologist. Get it through your thick head these companies went half way around the world through the back door RTO process because they are all FRAUDS! The only purpose to go public is to raise cash and yet all of the fantastically profitable high growth Chinese companies chose to go public half way around the world in a process where they give part of the company away for nothing? Are you simple? They went public and raised no cash? They're trading at single digit P/E's because everyone knows they are all FRAUDS!
    Oct 26 07:58 AM | 3 Likes Like |Link to Comment
  • Netflix Earnings Disaster, Calling The Short Of The Century [View article]
    Rocco you probably missed out for exactly the same reason I don't do shorts, you can be dead on with your analysis and still get crushed. As I recall you did short NFLX on and off over the course of the last 6 months or so but the threat of the momo's forcing a margin call always scared you away. The beauty of going long stocks is if your analysis is right you will eventually win. BTW if you think you are sick imagine how Tilson feels. Just a few more months... I saw you take some heat for giving Hastings a little credit once in a while but imagine how Tilson feels after kissing Hastings arse in public a couple of months ago just be done with a call that was a couple of months away from proving to be dead on the money.
    Oct 24 10:28 PM | 3 Likes Like |Link to Comment
  • China: Understanding The Nature Of The Bubble [View article]
    What happens to property values when the massive building bubble stops and huge swaths of the poplation go unemployed? That's exactly what just happened to the U.S. economy and it's going to be orders of magnitude worse in China. Only 15% of the U.S. GDP was construction at the height of our bubble. It's 70% of China's. You are insane if you really think this isn't a disaster in the making for their economy.
    Oct 21 05:01 PM | 3 Likes Like |Link to Comment
  • Why Netflix Could Double Over The Next Year [View article]
    Even accounting for up to 1/3 of customers that Hastings claim are repeats NFLX has already signed up over half of their addressable market at least once. Their churn rate was almost 50% a year before the recent price hike and this is while they are in high growth mode. You are whistling past the graveyard if you tell yourself their churn rate is not a massive problem.

    I've gone back and calculated the ratio of subs leaving in a quarter to the number of gross additions in the year ago quarter over the last few years and the percentage is consistently around 100%. That means with year ago gross additions in the coming quarters in the 5M-6M range NFLX was looking at having to sign up 5M-6M new subs a quarter just to break even on net subs and this was before the price hike (service cut) fallout. Do you really think tv re-runs will keep subs coming back year after year? Particularly since tv everywhere is set to offer the exact same content for free?

    The hail Mary roll out to 43 third world countries at the same time may buy them a little time but it won't save them. The whole thing is a gimmick to goose the net additions number as they won't have to deal with any existing subs walking in these markets offsetting new additions for a couple of quarters. Look at Canada fast start on a net add basis for a couple of quarters has ground to a halt as subs are starting to walk and offset gross adds. This is a Ponzi scheme.
    Oct 9 11:40 AM | 3 Likes Like |Link to Comment
  • What You Know, But Netflix And RIM Forgot [View article]
    Dana,

    I think NFLX current streaming content costs are ~$1.5B/ year, Michael Pachter estimates it will be ~$2B/ year in 2012. NFLX has ~23M streaming subs right now. If we assume real optimistically they hit 30M in 2012 that's a cost of ~$5.55/ month per sub. I don't know what the exact cost of a DVD round trip is but I know it's in the $1.00 range. Assuming a DVD delivery per week and it costs ~$4.33/ month. Add that up and NFLX was looking at breaking even at best possibly losing money on the dual plan at $10.00/ month. They had no choice but to separate the services or charge a lot more for the dual plan.
    Sep 16 06:43 PM | 3 Likes Like |Link to Comment
  • Netflix On Last Legs? It's All But Official [View article]
    <<<(1) The Starz deal not being signed means NFLX holds on to a boatload of money that they would of passed on to Starz >>>

    Wrong what this means is exactly what I've been preaching on the forum for months now, NFLX can't afford anything but ancient tv re-runs. They'll replace the newer movie content that Starz provided with I love Lucy re-runs.


    <<<(2) the uncertainty of the deal has ended ( Wall street loathes uncertainty)>>>

    So instead of speculating that they can't afford good content the street will be relieved to know for sure they can't afford decent content?

    <<<(3) Reed will come out with a nice and effective spin on the situation >>>

    Who cares? How is going to put lipstick on this pig particularly after claiming the first loss of content with Starz was just a short term dispute between them and Sony? I think even Cramer will have to admit the king has no clothes now.

    <<<(4) The stock having dropped 33% from its highs is not real frothy anymore>>>

    50+X P/E on earnings that will be going backwards soon? Are you kidding me?

    <<<(5) you never go broke taking a profit!!!>>>

    Plenty more to go.
    **********************...

    I've been posting on Rocco's articles and other NFLX articles for several months now focused on two themes, churn and loss of quality content. I'll take a bow here as well and I'm looking forward to taking a bow on announcements of net sub losses in the coming quarters as well. It might not be the next one or two but it's coming soon.
    Sep 1 08:38 PM | 3 Likes Like |Link to Comment
  • Did Netflix CEO Reed Hastings Make the Biggest Mistake of His Career? [View article]
    Rocco,

    I didn't do the math on how many sub it will take to get to $1B in revenues but I did play around with some numbers to see how they get to year over year sub addition growth. As is typical the language leaves room for interpretation but it looks like he is saying he expects more net sub additions in Q4-11 than in Q4-10. They added ~3M in Q4-10. In Q2 they lost ~3.5M subs and would probably be at 4M loss by Q4 without the affects of the price increase. That means they would need to add ~7M new subs in Q4 just to match last years net adds without dealing with the turmoil of the price increase. In actuality 4M walking in Q4 is probably low. I've tallied up adds, losses and net gains since Q1-08 and did a calc on percentage of subs walking to gross adds one year earlier going back to Q1-09. Here's the numbers:

    Q2-11 114%*
    Q1-11 86%*
    Q4-10 99%
    Q3-10 103%
    Q2-10 105%
    Q1-10 74%
    Q4-09 79%
    Q3-09 109%
    Q2-09 119%
    Q1-09 80%

    Average 97%

    * I did the research after the Q1-11 report and based Q1-11 on the figures from the shareholder letter which I think might not have included sub losses from Canada. Q2-11 is just from memory based on the figures from the shareholder letter and probably don't include sub losses from Canada.

    What these numbers show is that they consistently lose almost the exact same number of gross adds one year earlier. Gross sub gains in Q4-10 were 5.6M+ which would mean ~5,500 subs walking if they hit their average. The low end of recent trends would be ~4M subs walking in Q4. Even if they hit the low end in Q4 it looks like they'll hit the high end in following quarters to revert to the mean.

    I haven't followed the Canada trends but from what I understand they got out to a quick start adding ~300K subs in each of their first two quarters but have tailed off recently at about half that pace. This makes some sense as there were no subs walking early on to offset gross adds but now they have to deal with that problem. IMO a major reason to rush into Latin America is to use this trick of gross adds without losses to goose net adds for a couple of quarters as U.S. reaches saturation. Kick that can down the road one more time.
    Jul 27 10:55 AM | 3 Likes Like |Link to Comment
  • Netflix on Thin Ice [View article]
    I base my contention that subscription streaming is not a sustainable business on a couple of points. First their current churn of almost 50% and the fact they've already signed up a substantial portion of their addressable market. If you look at the sub numbers (that will no longer be reported after 2011) they lose subs by the droves and the numbers are steadily increasing. They are on a pace to lose ~12m/ year now and it will increase to something like 14M-16M/ year in 2012. The only thing that's masking this is the tons of new subs that are taking their place. When they run out of new subs and it's not far off the mythical virtuous circle of sub growth enabling more content spend (not true) will turn into a death spiral as a declining sub base will force them to cut back on content which will accelerate sub losses and churn.

    Back to the untrue myth of sub growth enabling more content. Their entire success story to date has been due to one unbelievably stupid deal that Starz did which has enabled them to offer decent new movie content for essentially nothing to under the current contract that will expire this year. They'll get the bottom of the barrel of Starz content in the next deal for 10X the current price if they even do another deal. You can add to that they are already losing content with Starz and Showtime limiting content on their current deals and the loss of Sony and reported loss of some Disney content soon. While if you just go by the volume of tv-reruns they have been adding to the library (that others offer for free) you could say they are adding content and that's certainly their argument but they are losing new movie content and replacing it with re-runs leading to a low quality library. How long will subs keep paying a subscription for tv re-runs that are available for free and old movies that they will quickly run through?

    IMO this is AOL all over again, a subscription so cheap and being the first mover and market leader it's easy to get a large portion of your addressable market to give you a shot but in the end there is not enough substance to the service to keep subs coming back. The fact that the Street completely ignored the obvious flaw in AOL's model and ate the story up as long as they were signing up tons of subs is an interesting parallel as well.
    Jul 15 01:32 PM | 3 Likes Like |Link to Comment
  • Netflix Nukes Itself [View article]
    Amen brother Shady, I've been making the argument that NFLX subscription streaming model is unsustainable for a while now but you make it a lot more succinct than I can. My Spidey sense tells me this is all a prelude to guidance that even Goldman's analyst won't be able to defend.
    Jul 12 10:17 PM | 3 Likes Like |Link to Comment
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