Seeking Alpha

Rob Fagen

View as an RSS Feed
View Rob Fagen's Comments BY TICKER:
Latest  |  Highest rated
  • A Share Of Netflix Vs. A Tulip Bulb In Amsterdam 1637: Nosebleed Valuation [View article]
    Guinness is $190 per keg? Talk about a bubble! Well, I suppose that's about $2 per pint, which doesn't sound so bad.
    Mar 12 12:09 PM | Likes Like |Link to Comment
  • Warning: Expect The Internet To Get Hijacked Today [View article]
    Lou,

    Please check out Dan Rayburn's very insightful (and possibly more accurate) take on this event.

    http://seekingalpha.co...

    The key point is that Netflix is going to be paying Comcast directly for what they previously have paid only Cogent for. Additionally, Netflix will now get a contractually defined level of service, which it hasn't been getting from Cogent.

    I think the actual tally is:
    Comcast: mostly win (more revenue, but with greater obligation)
    Netflix: win (better customer experience, and maybe lower cost)
    Netflix customers: win (better streaming)
    Cogent: lose (less revenue)

    Regards,

    Rob
    Feb 26 12:25 PM | 1 Like Like |Link to Comment
  • How Healthy Is The Balance Sheet At Netflix? [View article]
    @nanonerd: I think you're thinking in the right direction, but still haven't thought it all the way through. The key for me to realize that was when you said "will Netflix make profits of $5.5 billion over the next 3 years to cover the streaming costs".

    Netflix doesn't have to make $5.5b in *profit*. They have to make $5.5b+gross margin in *revenue*.

    They have subscribers today. Some percentage of those will be lost to attrition. Some percentage will be gained through acquisition. Either way, in order to cover these *future* expenses, Netflix needs to bring in $2-3b per year in each *future* year. This translates to 20-30 million customers.

    That's what I was saying about matching the off-balance-sheet liabilities with the off-balance-sheet assets. The subscriptions that haven't yet been paid (but are very likely to be paid except in the case of a total disaster) are the asset-flipside to the contingent liabilities that are being recognized off-balance-sheet.

    I may not be expressing myself clearly, and if so, I apologize.
    Dec 9 05:13 PM | Likes Like |Link to Comment
  • How Healthy Is The Balance Sheet At Netflix? [View article]
    As I posted above:

    These payments are currently liabilities and when the content actually starts being used, they will be an expense. Netflix won't need to raise debt financing because there will be income to offset the expense when the expense arrives. Netflix is currently managing it's level of expenses for content quite well and, as the article notes, has recently returned to better profitability.

    I agree that the so-called "off balance sheet debt" looks odd. However, when you think it all the way through, you need to offset it by the "off balance sheet assets". The future obligations to the content owners are offset by the future expected revenue from customers.
    Nov 22 09:52 AM | Likes Like |Link to Comment
  • How Healthy Is The Balance Sheet At Netflix? [View article]
    These payments are currently liabilities and when the content actually starts being used, they will be an expense. Netflix won't need to raise debt financing because there will be income to offset the expense when the expense arrives. Netflix is currently managing it's level of expenses for content quite well and, as the article notes, has recently returned to better profitability.

    I agree that the so-called "off balance sheet debt" looks odd. However, when you think it all the way through, you need to offset it by the "off balance sheet assets". The future obligations to the content owners are offset by the future expected revenue from customers.
    Nov 21 04:43 PM | Likes Like |Link to Comment
  • More on Netflix: 1) Piper's Michael Olson notes unique visitors to Netflix's (NFLX -2.1%) site fell 4% Y/Y in Q4, per NPD. There's a good chance the total number of unique Netflix users still rose thanks to growing TV/mobile use. Unique visitors to Redbox.com (CSTR +0.2%) fell 13% Y/Y. 2) As part of the buildout of its OpenConnect CDN, Netflix is installing servers on Cablevision's network, thereby lowering bandwidth costs and reducing Cablevision's traffic burden. OpenConnect stands to diminish Netflix's use of CDN services from AKAM, LLNW, and LVLT[View news story]
    See my other comment (http://seekingalpha.co...) in light of this information about OpenConnect lowering bandwidth charges for transport to end customers. Looks like my assertion is actually relevant.
    Jan 8 05:20 PM | 1 Like Like |Link to Comment
  • Netflix (NFLX -0.4%) is going 3D: the streaming site is now providing a limited number of 3-D titles, and has rolled out a higher-quality 1080p format it calls Super HD. With Netflix recommending at least 7Mbps connections for Super HD streams (compared with 5Mbps for traditional 1080p), expect the company's bandwidth bill to go up, and for ISPs to become even more frustrated. Separately, Cantor is estimating Netflix's Warner Bros. deal will cost $100M/year, and CNNMoney's Paul R. LaMonica argues shares are now overvalued, given limited earnings and huge content obligations. [View news story]
    Regarding bandwidth bills, I would possibly expect ISPs to be frustrated, but I'd be surprised if there was a material difference to Netflix's bandwidth bill. My understanding is that they solve this with peering agreements and CDN magic. There will be some additional bandwidth to seed the content, but after that, it should all be very low cost or free.
    Jan 8 02:15 PM | Likes Like |Link to Comment
  • Amazon Gobbles Up More Lost Netflix Content [View article]
    Bill,

    You're generally very thoughtful. I know you're not a journalist, so I shouldn't expect a bias-free view. However, "This isn't the first time Amazon has taken advantage of Netflix's penny pinching" and you cite Netflix letting Epix exclusivity lapse there specifically, and the fact that Netflix dropped A&E content prior to Amazon picking it up is the basis of the article (implying that it was all the content).

    Netflix cherrypicked the 300 hours out of the 1100 hours of A&E that were contributing economically to the streaming efforts. Amazon picked up all the rest (ironically including the stuff to do with pawning and storage -- where useless stuff goes to die).

    Epix wasn't dropped, just the exclusivity.

    I guess my point is that you're painting a harsh picture of desperation and/or incompetence that could also be described to shrewd content management decisions.
    Jan 7 09:35 AM | 2 Likes Like |Link to Comment
  • Netflix: Earnings, Internet Traffic Look Promising [View article]
    I continue to marvel at how, like every generation of teenagers thinks that they invented sex, there are folks continually discovering and dismissing Netflix's seasonality.

    There's been a Christmas spike since forever. There's been a summer lull also since forever. There's generally a run-up in the stock price following the Q4 & Q1 conf calls which settles back over the following month. There's generally disappointment around the Q2 & Q3 results. Of course, all of this was masked recently by the feverish rise to 300 and subsequent fall to 50.

    As always in life, the answer is somewhere between the extremes. 300 was too high, 50 was too low. At this point, with the prospects of global streaming, I'm happy to call anywhere in the 70-100 range just right.
    Dec 31 11:49 AM | 1 Like Like |Link to Comment
  • Netflix: Earnings, Internet Traffic Look Promising [View article]
    Bill,

    Have you considered that the percentage drop in earnings is due to planned investment in expansion of the business? You've touched on that issue in prior articles but from this comment it doesn't seem like you're connecting the dots.

    Think of Netflix as the world's largest startup and they're operating on the edge of profitability on purpose. That purpose being capturing the larger prize of $5 per month from a billion global streaming customers with 10% margins (as opposed to focusing on the $9 per month from tens of millions of domestic DVD customers with 40% margins).

    I'm sure you've read Innovator's Dilemma. Netflix has been very busy building the business that will gut its own legacy business before someone does it for them. They've also been pretty transparent about what they're doing and the financial effects.

    Regards,

    Rob
    Dec 31 10:21 AM | 2 Likes Like |Link to Comment
  • Nattering Nabobs Of Netflix Negativism, Revisited [View article]
    This is half-snarky, half-serious: Didn't NFLX actually reach $300 before crashing? Give him some credit for hitting the target. He probably didn't say it would *sustain* at $300, just get there...
    Oct 5 11:24 AM | Likes Like |Link to Comment
  • Netflix Is Flying too Close to the Sun [View article]
    Done.
    Dec 11 01:15 PM | Likes Like |Link to Comment
  • Netflix Is Flying too Close to the Sun [View article]
    Andrew,

    I come back from vacation and see that NFLX raised money last Monday. I guess IOU one beverage of your choice.

    I was pretty close to getting off, though :)

    Rob
    Nov 27 03:02 PM | Likes Like |Link to Comment
  • Netflix: Fundamentals and Valuation Discombobulated [View article]
    That wouldn't happen to be Schrodinger's cat, would it? That's about the only cat that would be smart enough to do it that I know of. Even if it is, then he may or may not be able to start its own streaming service. Actually, you wouldn't know if it did start a streaming service until you tried to look at the cat's financial statements of operations. At that point, maybe it becomes Bilton who does or doesn't exist. :)
    Jun 4 11:15 PM | Likes Like |Link to Comment
  • Netflix: Fundamentals and Valuation Discombobulated [View article]
    Do you have a link to Netflix's announcement that margins are going down because of increase content costs? The only thing I recall recently was Well's comments at the BofA/Merrill Lynch conference where he suggested that the deals being discussed today (including Starz) are all falling within the 14% gross margin target.

    www.homemediamagazine....
    Jun 3 01:10 PM | Likes Like |Link to Comment
COMMENTS STATS
123 Comments
150 Likes