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  • Netflix Q1 2011: Imaginary Q&A Series 15 comments
    Apr 20, 2011 5:24 PM | about stocks: AAPL, AMZN, CRM, DISH, GOOG, LULU, NFLX, OPEN, WMT, YOKU

    Netflix (NFLX) is scheduled to answer select questions submitted by email to ir@netflix.com the afternoon of April 25, 2010.  Here's how I imagine a decent call would sound:

    OPERATOR: Welcome to the Netflix First Quarter 2011 Earnings Q&A session.  Please note your line has been placed on mute, because most of you tend to rant non-stop.  We may make forward-looking statements today….  Your first question comes from the line of Righteous Capital. 

    RIGHTEOUS CAPITAL: Thanks.  Netflix announced former CFO's Barry McCarthy's departure December 7th.  In November, he cashed in around $40 million – some 230,000 shares, substantially more than he'd sold in any prior month recently or ever.  Is knowledge of the impending departure of a public company CFO material information?  Should your executives sell Netflix shares while in possession of material nonpublic info?

    NETFLIX: I believe the shares were duly sold pursuant to a Rule 10b5-1(c) plan, such that the timing of his relatively large sales was a coincidence.

    RIGHTEOUS CAPITAL: Uh huh.  Just one more.  Your "Reference Guide on our Freedom & Responsibility Culture" urges salaried employees: "You focus on great results rather than on process."  Does this mean you focus on meeting earnings and cash flow targets rather than consistent accounting and working capital management processes?

    NETFLIX: Come on, it's a well-regarded management tool: set a target, give high-grade people latitude to innovate on the process that attains it. 

    RIGHTEOUS CAPITAL: So your answer to my question is … 

    NETFLIX: Next question.

    OPERATOR: And your next question comes from the line of Really Skeptical Capital.

    REALLY SKEPTICAL CAPITAL: Jim Pyke at Seeking Alpha notes that Netflix ended 2010 with about 20 million customers and has lost about 32.6 million subscribers in total.  Moreover, the subscribers lost each year were consistently 66%-75% of Netflix's starting subscribers in each of 2006, 2007, 2008, 2009 and 2010.[1]  Rob Fagen suggests "A great deal of those that leave eventually come back."[2,3]  Let "active subscribers" denote only subscribers with a Netflix account duly paid within the trailing 30 days.  What percentage of the 32.6 million subscribers who left Netflix were active subscribers at March 31st?

    NETFLIX: We're focusing on the current subscriber count as a key metric, which encompasses net churn.

    REALLY SKEPTICAL CAPITAL: Well, there are broadly two models of Netflix growth.  In what we might call the "Niche Leader" view, Netflix has developed a unique collection of content for a modest price point, has loyal customers, and is becoming increasingly valuable to customers and content providers alike.  In what we might call the "Death Spiral" view, Netflix appeals to most customers for less than a few years: Netflix subscribers catch up on select old content, then cancel the service for ages.  Rapid subscriber growth would mask churning through an addressable market toward net subscriber losses. 

    Do you consider whether Netflix subscribers' churn and rejoining more resemble a "Niche Leader" or "Death Spiral" to be material information?  Is it appropriate for Netflix employees to sell stock while in possession of material nonpublic info?  In light of our nation's securities laws, would you like to reconsider your declination to answer the 32.6 million question now and to break down churn in every future …

    OPERATOR: It appears we lost the connection. 

    NETFLIX: Bummer. 

    OPERATOR: Your next question comes from the line of Fundamentally Sound Capital.

    FUNDAMENTALLY SOUND CAPITAL: You wrote in January, "We think there are two fundamental questions for investors: (a) What will our domestic growth trajectory be over the coming years, given our strategy to maintain modest domestic operating margins so that we can invest aggressively in additional streaming content? (b) How successful will Netflix become outside of the United States?"[4] 

    You reiterated that view earlier this month: "Those are the two core investor questions … and then the question is 'Well, what's the appropriate discount to apply to those?'  That's where the investor judgment comes in.  And then once an investor answers those questions for themselves, then they can figure out if they want to be a buyer of our stock at the current price."[5]

    NETFLIX: That's right.

    FUNDAMENTALLY SOUND CAPITAL: Now in comparison with Netflix's 20-odd million customers, Google's (GOOG) YouTube has 144 million unique visitors in the U.S.[6]  Former CEO Eric Schmidt "told Google's board of directors that his estimate of YouTube's worth was somewhere between $600 million and $700 million" five years ago, "according to court records reviewed by CNET."[7]

    NETFLIX: Are you asking a question?

    FUNDAMENTALLY SOUND CAPITAL: Of course.  As you propose we can value Netflix simply based on its growth trajectory, should we consider Netflix worth $700 million – $13/share – if we think Netflix will reach 144 million American users in 5 years and even more abroad, delivering splendidly on what you call the "two fundamental questions for investors"? 

    NETFLIX: I think that's too simplistic.

    FUNDAMENTALLY SOUND CAPITAL: Of course it is.  Here's the problem: what you call the "fundamental questions for investors" – and consequently focus your reporting on – disregard earnings, cash flow, pricing power, the nature of subscribers' churn, and your view that "operating margins in an industry are really determined by the number of competitors.  So if there's three or four roughly equal-sized competitors at maturity, you'd expect pretty low operating margins.  If there's one firm that's the leader in the market, you'd expect higher operating margins.  So it really depends upon the competitive climate as opposed to something inherent in the cost structure."[8]  Those are your insighftful words.  Now would you like to recant your suggestion that Netflix can be valued on the basis of its headline growth without regard to earnings, cash flow, pricing power, the nature of subscribers' churn, or competition?

    NETFLIX: Okay, okay.  Let's talk about competition.

    Amazon (AMZN) looked into licensing every title we offer, and balked at the price.  They must not have seen a decent return on investment in what we're doing.  Of course they didn't.  Investors can we see we didn't generate cash net of our expenditures in the last year, even with the favorable Starz deal.

    FUNDAMENTALLY SOUND CAPITAL: Do you think you have a durable algorithm advantage?

    NETFLIX: Not really.  Desire, intelligence and resources held about constant, more data equals better algorithm.  We have leading data now, but Amazon or Google could catch up fast if they nearly match our streaming library and serve millions of users.  They're not incompetent at preference algorithms; they could just use more data.  That's one reason we hope YouTube won't license our streaming content this year.

    FUNDAMENTALLY SOUND CAPITAL: You consider Amazon and Google your main competition?

    NETFLIX: Well, let's not forget Charlie Ergen (DISH) with the potential triple-play threat from satellite and now Blockbuster brand, the model of Zediva that could render our streaming investment worthless if it works, or Wal-Mart's Vudu (WMT).  Vudu might offer an unlimited streaming plan with around 80% of proceeds divvied up among content providers in proportion to content consumed, like a consignment store that requires no outlay for inventory.  They could match our streaming service and price without investing a dime in content.  Wal-Mart's a bigger threat to us than Apple (AAPL), because it welcomes thin margins.

    Google meanwhile could spend our entire cost of 'net operations to replicate our streaming service on YouTube Live and take our subscribers who'd prefer free to not free.  Google could do that to become a behemoth in internet-connected TVs.  I doubt they will, but they could wipe out our streaming service easily now with I imagine less than 20% of their cash.  That would kill our business.

    OPERATOR: Your next question comes from the line of Churn Em & Burn Em Capital. 

    CHURN EM AND BURN EM ANALYST: I can't believe I'm hearing this.

    NETFLIX: Well, look, Salesforce.com (CRM) is priced at a gazillion times earnings.  OpenTable (OPEN) is priced near 100x EBITDA and could be displaced by a Google app.  Youku (NYSE:YOKU) is priced near 100x revenues.  Lululemon (LULU) sells patent-free spandex and is priced near 50x earnings.  On one hand, never bet against yoga shoppers.  But clearly the market's overheated.  Why begrudge me pumping NFLX through valuation-irrelevant growth stories to momentum junkies who never view our owner earnings?  

    Besides, there's an upshot to this.  We'll raise a billion in a smooth secondary offering, operate at weak margins, bulk up to 60 million subscribers, raise another couple bil, and have a streaming library that no competitor will match when they can see we're earning peanuts.  Then kapow: we'll hike our monthly price to $14.99 and most customers will stay because there'll be no better deal. 

    We'll remain a sweet deal.  We can even save marriages: we'll find movies rated four stars for both of you.  Of course, you'll each need an individual Netflix plan to enable that. 

    We'll go from about cash flow breakeven, or modestly bleeding money continuously, to boom: an extra $4 billion from that $14.99/month price plan dropping to the pretax line.  Investors can capitalize that at $50B.  Come on, cheer it with me: eff eye eff tee wy!  And the crowd roars, "billion baby!"

    CHURN EM AND BURN EM ANALYST: Billion baby!

    NETFLIX: Competitors wouldn't fully challenge us on the way up because they could see we weren't generating cash.  Then boom: we win. 

    We'll invest our several billion annual owner earnings in becoming bigger and better to our customers' delight, making it ever harder for anyone to reproduce our offering at our price point.  It doesn't matter that we're worth bubkis today and would die a slow death if we never raise another dollar from the capital markets for our streaming content licensing spree. 

    You see, we have a plan.  Now, would all the bears like to back down as fast as my friend Whitney?

    CHURN EM AND BURN EM ANALYST: Thanks, that was helpful color. 

    UNIDENTIFIED CROSSTALK: Dude, what does color mean?  I don't know, but analysts say it as if they know what they're talking about.  I like blue.

    CHURN EM AND BURN EM ANALYST: Just to confirm I'm hearing you right, you're saying Netflix isn't fundamentally worth anything today based on operating around cash flow breakeven in the foreseeable future, and Google could spend a fraction of its cash to replicate your streaming service if it wants to, basically wiping out the prospect that you'll ever earn big money.

    NETFLIX: Well, yeah.

    CHURN EM AND BURN EM ANALYST: Great, we'll raise our target to $300/share.

    OPERATOR: That concludes today's conference call.  Please kiss our derrieres after the call to be considered among underwriters in our upcoming secondary offering.  Finally, please note that today's call includes entirely imaginary statements that may bear no semblance to reality beyond verifiable facts. 

    Notes and Disclosure

    1. Jim Pyke, "The Netflix Churn Challenge" at Seeking Alpha, February 10, 2011 (here). 

    2.  Rob Fagen, "What Do You Get When You Buy Netflix?" at Seeking Alpha, February 4, 2011 (here). 

    3.  Seeking Alpha contributor Rob Fagen "exercised and sold about 8% of my employee options today" on or about January 27, 2011 (here).  Reed Hastings reported selling 5,000/61,500 = 8.1% of a tranche of stock options January 27, 2011 per a Form 4 filing with the SEC accessed via 10kwizard.com.

    4.  NFLX 8-K filed with the SEC January 26, 2011, accessed via 10kwizard.com.

    5.  Henry Blodget and Dan Frommer, "Exclusive Interview with Netflix CEO Reed Hastings," Business Insider, April 4, 2011 (here). 

    6.  Tiernan Ray, "Netflix: Google's YouTube A 'Substantial' Threat, Says Wedge," Barron's Tech Trader Daily, April 8, 2011 (here). 

    7.  Greg Sandoval, "Schmidt: We Paid $1 billion premium for YouTube," CNET, October 6, 2009 (here). 

    8.  "Netflix CEO Discusses Q4 2010 Earnings Call Transcript" by Seeking Alpha (here).  

    Disclosure: The author manages a limited partnership and separate accounts (collectively, "accounts").  Some of the accounts own put options on one or more of NFLX, OPEN and YOKU.  The accounts have no other position in stock or stock options of companies mentioned above upon article submission.  The author may buy or sell any position at any time.  The author may change positions in light of emergent facts or considerations, including new price-to-value estimates of the author's current and prospective investments. 



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Stocks: AAPL, AMZN, CRM, DISH, GOOG, LULU, NFLX, OPEN, WMT, YOKU
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  • Komodo Global
    , contributor
    Comments (88) | Send Message
     
    Author’s reply » S.A. determined this note, including the timely market commentary embedded in "well, look," is not really of interest to investors, as if transcripts of orchestrated conference calls are preferable to more thoughtful discourse. Included in this imaginary Q&A is an observation that what Netflix calls the two fundamental questions for investors to value it are entirely insufficient to value it. Of course S.A. is right: how could that possibly be of interest to investors.
    20 Apr 2011, 06:51 PM Reply Like
  • Rob Fagen
    , contributor
    Comments (124) | Send Message
     
    Komodo,

     

    You didn't post this over on hackingnetflix.com as user "flawed" did you? I liked the post and replied over there, but in case "flawed" isn't you, I'll repost the reply here as well.

     

    -------------

     

    @flawed: Wow. I'm internet famous. My kids will be so proud of me.

     

    Only two issues.

     

    First, with your comparison to YouTube indicating an enterprise value of $700MM, you do realize that YouTube doesn't charge anything, and Netflix would be charging on the order of $100 per year? YouTube is monetizing through advertising, and I don't know how close they come to $100 per user per year, but I suspect a fairly large multiplier there. You make some good points, but this empty attack undermines everything else pretty deeply in my eyes.

     

    Second, in note #3, are you implying that I'm Reed? That actually made me smile. I'm not Reed, I'm merely an admirer. I don't have a link, but the last I looked, Reed's been selling 5,000 shares every other week for at least four or five years, and I thought his holdings were well over a million shares in options. Additionally, no one ever points out that he's continually adding to his stockpile of options through salary taken as options. Again, last I looked, the CxO team as a whole was taking about half of their salary in new options every paycheck. Seems like a lot of insider confidence there. Once again, you've tarnished a pretty entertaining post that nicely brings up some relevant facts by totally blowing something pretty basic.

     

    ------------------

     

    One additional note, I did see the proxy statement for the annual meeting coming up in June, and Reed still has well over a million actual shares in a trust, and is taking his salary 84% in new options and is continuing his planned sell at the same old rate because he's got options expiring in July.

     

    ir.netflix.com/secfili...
    21 Apr 2011, 07:47 PM Reply Like
  • Komodo Global
    , contributor
    Comments (88) | Send Message
     
    Author’s reply » Hi Rob,

     

    I didn't post it elsewhere. As to your two items:

     

    "You make some good points, but this empty attach undermines everything else pretty deeply in my eyes." Well, first of all, the various conference call participants should communicate different points of view :) Actually the line you object to is a sound objection: *of course* there are differences between Netflix and YouTube in revenues and earnings; Hastings' "two fundamental questions" on the basis of which he suggests Netflix can be valued entirely dismisses those differences! He's suggesting Netflix can be valued on the basis of its growth trajectory, which makes no sense in itself. The YouTube comparison lays that bare. In other words, his "two fundamental questions for investors" are horrid and detract from engagement with the investment community on matters of substance like the nature of Netflix's churn.

     

    Second, yes, I don't know who you are :) Hastings reported selling about 8% of a particular tranche of options (the updated footnote fixed that), and reported 1.267m shares owned by trust, in the noted filing. As to taking any portion of pay in options: decade options may tend to be underpriced by conventional models, they're taxed preferentially, and it's unclear that doubling the cash portion of pay at Netflix would be justified or accommodate cash flow targets. So I have difficulty viewing that as a vote of confidence. Buying stock with most of one's cash comp could be a vote of confidence (or a marketing gesture ahead of a secondary offering). When was the last time a Netflix officer so acted? Cheers.
    22 Apr 2011, 12:33 AM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    Rob,

     

    In addition to YouTube not charging a subscription price they also pay next to nothing for content. How much does NFLX pay for content? Oops I forgot we're not supposed to worry about that. When they hit the wall on new sub additions soon and total subs rapidly decline as existing subs continue to walk away in droves then we'll worry about silly things like content costs.
    22 Apr 2011, 07:10 PM Reply Like
  • Rob Fagen
    , contributor
    Comments (124) | Send Message
     
    I admit that's a pretty good point that YouTube doesn't have to pay much of anything for content. However, have you ever thought about the fact that Netflix is pretty good about not paying for content that they're not reasonably certain will be accretive to earnings? This does two things. First, it makes sure that Netflix will continue to grow and grow profitably. Second, it leaves nothing on the table for a competitor to come in and poach without overspending and running at a loss.

     

    Many people wave around the "company 'X' could enter and crush Netflix by writing big checks" argument. Implicit in that is that Netflix is writing checks at random for whatever the content owners want. I believe that's totally wrong. While Netflix is writing large checks in an absolute dollar sense, I feel certain that they're extracting all possible value out of each one of those dollars in terms of marginal customer satisfaction and increased revenues to profitably cover those expenditures. If they can't make a profitable deal with one content provider, then they will make one with the next one. There are hundreds of content providers that Netflix can profitably generate demand for. They are not beholden to any one source and can afford to walk away from any given content owner if they won't negotiate reasonably. Also implicit in the "company 'X'" theory is that they don't care about being profitable because all they've got on their mind is crushing Netflix and 'owning' what everyone says is an 'impossible to be profitable' business. That just strikes me as being below the level of intelligence usually ascribed to the potential competitors discussed.

     

    As far as hitting the wall on sub additions, re-read some of the comments Reed has made about the lower and upper bounds of the potential subscriber base, both domestically and internationally. I think we're still in the very steep vertical part of the S curve. My opinion on that might change Monday after the earnings call, but I strongly suspect not.
    23 Apr 2011, 05:18 PM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    NFLX subscription streaming model is fatally flawed Rob and if NFLX is still around five years from now they won't offer a subscription based streaming service. They've signed up ~53M subs out of a potential ~70M broadband households since 2002, most of which were signed up over the last couple of years and yet they are only left with 20M subs to date. Without local news and sports and all of the current tv programming there is no reason for subs to hang around for more than a couple of years at best. Which is exactly what's been happening and exactly why your pal Reed won't discuss churn after 2011.

     

    You know as well as I do that international expansion is a whole different animal and there is no way that's going to pick up the slack for domestic sub growth when it hit's the wall soon. Even if international was robust they just lose them after a couple of years anyway. When new sub growth hits the wall existing subs continuing to walk in droves will cause total sub count to rapidly decline forcing NFLX to cut back on programming which will lead to a death spiral for their subscription streaming service. You're nuts if you think select tv re-runs and one new tv series is changing this dynamic.
    24 Apr 2011, 10:58 AM Reply Like
  • Rob Fagen
    , contributor
    Comments (124) | Send Message
     
    Your comment about "signed up ~53M subs out of a potential ~70M" is giving me a pretty clear view into where I think you've made your mistake. Correct me if I'm wrong, but your underlying assumption is that once someone has signed up, used the service and left, that they're gone forever. I have first-hand knowledge that this assumption is false.

     

    Similarly, I think you're too closely wedded to your own lens on the value of Netflix content. What you describe as desperation is just good management of the marketplace and supply chain.

     

    Likewise, calling international a new found focus, like it's some recent idea, is foolish. It was 2004 when Netflix was ready to start shipping DVDs in the UK but pulled the plug in order to focus on domestic competition. It's the same situation as to why the company was named "Netflix" instead of "DVDs by Mail". The plan the whole time was to be an international distributor of movie content over the internet. It's just finding the right time to launch each step of the plan along the way.
    24 Apr 2011, 11:53 AM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    While surely some subs who walked came back again at a later date, when you sign up 53M and only have 20M left, most who left didn't come back.
    24 Apr 2011, 12:13 PM Reply Like
  • Komodo Global
    , contributor
    Comments (88) | Send Message
     
    Author’s reply » When there were fewer subscribers who left each year than who joined ([1] above), theoretically *all* subscribers can be ones who left and returned. I doubt most are. This question -- how many current subscribers were counted among those who formerly left -- is obviously material nonpublic information. It also doesn't seem to be among info that companies would reasonably lobby to withhold from reports for competitive reasons. Netflix insiders sell stock while in possession of this key info that can be readily shared. How is that appropriate?
    24 Apr 2011, 12:37 PM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    seekingalpha.com/artic...

     

    While it may be technically possible that all or most subs are coming back I get the feeling you agree with me that it's logically not likely. If you look at the chart in the article above there are a couple of things that I see of interest not pointed out in the article. First 60% of the 53M total subs were signed up over the last three years. Second the percentage of subs who walked compared to the number signed up the previous year for the last three years is 93%, 94% and 92% (similar in prior years as well). How likely is it that subs who walked in 2008, resigned in 2009 and walked again in 2010?
    24 Apr 2011, 12:58 PM Reply Like
  • Komodo Global
    , contributor
    Comments (88) | Send Message
     
    Author’s reply » "How likely is it that subs who walked in 2008, resigned in 2009 and walked again in 2010?"

     

    Or left and rejoined the same year? I don't know. And I don't think we should have to guess about something so fundamental to the growth of a company that markets itself to investors based on its growth. I find it curious when an investment community harbors respect for a management team that refuses to disclose such basic info, and doesn't even persist in asking for it. It's almost like most Wall Street analysts covering NFLX have been lobotomized. Maybe that's a little harsh.
    24 Apr 2011, 02:25 PM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    Komodo,

     

    They added 3.3M subs in Q1 to end with 23.6M and are projecting they end Q2 with 24-24.8M subs. That would equate to ~0.4m-1.2M subs added in Q2. Thats a pretty dramatic slow down in sub growth and to me it looks like the first step in the death spiral. First a dramatic slow down in sub growth next sub growth starts going negative. What do you think?
    25 Apr 2011, 08:31 PM Reply Like
  • Komodo Global
    , contributor
    Comments (88) | Send Message
     
    Author’s reply » Well, I added to our put position Monday before the call with NFLX over $250, and even bought May 250 strike around $15, so I'm not a disinterested observer here. With that out of the way:

     

    I tend to basically ignore guidance and focus on results. Perhaps Netflix is churning through subscribers in the "death spiral" I described above and in a prior comment (seekingalpha.com/autho...), and will surprise analysts with net subscriber losses in due course as you suggest. I don't know. I suspect Netflx management knows, because they should know what % of subscribers who left have rejoined and are subscribers now. I find it extraordinary that analysts don't clamor for that core disclosure.

     

    Hastings commented in the Q&A today: "And people do test out the service, come back, go out, go in. And that's fine because our overall growth, our net adds are continuing to increase." It's just a ludicrous remark without quantification: whether it's fine hinges on whether subscribers who left are substantially rejoining or not. Substantial rejoins may look like sustainable growth; low rejoins may look like a death spiral.

     

    As to the results, Netflix's owner earnings remained negative. Netflix also spent more than 100% of its headline free cash flow to shrink shares outstanding by 0.5%. On one hand, that's like a 2% runrate dividend. On the other hand, it's like a 2% runrate dividend funded by more than 100% of earnings.

     

    Simple math can illustrate the potential lunacy of its price. Andrew Shapiro offers some such math here: seekingalpha.com/autho....

     

    In a similar vein, suppose Netflix attains that 60m subscriber count in 4 years, averting the death spiral, and even gets an avg $9.99/month per predominantly streaming subscriber with its target 14% operating margin. That'd be 60mx$120x14% = $1b op, $600m net income. At its current price of over $13 billion, NFLX is over 20x that perhaps near-best-case figure 4 years from now.

     

    Presuming NFLX owners expect at least 20% annual return given competitive risks, it'd be trading over 40x that perhaps near-best-case earnings in 4 years with fantastic future growth. In other words, it could plummet 50% and still be priced optimistically among the universe of companies with some competition.
    25 Apr 2011, 11:57 PM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    BTW Rob what you see as shrewd maneuvering in NFLX content acquisition lately I see as desperation trying to find something that will keep subs from walking after they've seen everything they want to see a dozen times. Their subscription model doesn't work if they can't keep subs renewing over the long haul. So far subs have been walking away in droves only masked by new subs taking their place. Look out below when new sub growth hits the wall. You can chalk up the same agenda to Reed's new found focus on international expansion. It's not a sign of strength it's a sign of desperation looking for something to mask the problems he knows are near in the U.S.
    24 Apr 2011, 11:16 AM Reply Like
  • Milkweed
    , contributor
    Comments (1351) | Send Message
     
    It looks like I forgot to add in international subs so the slow down in projected sub growth is not quite as bad as I posted last night but at ~1.3M-~2.25M in Q2 it's still a pretty dramatic fall off. I hear you on the valuation side and realize it's possible that if subs are quiting and then rejoining there might not be a death spiral I just think the consistent loss of ~90%+ of the prior years sub gains is subs getting bored after a year or so and walking.

     

    In his letter to shareholders Hastings admits the strategy is to be a TV re-run service and that they are an added cost on top of cable not a replacement for cable. How long can they realistically expect subs to keep renewing for this? Particularly since cable is offering the re-runs for no additional cost. I know they have a massive valuation problem but I think their subscription streaming model is also not sustainable. I also agree it's potentially bordering on being illegal that they won't discuss what looks to be extremely material information about how many subs are walking and then rejoining but I also think the fact they are reducing information on standard subscriber metrics after 2011 is a big clue to how many subs rejoin.
    26 Apr 2011, 09:52 AM Reply Like
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