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  • Time To Punch Your Netflix Ticket [View article]
    valuation is irrelevant. That's not what keeps the stock moving up. It's counterproductive to even try to value it.
    Sep 12 03:05 PM | 2 Likes Like |Link to Comment
  • Netflix's Q2 Was Fine; The Stock Is Just Expensive [View article]
    rate of sub additions slowed considerably as co cut marketing. Raising margins is great but at what cost?
    Aug 1 05:59 PM | Likes Like |Link to Comment
  • Why I'm Long Netflix [View article]
    ""Folks, so much of the good stuff will NEVER make it to Netflix streaming!""

    The streaming content library is smallish compared to what Netflix offered with the DVD service. DVDs were cheap --most expensive capex year was $223 million. The acquisition of streaming content in 2012 was $2.5 billion of which $762 million went to liabilities and the rest was cash paid--$1.7 billion. The deep and obscure library that brought them subscribers gives way to sorting out the most viewed shows and cutting the rest. This is not what Netflix used to be about but that's the economic reality of renting series and movies from producers. Every time they re-up or have to decide to re-up on a contract, dollars dictate and the library shrinks. Without pricing power of their own and the box they are in at $7.99 per month, this will be the new Netflix reality until competition fades and that seems unlikely
    Jul 25 07:31 PM | Likes Like |Link to Comment
  • Ponzi Or MLP? Linn Energy's Unsustainable Distributions [View article]
    you need to read better:
    Historical GAAP cash flow from operating activities was sufficient to cover the distribution with only one material reconciling item, premiums paid for derivatives, in calculating the non-GAAP financial metric of distributable cash flow (“DCF”). As stated before, LINN views puts as a “capital” cost and considers the premiums it pays for derivatives as part of the investment in its business.""

    CFFO will cover distributions sans premium expense. If you and they regard premium expense as a capital cost then by rights it goes one section down in cash from investing along with acquisitions and investing in PP&E. Placed there, it does not impact CFFO and CFFO will cover distributions most years. Read more carefully. In your linked rebuttal from Linn they clearly say they are adding back the premium paid for derivatives.

    You seem to have real difficulty wrapping your brain around distributable cash flow vs free cash flow. The company distribution exceeded distributable cash flow one time in the last six years. Repeat after me--MLPs/LLCs do not base distributions on either cash flow or free cash flow. If you believe you are an instrument of change because you think it's deceptive, don't hold your breath. It's not going to happen. The non-GAAP DCF works for these companies

    If you want to talk about irresponsible fiscal policy in a growth company paying a dividend, that's a different discussion. Linn elected to go the tax-advantaged LLC route and as such they are required to pay cash to unit-holders. It is different than electively deciding to pay the shareholder a dividend you can't afford.

    Unlike C-corps, LLCs distribution is not based on free cash flow and never will be until the laws governing MLPs are revoked or changed. I don't think your series of articles is going to initiate that change. With the lack of clarity and detail and cursory reading of their filings that you seem to have and do, your articles lack credibility.
    Jul 13 11:30 PM | 2 Likes Like |Link to Comment
  • Linn Energy: Many Ponzi-Like MLP Blow-Ups To Follow [View article]
    this article contains so much charged emotional language and Wall Street jargon, it's nearly impossible to read. It fails to bring any understanding to the LLC/LP segment of O&G at all.

    Taking on debt and selling equity to pay a distribution is not a Ponzi scheme. With low interest rates on debt and O&G assets on sale from companies like BP and CHK, it has been a good time for the strategy. Linn only came into being in 2003 and is in high growth mode.It has been the beneficiary of low borrowing costs and a big inventory of for sale fields to choose from and it would be stupid for them not to take advantage of that environment

    You could argue it's fiscally irresponsible for a growth company to pay a distribution and maybe Linn would have been better of as C corp. But unless you are reading and analyzing their tax filing that are completely different than the SEC filings, you really have no business saying anything about what they should be distributing in the way of taxable net income. They cannot hold cash or keep net income without getting the tax bite passed on to unit-holders. This makes them cash poor and unprofitable. It doesn't mean that their strategy is a Ponzi scheme or even unsustainable.

    the SEC is informally looking at the non-GAAP accounting for distributable income. If you would look across the peer group--BBEP,LRE, QRE--you will see they all use a nearly identical formula and there is no line item for derivative expense for anyone. As a non-GAAP measure, I see little recourse for an SEC intervention unless they decide to redefine non-GAAP and try to turn into a GAAP requirement. Distributable cash flow is not intended to be a proxy for free cash flow. Investors looking for sustainable dividends should look at free cash flow and if they don't, it's not Linn's problem. Linn has never claimed it can support distributions from free cash flow. They state very clearly in their filing distributions will depend on debt and equity.

    As such, the distributions with any LLC/LP will depend on how much net income there is to distribute by law. Again, if you are not using their tax filings for your insight, you have no idea what that is. Taxable net income will fluctuate and as investors we can expect the payout to do likewise. Linn does not promise a sustainable ever-increasing payout.
    Jul 7 10:21 AM | 2 Likes Like |Link to Comment
  • "Netflix (NFLX) has exploded the old broadcast television format," says Tero Kuittinen, discussing the implications of Arrested Development's use of a unique/complex episode structure. "Entire 10-episode cycles can be created in a way that makes them far more elaborate and tightly plotted than anything network television can handle." There could also be implications here for Amazon. Though reviews weren't great, one study pegged AD's opening weekend viewing at 3x that of  the acclaimed House of Cards. Also: NPD estimates Netflix had an 89% share of Q1 U.S. subscription TV show streaming activity; Hulu had 10%, and Amazon Prime (AMZN) just 2%. [View news story]
    the downside of a network/netflix/amazon buying a total season (sight unseen in the case of house of cards) is that there is no room for error or tweaking of the series once it is underway. What you have is all you are going to get and it better be good or it will be a huge sink hole for cash. If a network strings out a series it can either be changed or cancelled if necessary based on viewing numbers. There is no such latitude in the series dump all at once business model.
    Jun 8 11:01 AM | 1 Like Like |Link to Comment
  • Netflix Original Content: Why It Matters [View article]
    Let's face it - most TV is crap. I spent the entirety of my college career without a TV and I didn't miss it one bit.

    Not even close--most tv is actually very very good
    Where do you think NFLX gets most of its best programming? AMC, USA FX A&E Showtime etc etc
    It's own exclusive content like Hemlock Grove and Lillyhammer and AD is marginal at best. HoC was acceptable if slightly tedious with too much southern drawl for the normally excellent vocal actor Spacey
    May 31 12:28 PM | Likes Like |Link to Comment
  • Netflix Moves To Become The HBO Of The Internet [View article]

    DVDs are a dwindling source of revenue for NFLX. They are not a dominant player. Even if they were. it's a dead end. It's saving grace is its higher margins and cheap capex The thing that made NFLX great was the depth of its library in DVDs before streaming. The mail turnaround was clunky but tolerable when you knew that anything you could think of to watch was available. It wasn't the mail service that made them great, it was the library and the abolished late fee penalty. Neither applies to streaming and they have no advantage over competition anymore. Their interface is probably the biggest draw in addition to the price. If they raise prices, they will lose customers.

    Netflix cannot afford to have the library in streaming they had in DVDs. There is way too much content out there for them to have it all and that puts the business at an immediate disadvantage to what it was. They can only make up for that by being the low cost subscription in the space. As such, they will never be able to afford all the content they need to make them as irresistible as they were when they were in DVDs. They can no longer own the content as they could the discs and control the consumption by having turnaround times due to shipping. By only being able to rent content from producers now, and not being able to throttle consumption, they are in a losing race to keep the library full and keep margins respectable. It's a crap business model as it stands now. They have no pricing power and no content leverage to support an increase. They can't afford to spend endlessly on new releases and maintain an extraordinarily deep library. They are already talking streamlined content and selective buying and that is not what brought to the dance as a DVD rental service.

    Channels like HBO have pricing power and a whole army of cable services pushing them on to consumers through bundling and cable packages. A cable subscriber is also able to pick and choose the channels that have the series and movies they want. Netflix has very limited movies available for streaming and cannot show new seasons of big hits for titles like Breaking Bad and Walking Dead until the previous season is around 18 months old. There are not a lot of fans of new series that want to wait over a year to see the old season. Netflix touts binge viewing as the wave of the future, but will never be able to offer that for hot titles as long as they are contractually constrained from being able to show the newer seasons of hot shows.I can go to HBOGO and see a Game of Thrones binge of all the seasons right up to episode 8 season 3 this year. It's a big advantage for cable subscribers. You can do that for Showtime as well.

    IMO the demise of cable is overstated. They are looking for ways to retain their base and that will necessarily keep NFLX subscriber numbers from hitting the 100s of millions that are priced in at $240. It will also make it difficult for them to charge premium prices for a limited library that can't keep up with the deluge of popular new and old series that are being released every day
    May 23 11:26 AM | Likes Like |Link to Comment
  • Netflix Moves To Become The HBO Of The Internet [View article]
    Another in a long series of disappointing SA Netflix articles.
    Netflix is never going to be HBO until they can charge more than $7.99 per month for a subscription. You really need to look at the cost of their streaming revenue before telling us they are HBO. HBO as a premium content channel gets nearly triple NFLX sub costs and is an extremely profitable revenue stream for time/warner.

    There is so much original programming hitting cable these days you can't even imagine how consumers can keep up. Both cable channels and networks are cranking out pretty good series at a frantic pace. Every month there are dozens of new and returning shows to track. Even a DVR can't give you all there is to see. Netflix will never win this race by having to keep up with the new releases and keep hold of their library. What they will have to do is buy all the popular titles for discrete windows of time if they want to be all things to all consumers and they can't hope to do this at current pricing. They don't even own their best effort to date House of Cards. They are in a losing race without pricing power. I challenge you to separate out their streaming revenue and their cash cost of the content and look at the gross margins. This number is not easy to calculate and I have been searching for it for quite awhile. As near as I can get show gross margins of around 1%-2%. They are of course EPS negative and cash flow negative

    If you can figure out this cost I would be clearly interested in seeing your work. Without that you can have no clear idea of their future.
    May 21 08:46 PM | 2 Likes Like |Link to Comment
  • Amazon, Netflix - Bullish Earnings Quality? [View article]
    decent look at NFLX accounting
    can you provide a little more detail on the streaming margins as a standalone business since you seem to have a good grasp of the numbers?

    here's the thing:

    Because NFLX does not count streaming content acquisition as a capital expense, it's hard to know what the actual cash spend on streaming content is. If it was capex like DVDs, we could easily get the number. As it stands, their opaque accounting makes it almost impossible to easily arrive at the cost of streaming content

    As it stands now, the subscription cost is a combination of DVD costs and streaming costs with no easy way to separate them. So if you have an excellent understanding of their numbers, maybe you can provide the information? I have been unable to get to the number yet.

    What you can start with is streaming library additions from the cash flow statement and subtract the change in liability. As liability increases, less cash is spent since it goes to liability. If liability decreases, then more cash was spent. This part is easy. Where it gets hard is the "hidden" cash spend that is in subscription cost, goes to the bottom line of the P&L, but is hard to quantify. That hidden cash spent on streaming is for things bought off the balance sheet that are part of the footnoted future obligations. Since NFLX only reports the raw increase in streaming content and no absolute figures, we don't know what that spending costs. Do you have any ideas? That hidden cost needs to be added to the cash flow statement figure we calculated.

    With that we can see what the standalone gross margins are and get an idea of what future cash spending will need to to make NFLX a quality investment. Without that standalone figure, we don't know enough--accruals or not. With the DVD business vanishing, this part of the business is crucial but obscured by complex and muddy accounting

    Also, you need to take into account that they do not own any of the streaming content--they are renting it. That means they have to buy it again every 1-5 years to keep it. Costs will not be contained if they elect to repurchase all the titles they have bought in the past and keep up with new releases. New releases are coming out at unbelievable rates
    May 9 11:08 AM | 1 Like Like |Link to Comment
  • Critiquing Netflix's Move Towards Content Creation [View article]
    where does your $100 million price tag for HoC come from?

    You realize they did not "create" HoC? so is this $100 million their licensing fee for first window rights? if there are 26 episodes then the cost to rent it was $3.9 million per episode which seems extraordinarily high since a production like game of Thrones costs about $5 million per episode to actually create.

    These articles are awful. bad research and no numbers to make a case for or against. The streaming margins are awful right now and the DVD business is dwindling rapidly. What would help all of us and make a really interesting and useful article is to make NFLX into two businesses DVD and streaming analyze the cash flows and then quantitatively tell us what the streaming business is producing. Then you can figure out what it will take to make NFLX as good as it was in 2010 and 2011. The numbers are obscured by opaque reporting and I have not been able to get a good read on the two businesses as separate entities. I am waiting for one of these so far useless SA articles to offer some great and illuminating information.
    Apr 30 11:45 AM | Likes Like |Link to Comment
  • Netflix: Potential Future Growth Makes It A Buy [View article]
    if asking for some actual numbers is a negative comment then I continue to be negative. I see dozens of these next to useless articles on the huge potential of Netflix but no attempt to inform us what the actual financial statements are telling us

    I don't know the numbers because the company does not always report them. In fact, DVD/streaming revenue numbers are a new addition in 2012

    As far as costs of streaming go, there is a way to approximate what they spend but so far I have NOT been able to calculate the actual number with any certainty. The cost of subscription (not separated anymore from fulfillment cost) included shipping and handling, streaming tech costs, revenue sharing, amortization of streaming and DVDs and finally a streaming cost related to payments that were not reflected on the balance sheet--probably those high off balance obligations are part of that.

    Netflix takes great care to keep these numbers fairly obscure so while you can see the effects on cash flow, you cannot see what part of that is streaming costs in isolation. This is aggravating and I would like to see anyone of the genius articles coming out at SA predicting huge profitable future growth find this number for me. netflix was free cash flow negative for 2012 with CFFO at $22 million and down from $318 million in 2011 and I guarantee that it was streaming eating up cash flow, not DVDs.

    So how about it IAE Research? can you help me out?
    Apr 4 12:29 PM | 1 Like Like |Link to Comment
  • Netflix: Potential Future Growth Makes It A Buy [View article]
    can you discuss margins and current price structure and translate that in pot profitability projections?

    There are loads of netflix articles like yours that presume huge growth potential but fail to address the company's profit potential

    Ideally what I would like to see is someone separate this company in to DVDs and streaming. DVDs are a declining source of revenue and cannot be included in any growth projections. So what would be most informative is for you to model current cash costs of streaming and revenue and take a look at those gross margins. Then tell us what kind of subscriber numbers they need to see to turn Netflix back in to the cash flow positive growth company they were in 2010-2011. I would ascribe all marketing costs to streaming. G&A maybe 50/50 at least for now. Hint--streaming gross margins are probably less than 1% so they have a long way to go at current pricing to consumers.
    Apr 3 02:07 PM | 1 Like Like |Link to Comment
  • Quicksilver Resources (KWK -9%) gives back some of yesterday's gains after selling a 25% stake in its Barnett Shale assets to Tokyo Gas for $485M. Raymond James says KWK received a solid price in the sale, but maintains its Underperform rating, preferring to "wait for more progress on the recapitalization front before getting excited." [View news story]
    ""Interesting assessment Tvaddic. So did MRC do the DVD deal?"""

    yes--MRC has all the rights to monetize House of Cards with DVDs, Blue rays and eventual sales to competitor networks. Netflix has only first window streaming rights. In an interview with Sarandos about 2 years ago, Sarandos stresses that Netflix is only licensing the show and has no other rights to use of the content. He very much plays down the risk and the novelty saying it is like any other licensing deal except they bought sight unseen and risk a failure in demand. Since they don't release viewer numbers we can only guess at the audience.

    I find it disingenuous that Netflix keeps claiming credit for the inception production and rights to content sales when in fact the program could just as easily have ended up at HBO if MRC had shopped it aggressively to them. This was not a Netflix creation and they deserve no credit.
    Apr 2 09:25 PM | 1 Like Like |Link to Comment
  • Netflix: International Expansion And The Road Ahead [View article]
    netflix does not usually produce their own content so they have no advantage in producing it. House of Cards was a Media Rights production and the upcoming Sense8 (just like HoC) was being shopped around to see who would license it from the Wachowskis of Matrix fame and not so much fame from V for Vendetta. It is being produced by Georgeville television. Netflix produces very little of its "original" content.So there is no advantage. Any of these shows could just as easily have ended up at HBO or Showtime or AMC

    I notice the entire media world gives them credit for inception and production and they are happy to not set the record straight
    Mar 27 11:58 PM | Likes Like |Link to Comment