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  • Is Netflix On A Suicide Mission? [View article]
    HBO and Showtime didn't produce any original content when they launched. How good was the quality of the content when cable first started. As subscribers grow, Netflix has more money to invest in content. A small portion the content will be originally produced (Lilllyhamer, House of Cards). Yes there will be competition, but Netflix has first mover advantage and has the largest audience, meaning they have the money to spend. Amazon will compete but it is tangential to their other business so the investment will be measured. How many channels are on your cable system? Does only one network make money? HBO, Showtime, Starz, and Epix are all subscription networks on cable. Is only one of them profitable? You will be right on your short if Netflix can not grow their subscribers. If subscribers continue to grow, I believe your short thesis is a risky bet. Their problems last year were self-inflicted. For the time being, it looks like customers are giving the company another chance.
    Jan 27 01:49 PM | 3 Likes Like |Link to Comment
  • Is Netflix On A Suicide Mission? [View article]
    They are not killing the DVD business. Consumers are killing the DVD business. Think music. Consumers no longer buy CDs. They download from ITunes. Streaming video is no different. They are happy to let consumers continue to order DVDs by mail, but they are not going to spend marketing dollars on a dying business.

    As for the relative profits. The streaming business has lower margins because it is still ramping. Repeating what I posted on your site last week, all television networks in their infancy generate losses, because they must procure content before they attract viewers/subscribers. That statement is true for HBO, MTV, ESPN and all the other networks that have been launched in the last 35 years. The quality of the content determines how quickly a network attracts viewers/subscribers which of course will determine the level of subscriptions or advertising revenue. As a network reaches an inflection point on content costs the contribution of each additional subscriber falls entirely to the bottom line. They are virtually no additional costs. So actually streaming content is a very profitable business.

    Again Netflix is no different then HBO/Showtime other then the programs are streamed over the internet rather then over the air. In addition Netflix allows for viewing on demand, personalizes your selections, and has a wide selection of programming. HBO and Showtime have superior programming, because approximately 40% of the content offered is originally produced. But you pay $15 a month for each service on top of a $80 to $100 monthly cable bill. So $7.99 a month is a bargain.

    If you don't like Netflix's content, that's your prerogative, but the fact subscribers are growing again as our hours watched suggests a large segment of the population is finding enough content to continue subscribing to the service.

    Showtime earns a 35% operating margin on 24 million subs. At 40 million subs Netflix will earn $10 assuming a 20% margin.

    Thanks for shorting the stock. The one certainty of each short sale, is it eventually has to be bought back
    Jan 27 11:07 AM | 3 Likes Like |Link to Comment
  • Netflix's (NFLX) streaming service offers just 5 of the top 100 2011 movies compared to 10 one year ago and in the 40s for Amazon (AMZN), iTunes (AAPL), and Vudu (WMT). The data make even clearer Netflix's move away from offering popular movies on a subscription basis and towards more of a TV-network type model, writes Tristan Louis.  [View news story]
    If you like the price that's good for you. Overall cable subcribers have declined in each of the last three years. The cable companies say it's the economy. I say it's a segment of the population using Netflix, hulu, and an antenna.
    Jan 23 03:05 PM | 1 Like Like |Link to Comment
  • Netflix's (NFLX) streaming service offers just 5 of the top 100 2011 movies compared to 10 one year ago and in the 40s for Amazon (AMZN), iTunes (AAPL), and Vudu (WMT). The data make even clearer Netflix's move away from offering popular movies on a subscription basis and towards more of a TV-network type model, writes Tristan Louis.  [View news story]
    No television network in history has been profitable early on, whether it be advertising supported or subscription. The simple fact is you incur programming costs before you attract viewers/subscribers. The negative costs can exist for three to five years. Netflix had the advantage of a cash flowing DVD business to subsidize the start up of their streaming business.

    The reason subscriber growth has restarted is because consumers are no longer looking at the streaming business as substitution for the DVD by mail business. Originally, subscribers expected to see the latest box office releases amongst the streaming options. Now they are watching literally billions of hours of television shows and older movies without any commercial interruptions. When you line up what Netflix offers compared to a basic cable package you realize all you are giving up is your local news and ESPN.

    Netflix streaming business is break even at 23 million subscribers
    Jan 23 03:02 PM | 1 Like Like |Link to Comment
  • Netflix's (NFLX) streaming service offers just 5 of the top 100 2011 movies compared to 10 one year ago and in the 40s for Amazon (AMZN), iTunes (AAPL), and Vudu (WMT). The data make even clearer Netflix's move away from offering popular movies on a subscription basis and towards more of a TV-network type model, writes Tristan Louis.  [View news story]
    Watching television shows without commercials for $7.99 a month is much better deal then your $85 cable bill.
    Jan 22 10:39 AM | 1 Like Like |Link to Comment
  • Can Netflix Avoid Going Under In 2012? [View article]

    If you ever analyzed the value of a "paid television network" you
    might begin to understand the potential value of Netflix.

    1. We should expect more on line viewing options (AMZN, GOOG, Hulu)but there won't be an unlimited number. The reason the number of competitors will be limited is the cost of acquiring differentiated content and the difficulty of building up an audience. The bigger risk is the emergence of new video content (i.e. You Tube) that increasingly competes for a limited amount of time to view video.

    2. As a first mover, despite the missteps of the past year, Netflix is
    likely to maintain a significant share of the overall on line
    audience. We should be reasonably certain absent further missteps the current Netflix subscriber base is fairly sticky. Yes there will be continued investment by the other competitors but again, other then You Tube, there isn't new, original content being created on line. Yes HBO Go and Cable everywhere are viable options but only within their current economic models.

    3. The oft mention comment there is nothing on Netflix streaming is a product of too much choice. Despite an explosion of cable networks in the last ten years people continue to complain there is nothing to watch on tv. If viewers complain about the original content (but watch it anyway) why would they suddenly be more enthralled with the content on Netflix?

    3. Netflix as a "TV network" has a couple of distinct advantages.
    One, they know what their subscribers are watching. This data is very significant since they know the value of all content. Traditional
    networks are dependent on Nielsen ratings which are statistical
    samples of a television audience. Second, they are not limited by
    time slots, or demographics. Netflix can be many things to many
    viewers so in theory it is much bigger then a tv network which usually plays to specific demographics. Third, because Netflix knows the viewing habits of each member, they can suggest content to watch. As the number viewing options continues to explode, knowing what to watch at any moment is increasingly becoming a challenge. Recommendations from Facebook friends will help viewers but even those recommendations
    may be limited to popular shows.

    4. What might Netflix earn some day and what might it be worth? To answer this question we have to mix apples and oranges. Right now Netflix is investing in content and establishing new markets so profits are suffering, but like most television networks they will reach an inflection point where the relatively fixed programming costs are surpassed by subscriber growth. Remember there is nothing so unique about Netflix's model. They acquire programming and sell subscriptions. The difference is you watch the content via the internet rather then a cable provider. For potential profits, let's look at Showtime. Showtime is part of CBS's cable networks. The only other properties in that operating segment are the Smithsonian network and the CBS Sports College television network, These are both minor
    properties and probably not generating much EBIT. Showtime, with 20 mm subscribers generates a 37% EBIT margin. Obviously, Showtime has some good original programming but even at 20% EBIT margins, Netflix would earn substantial profits.

    I don't know what Showtime would be worth as a stand alone property but here's another look at what tv networks are worth. At a recent Hasbro presentation they said leading children's networks are valued between $3.5 billion and $17 billion. These are advertising supported properties, but the interesting point is the most watched children's television network only reaches 1.7 mm viewers. As we know, Netflix is valued around $6 billion. Or you can look at Viacom with a $26 billion market cap. For $26 billion you get Nickelodeon, MTV, Comedy Central, TV Land, Spike, CMT, BET, VH1, and Paramount Studios. It's quite an array of networks, but how much "must see tv" are on all these networks. In my opinion for $7.99 a month you can easily find more compelling programming then schlock on the suite of Viacom properties.

    At 40 million subs, Netflix will be earning $10.
    Jan 20 09:30 PM | 3 Likes Like |Link to Comment
  • Netflix's (NFLX) streaming service offers just 5 of the top 100 2011 movies compared to 10 one year ago and in the 40s for Amazon (AMZN), iTunes (AAPL), and Vudu (WMT). The data make even clearer Netflix's move away from offering popular movies on a subscription basis and towards more of a TV-network type model, writes Tristan Louis.  [View news story]
    It is not a movie streaming service. The company is focused much more on adding television shows and their subscribers approve judging by the hours of viewing. Streaming recently released movies is a commodity service that many other sites already offer. Offering a deep and varied portfolio of television shows along with movies provides viewers with a viable alternative to what the cable/DBS offers all for $7.99 a month.
    Jan 20 02:04 PM | Likes Like |Link to Comment
  • Toyota's (TM +0.5%) newest hybrid vehicle will boast an industry-leading 53 miles per gallon in city driving and sell for less than $19K, the president of its U.S. sales unit says. The subcompact Prius C is the fourth member of Toyota's family of Prius vehicles; the 1.5L-engine car will debut later this year, along with another new Prius, a plug-in hybrid.  [View news story]
    I have over 100 movies in my Netflix que. Why would I care if a new release comes out in 28 days, 56 days, or 12 months. If I wasn't anxious to see a film in the theatre, it makes no difference to me when I view it at home.
    Jan 10 08:00 PM | Likes Like |Link to Comment
  • Netflix (NFLX +6.9%) shares are soaring, making it not only the best performing stock in the S&P 500 today but for the year so far, up 22%-plus on no news. The stock that had been "the plaything of momentum traders" last year apparently has resumed its old role, Mark Gongloff cracks.  [View news story]
    Netflix lets you watch want you want to watch, when you want to watch it without commercial interruption. Plus, if you are uncertain about what to watch, they'll make suggestions to you based on your viewing history. For $8 a month you get television on demand. How cool is that!?
    Jan 6 02:00 PM | 1 Like Like |Link to Comment
  • A New ETF Aims to Short the Market [View article]
    hope he wasn't still short GMCR today
    Mar 10 09:34 PM | Likes Like |Link to Comment
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