4 ms·

My understanding is they have started trying to become publisher as well similar to what Netflix is doing. Perhaps remove the middle man and have content which

My understanding is they have started trying to become publisher as well similar to what Netflix is doing. Perhaps remove the middle man and have content which can be exclusive on Spotify or content they can license to others.

adventured 8y ago
That's an interesting problem, because Netflix is unable to achieve any sense of real profitability in their model either. Netflix is pretending to be profitable, while they bury themselves massively in debt to pay for content (ie they can't properly fund business expansion out of operations after 20 years). A particularly inherently unsustainable model when you've got single digit margins. Here's the Netflix balance sheet the last four years: 2014: -$914m; 2015: -$2.08b; 2016: -$4.6b; 2017: -$6.7b; 1Q18: -$7.3b They took on on roughly $5.7b in new debt in three years, at an accelerating clip, versus combined earnings of $850m. While they might be able to sustain that for some time, it's a dead-end model: eventually the whole stacking scheme gives out, subscriber growth tails off (plausibly beginning now), and you've got a mountain of debt that costs you ever larger sums of interest and limits your ability to maneuver. Right now their annual interest costs are eating the equivalent of a full quarter of their profits. They'll more than double their debt in the next few years by necessity to keep up the content spending, and their interest costs will ballon to a billion dollars per year.
- macspoofing 8y ago
  Netflix needs to become HBO, i.e. a content creator. And it's clear as day they are trying to be that. It's smart and they need to do that to survive, to the point where they are willing to debt-finance this. If they don't do that, publishers will extract every little bit of profitability from them.

4 ms·

My understanding is they have started trying to become publisher as well similar to what Netflix is doing. Perhaps remove the middle man and have content which

by notyourwork 8y ago

adventured 8y ago
That's an interesting problem, because Netflix is unable to achieve any sense of real profitability in their model either. Netflix is pretending to be profitable, while they bury themselves massively in debt to pay for content (ie they can't properly fund business expansion out of operations after 20 years). A particularly inherently unsustainable model when you've got single digit margins. Here's the Netflix balance sheet the last four years: 2014: -$914m; 2015: -$2.08b; 2016: -$4.6b; 2017: -$6.7b; 1Q18: -$7.3b They took on on roughly $5.7b in new debt in three years, at an accelerating clip, versus combined earnings of $850m. While they might be able to sustain that for some time, it's a dead-end model: eventually the whole stacking scheme gives out, subscriber growth tails off (plausibly beginning now), and you've got a mountain of debt that costs you ever larger sums of interest and limits your ability to maneuver. Right now their annual interest costs are eating the equivalent of a full quarter of their profits. They'll more than double their debt in the next few years by necessity to keep up the content spending, and their interest costs will ballon to a billion dollars per year.
- macspoofing 8y ago
  Netflix needs to become HBO, i.e. a content creator. And it's clear as day they are trying to be that. It's smart and they need to do that to survive, to the point where they are willing to debt-finance this. If they don't do that, publishers will extract every little bit of profitability from them.