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>Netflix’s issue is not the quality of content - it’s their business model. They are borrowing billions to create content with the only way to recoup the cost i
by friedman23 7y ago
>Netflix’s issue is not the quality of content - it’s their business model. They are borrowing billions to create content with the only way to recoup the cost is mostly by subscription revenue. Their initial rationale was that they were building a content library that would have value. But, they admitted during the last conference call that subscriber growth was slow expectations because they didn’t have any new big releases. No one is going to are about “House of Cards” in five years.
I think you are contradicting yourself here. If the quality was good they wouldn't have mentioned not having big releases as being the reason why their subscriber growth was slow.
>Compare that to Disney’s library. People still care about Disney’s animated movies from the 30s and even adults are nostalgic about the 90s X-men animated TV show and the original Star Wars from the 70s.
I think you are arguing in favor of what I was saying?
>Besides, Disney makes billions from their content from theatrical releases, video on demand, network and cable TV, theme parks, toy sales, etc.
Yes, and for some strange reason Disney trades at 2x the market cap of netflix with 17x p/e while netflix trades at 88x p/e. Either Disney is severely undervalued or Netflix is severely overvalued (or both).
- scarface74 7y agoI think you are contradicting yourself here. If the quality was good they wouldn't have mentioned not having big releases as being the reason why their subscriber growth was slow. No, I’m saying that Disney’s library content has value and doesn’t have to be hit driven to be successful. If Netflix’s only way of gaining customers is by keep getting in debt to fund new content, it has an unsustainably high customer acquisition cost. If customers don’t care enough to stick around to have access to its library content, the lifetime value of a customer is low. Either Disney is severely undervalued or Netflix is severely overvalued (or both). Why does Uber and Lyft have any value at all when they are losing billions and have no hope of having profits that justify their value? Dropbox should also be valued at zero. Market cap is not a substitute for sound business fundamentals like actually having a profitable business model.
- friedman23 7y agoI think we both agree, I don't what statement I made you are arguing against. The interesting part of the streaming space is that the incumbents actually have an advantage over the upstart technology company. They are joining the party almost 8 years after netflix and will probably succeed just because of the massive repository of content they have accrued over the past 60 to 70 years.
- skinnymuch 7y agoDisney is hit driven in that all their things are mostly either for entire families or four quadrant sort of mainstream hit-style media. Which is most of their historical content library. Netflix actually has a lot of quality original shows. All modern as they are all from this decade. People want hits though, so that isn’t helping Netflix enough.
- scarface74 7y agoI’m not making a value judgment on the “quality” of Netflix’s content vs Disney’s. I’m only talking about business models. Netflix’s business model isn’t competitive by any objective measure.
- skinnymuch 7y agoFour quadrant media/tent-pole media isn’t what all hits are, but it is true for a lot of them. I was assuming quality in that regard. I don’t see any media company including Comcast’s media companies being close to Disney and runner up Warner in terms of content. Which is basically business model at this point. Netflix can’t compare to Disney, but all the other media companies can’t either. They are going to have to do something as well.