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> This is yet another category of business where I think they'd be far better off being private, so in theory there isn't constant pressure to continue increas

> This is yet another category of business where I think they'd be far better off being private, so in theory there isn't constant pressure to continue increasing revenue. Netflix has borrowed billions (and billions) of dollars to get where they are. As a private entity they've gone bust seven or eight years ago. Netflix priced themselves artificially low to grow, based on debt. That set unrealistic consumer expectations and they might have to face the consequences of that eventually, but Netflix's terms literally always said that accounts could only be shared with people living in the same household as you.

tw04 6y ago
>Netflix has borrowed billions (and billions) of dollars to get where they are. As a private entity they've gone bust seven or eight years ago. Netflix has been profitable since at least 2005... they may not have grown as quickly, but I'd need some data to back up the claim they'd be bankrupt without billions in investment. https://www.macrotrends.net/stocks/charts/NFLX/netflix/gross-profit https://www.macrotrends.net/stocks/charts/NFLX/netflix/gross... >but Netflix's terms literally always said that accounts could only be shared with people living in the same household as you. I never said anything to the contrary. But it's no secret to netflix or anyone else that account sharing happens. This wouldn't be a news story otherwise. It also doesn't change the fact it's customer hostile and clearly an attempt to increase revenue.
- Mindwipe 6y ago
  > Netflix has been profitable since at least 2005.. Only because you're allowed to not count issuing junk bonds towards your profitability. Netflix only started having cash positive quarters this year, and has fifteen billion dollars in debt, generally going up by four billion dollars a year. Netflix literally could not have afforded the interest on those junk bonds as a private company. It was only able to borrow so cheaply on the promise of it's growth. (And this year is unusually friendly to them due to Covid, I do not think they are suddenly actually profitable, they just didn't spend nearly as much as normal.)
- whatok 6y ago
  Netflix would not remotely resemble its current form and likely would have been acquired years ago if they did not pivot to their own content. Switching to their own content required and still requires huge amounts of money; est. 17bn last year[0]. Additionally, the gross profit number is a flawed number for many reasons; try looking at operating or net income or anything farther down the income statement from basic revenue. Netflix has no option but to finance content spend with debt as they do not generate enough FCF to cover content spend and will quickly fall behind competitors if they don't. [0] https://www.pcmag.com/news/netflix-will-probably-spend-19-billion-on-video-in-2021 https://www.pcmag.com/news/netflix-will-probably-spend-19-bi...
  - tw04 6y ago
    >Netflix would not remotely resemble its current form and likely would have been acquired years ago if they did not pivot to their own content. You can't acquire a private company unless they're willing to sell. >Switching to their own content required and still requires huge amounts of money; est. 17bn last year[0]. I don't follow your point? Private companies can take a loan just as easily as public. If they were unable to attain the financing they wanted, they'd still have plenty of their own content, just not as much. >Additionally, the gross profit number is a flawed number for many reasons; try looking at operating or net income or anything farther down the income statement from basic revenue. Netflix has no option but to finance content spend with debt as they do not generate enough FCF to cover content spend and will quickly fall behind competitors if they don't. I'd suggest you do the same. Their cash balance increased from $5 billion to $8 billion last year. They took out "debt" to finance their movies because money is cheap right now. Nothing they've done required them being a public company, and nothing you've shown makes me believe they couldn't be in exactly the same position they currently are as a private company. They didn't even start borrowing money of significance until 2012, I still don't believe for a second they'd be "bankrupt" as a a private company. https://stockanalysis.com/stocks/nflx/financials/balance-sheet/ https://stockanalysis.com/stocks/nflx/financials/balance-she...
    - whatok 6y ago
      > I don't follow your point? Private companies can take a loan just as easily as public. If they were unable to attain the financing they wanted, they'd still have plenty of their own content, just not as much. Private companies face a higher cost of capital than equivalent public companies and are unable to borrow as much money as public companies are able to. This is basic finance 101 stuff. Without debt financing, they would not have been able to begin their pivot when they needed to. Netflix is able to borrow at much lower rates than a company with the same financials solely because they are a large public company. Google "equity cushion" if you're unfamiliar with the term. > I'd suggest you do the same. Their cash balance increased from $5 billion to $8 billion last year. They took out "debt" to finance their movies because money is cheap right now. Nothing they've done required them being a public company, and nothing you've shown makes me believe they couldn't be in exactly the same position they currently are as a private company. Yes, Netflix is doing much better financially over the past few years and especially in the past year given the pandemic. I don't see how their cash balance is relevant in the face of content spend 2-3x that much. The initial contention was over content spend and a misleading gross profit number. >They didn't even start borrowing money of significance until 2012, I still don't believe for a second they'd be "bankrupt" as a a private company. They started borrowing when they needed to pivot to their own content, had to do so at pretty high rates, and luckily succeeded in their pivot. Throughout this, I don't see any acknowledgement of where streaming was back then and how competitive the space has become since then. Netflix needs to spend on content or it will get left behind. A smaller Netflix offers no competitive edge right now and a smaller Netflix years ago would have been held hostage by content owners while being unable to have any real control over sub pricing; see poorly handled rate increases years ago.
kmeisthax 6y ago
Right, but at the same time, Netflix also prices their product tiers around being able to pay for more simultaneous streams on the same account. Account sharing is literally a selling point for them.
- Mindwipe 6y ago
  Sharing inside a household is. Again, the t&cs explicitly forbid you account sharing with anyone outside your household. (As does Spotify's, and Spotify started doing something similar to do this a few years ago.)
  - NeutronStar 6y ago
    Ok so, what if I live with you but work in another city I travel to every week, do I not live with you? What if I'm a trucker on the move? What if I'm in the army and getting deployed?
    - javagram 6y ago
      In those 3 examples you’d still both file your taxes at the same address and be legally eligible to vote there too. Seems easily distinguished from the case of independent adults who sleep in different homes every night and have separate addresses on all their tax forms, drivers’ license and voting registrations...
      - Noted 6y ago
        So is Netflix going to require tax information on everyone in the household? How can they tell the difference from their end I think is one of the questions being presented
        Sohcahtoa82 6y ago
        Presumably, this person that is on the move is still using the same device no matter where they go. Their login session will be the same, just coming from a different IP.

tw04 6y ago

>Netflix has borrowed billions (and billions) of dollars to get where they are. As a private entity they've gone bust seven or eight years ago. Netflix has been profitable since at least 2005... they may not have grown as quickly, but I'd need some data to back up the claim they'd be bankrupt without billions in investment. https://www.macrotrends.net/stocks/charts/NFLX/netflix/gross-profit https://www.macrotrends.net/stocks/charts/NFLX/netflix/gross... >but Netflix's terms literally always said that accounts could only be shared with people living in the same household as you. I never said anything to the contrary. But it's no secret to netflix or anyone else that account sharing happens. This wouldn't be a news story otherwise. It also doesn't change the fact it's customer hostile and clearly an attempt to increase revenue.

Mindwipe 6y ago
> Netflix has been profitable since at least 2005.. Only because you're allowed to not count issuing junk bonds towards your profitability. Netflix only started having cash positive quarters this year, and has fifteen billion dollars in debt, generally going up by four billion dollars a year. Netflix literally could not have afforded the interest on those junk bonds as a private company. It was only able to borrow so cheaply on the promise of it's growth. (And this year is unusually friendly to them due to Covid, I do not think they are suddenly actually profitable, they just didn't spend nearly as much as normal.)
whatok 6y ago
Netflix would not remotely resemble its current form and likely would have been acquired years ago if they did not pivot to their own content. Switching to their own content required and still requires huge amounts of money; est. 17bn last year[0]. Additionally, the gross profit number is a flawed number for many reasons; try looking at operating or net income or anything farther down the income statement from basic revenue. Netflix has no option but to finance content spend with debt as they do not generate enough FCF to cover content spend and will quickly fall behind competitors if they don't. [0] https://www.pcmag.com/news/netflix-will-probably-spend-19-billion-on-video-in-2021 https://www.pcmag.com/news/netflix-will-probably-spend-19-bi...
- tw04 6y ago
  >Netflix would not remotely resemble its current form and likely would have been acquired years ago if they did not pivot to their own content. You can't acquire a private company unless they're willing to sell. >Switching to their own content required and still requires huge amounts of money; est. 17bn last year[0]. I don't follow your point? Private companies can take a loan just as easily as public. If they were unable to attain the financing they wanted, they'd still have plenty of their own content, just not as much. >Additionally, the gross profit number is a flawed number for many reasons; try looking at operating or net income or anything farther down the income statement from basic revenue. Netflix has no option but to finance content spend with debt as they do not generate enough FCF to cover content spend and will quickly fall behind competitors if they don't. I'd suggest you do the same. Their cash balance increased from $5 billion to $8 billion last year. They took out "debt" to finance their movies because money is cheap right now. Nothing they've done required them being a public company, and nothing you've shown makes me believe they couldn't be in exactly the same position they currently are as a private company. They didn't even start borrowing money of significance until 2012, I still don't believe for a second they'd be "bankrupt" as a a private company. https://stockanalysis.com/stocks/nflx/financials/balance-sheet/ https://stockanalysis.com/stocks/nflx/financials/balance-she...
  - whatok 6y ago
    > I don't follow your point? Private companies can take a loan just as easily as public. If they were unable to attain the financing they wanted, they'd still have plenty of their own content, just not as much. Private companies face a higher cost of capital than equivalent public companies and are unable to borrow as much money as public companies are able to. This is basic finance 101 stuff. Without debt financing, they would not have been able to begin their pivot when they needed to. Netflix is able to borrow at much lower rates than a company with the same financials solely because they are a large public company. Google "equity cushion" if you're unfamiliar with the term. > I'd suggest you do the same. Their cash balance increased from $5 billion to $8 billion last year. They took out "debt" to finance their movies because money is cheap right now. Nothing they've done required them being a public company, and nothing you've shown makes me believe they couldn't be in exactly the same position they currently are as a private company. Yes, Netflix is doing much better financially over the past few years and especially in the past year given the pandemic. I don't see how their cash balance is relevant in the face of content spend 2-3x that much. The initial contention was over content spend and a misleading gross profit number. >They didn't even start borrowing money of significance until 2012, I still don't believe for a second they'd be "bankrupt" as a a private company. They started borrowing when they needed to pivot to their own content, had to do so at pretty high rates, and luckily succeeded in their pivot. Throughout this, I don't see any acknowledgement of where streaming was back then and how competitive the space has become since then. Netflix needs to spend on content or it will get left behind. A smaller Netflix offers no competitive edge right now and a smaller Netflix years ago would have been held hostage by content owners while being unable to have any real control over sub pricing; see poorly handled rate increases years ago.

kmeisthax 6y ago

Right, but at the same time, Netflix also prices their product tiers around being able to pay for more simultaneous streams on the same account. Account sharing is literally a selling point for them.

Mindwipe 6y ago
Sharing inside a household is. Again, the t&cs explicitly forbid you account sharing with anyone outside your household. (As does Spotify's, and Spotify started doing something similar to do this a few years ago.)
- NeutronStar 6y ago
  Ok so, what if I live with you but work in another city I travel to every week, do I not live with you? What if I'm a trucker on the move? What if I'm in the army and getting deployed?
  - javagram 6y ago
    In those 3 examples you’d still both file your taxes at the same address and be legally eligible to vote there too. Seems easily distinguished from the case of independent adults who sleep in different homes every night and have separate addresses on all their tax forms, drivers’ license and voting registrations...
    - Noted 6y ago
      So is Netflix going to require tax information on everyone in the household? How can they tell the difference from their end I think is one of the questions being presented
      - Sohcahtoa82 6y ago
        Presumably, this person that is on the move is still using the same device no matter where they go. Their login session will be the same, just coming from a different IP.