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Users have valid criticisms here. Nothing in their post indicates that Netflix's costs have increased, so why would they hike prices by 60%? Why would you expec

Users have valid criticisms here. Nothing in their post indicates that Netflix's costs have increased, so why would they hike prices by 60%? Why would you expect a positive response to such a move?

quandrum 15y ago
Their costs have reportedly increased by ~11x http://money.cnn.com/2011/07/08/technology/netflix_starz_contract/index.htm http://money.cnn.com/2011/07/08/technology/netflix_starz_con...
- encoderer 15y ago
  Their licensing costs. And even then, that's a proforma FY2012 guess from an analyst that's not affiliated with the company. It's worth asking if Wedbush Securities has a short position on NFLX. This is a company that operates dozens of physical warehouses, employs thousands of people, and pays an astonishing amount in postage fees. Their licensing costs are surely just a fraction of their bottom line.
  - seanalltogether 15y ago
    You've got that the other way around. In 2010, Fullfillment Expenses cost them 9.4% of their revenue, Cost of Subscription cost them 54% of their revenue.
  - cube13 15y ago
    According to Netflix's 2010 SEC filing, their operations expenses are around $400 million. Adding in development, marketing and general administrative costs, their total non-license costs were around $800 million. They paid $1.2 billion in licensing costs. It's their most expensive cost, by far.
    - encoderer 15y ago
      That includes their physical disc's, doesn't it? The post I replied to -- and my reply -- was addressing streaming licensing: Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012. In other words, of that $1.2bn you quote from their 10-K, 1.02bn was physical discs.
  - losvedir 15y ago
    > It's worth asking if Wedbush Securities has a short position on NFLX. It doesn't look like they take positions themselves. They seem to be your standard financial services broker/dealer, in which case they do research for clients who take positions. It's likely they have a "Sell", or at least "Hold", rating if they're writing negative notes. But that's as it should be; I think you have the causality backwards in your implication.
simonsarris 15y ago
Netflix operating costs: Q1 2010: $202 Million Q2 2010: $203 Million Q3 2010: $225 Million Q4 2010: $232 Million Q1 2011: $300 Million
- deleted 15y ago
  [deleted]
mikeryan 15y ago
Netflix's subscribers have one valid complaint between cost or quality of content, but they can't complain about both. As much as everyone thinks that Netflix is going to compete with cable, the only way to truly do so is to start getting first run, quality content and that costs money - boatloads of it. Netflix has gotten a pass for now since it was the only game in town but if they want to compete for your entertainment dollars they're going to have to spend some cash on quality first run content. I give it less then 2 years before they start offering tiered plans - and maybe something subsidized via advertising. Its the only natural evolution of their model.
tomlogic 15y ago
IIRC, their streaming costs were based on number of subscribers. With this plan, they ensure that only people who actually use unlimited streaming (and are therefore willing to pay for it) will be included in that subscriber count.
- bpd1069 15y ago
  Now this makes sense, thanks for pointing this out, now I don't have to cancel and get cable tv.

Users have valid criticisms here. Nothing in their post indicates that Netflix's costs have increased, so why would they hike prices by 60%? Why would you expect a positive response to such a move?

quandrum 15y ago

Their costs have reportedly increased by ~11x http://money.cnn.com/2011/07/08/technology/netflix_starz_contract/index.htm http://money.cnn.com/2011/07/08/technology/netflix_starz_con...

encoderer 15y ago
Their licensing costs. And even then, that's a proforma FY2012 guess from an analyst that's not affiliated with the company. It's worth asking if Wedbush Securities has a short position on NFLX. This is a company that operates dozens of physical warehouses, employs thousands of people, and pays an astonishing amount in postage fees. Their licensing costs are surely just a fraction of their bottom line.
- seanalltogether 15y ago
  You've got that the other way around. In 2010, Fullfillment Expenses cost them 9.4% of their revenue, Cost of Subscription cost them 54% of their revenue.
- cube13 15y ago
  According to Netflix's 2010 SEC filing, their operations expenses are around $400 million. Adding in development, marketing and general administrative costs, their total non-license costs were around $800 million. They paid $1.2 billion in licensing costs. It's their most expensive cost, by far.
  - encoderer 15y ago
    That includes their physical disc's, doesn't it? The post I replied to -- and my reply -- was addressing streaming licensing: Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012. In other words, of that $1.2bn you quote from their 10-K, 1.02bn was physical discs.
- losvedir 15y ago
  > It's worth asking if Wedbush Securities has a short position on NFLX. It doesn't look like they take positions themselves. They seem to be your standard financial services broker/dealer, in which case they do research for clients who take positions. It's likely they have a "Sell", or at least "Hold", rating if they're writing negative notes. But that's as it should be; I think you have the causality backwards in your implication.

simonsarris 15y ago

Netflix operating costs: Q1 2010: $202 Million Q2 2010: $203 Million Q3 2010: $225 Million Q4 2010: $232 Million Q1 2011: $300 Million

deleted 15y ago
[deleted]

mikeryan 15y ago

Netflix's subscribers have one valid complaint between cost or quality of content, but they can't complain about both. As much as everyone thinks that Netflix is going to compete with cable, the only way to truly do so is to start getting first run, quality content and that costs money - boatloads of it. Netflix has gotten a pass for now since it was the only game in town but if they want to compete for your entertainment dollars they're going to have to spend some cash on quality first run content. I give it less then 2 years before they start offering tiered plans - and maybe something subsidized via advertising. Its the only natural evolution of their model.

tomlogic 15y ago

IIRC, their streaming costs were based on number of subscribers. With this plan, they ensure that only people who actually use unlimited streaming (and are therefore willing to pay for it) will be included in that subscriber count.

bpd1069 15y ago
Now this makes sense, thanks for pointing this out, now I don't have to cancel and get cable tv.