4 ms·

Fewer subscribers = lower revenues. <- That's the problem. Fewer subscribers = More articles about fewer subscribers = FUD = Lower stock price <- Not the probl

by sudonim 15y ago

Fewer subscribers = lower revenues. <- That's the problem. Fewer subscribers = More articles about fewer subscribers = FUD = Lower stock price <- Not the problem. The movement of the stock price doesn't affect Netflix' viability as a business. Kudos to them for making the business more targeted towards online streaming. I hated having to pay for physical DVDs when all I used was streaming. I switched my plan as soon as I could. I don't use Netflix all the time. For most shows, I auto-steal them after they air. For casual watching, I use Netflix and watch things like Pawn Stars, Trailer Park Boys, and other series long after they've aired. It fills the "I just want to flip on the TV and see something I wasn't expecting. I don't care what it is" need.

maratd 15y ago
> Fewer subscribers = lower revenues. <- That's the problem. That's not the problem. In fact, it might be the solution. What matters is profitability, not revenue.
- pchristensen 15y ago
  They have large fixed costs for content. Subscriber growth amortizes those costs across a wider base.
  - sounds 15y ago
    Although that's a fair first-order approximation, look here: http://files.shareholder.com/downloads/NFLX/1403529688x0x500395/7c72e777-75c5-4f7f-9640-5b06f8cc54e4/Guidance_Update_Sept_2011_final.pdf http://files.shareholder.com/downloads/NFLX/1403529688x0x500... I'd break their costs down into per-byte costs and per-subscriber costs. The fixed content costs are only fixed until they renegotiate their contracts. Most media businesses look to merge with the content creators to eliminate those costs altogether. I believe the real discussion going on is whether Netflix has a viable long-term business model. I believe they do, and I'm glad they got rid of DVDs.
jellicle 15y ago
Has anyone actually done the math here: 25 million customers at $10/month was the old calculus; 24 million customers at $16/month is the new calculus; I don't see any problem here. At all. (Okay, I'm handwaving because I'm too lazy to actually look up the revenue figures, but losing subscribers when you raise your prices is not necessarily a bad thing at all.)
- brown9-2 15y ago
  This is not an accurate estimation because not all of the old customers were on the same $10/month plan, and not all of the 24 million (forecasted) customers are on the $16/month plan. Netflix's own document lays out the forecast pretty well: http://files.shareholder.com/downloads/NFLX/1403529688x0x500395/7c72e777-75c5-4f7f-9640-5b06f8cc54e4/Guidance_Update_Sept_2011_final.pdf http://files.shareholder.com/downloads/NFLX/1403529688x0x500... (see Venn diagram). Too bad the CNN article doesn't delve into these details.
  - nandemo 15y ago
    It's not accurate, but think about it: 25M to 24M is only a 4% decrease; $10 to $16 for the dvd+streaming plan is a 60% increase, and even if that translates to only (say) a 6% increase in average revenue per customer, they're safe.

by sudonim 15y ago

maratd 15y ago

> Fewer subscribers = lower revenues. <- That's the problem. That's not the problem. In fact, it might be the solution. What matters is profitability, not revenue.

pchristensen 15y ago
They have large fixed costs for content. Subscriber growth amortizes those costs across a wider base.
- sounds 15y ago
  Although that's a fair first-order approximation, look here: http://files.shareholder.com/downloads/NFLX/1403529688x0x500395/7c72e777-75c5-4f7f-9640-5b06f8cc54e4/Guidance_Update_Sept_2011_final.pdf http://files.shareholder.com/downloads/NFLX/1403529688x0x500... I'd break their costs down into per-byte costs and per-subscriber costs. The fixed content costs are only fixed until they renegotiate their contracts. Most media businesses look to merge with the content creators to eliminate those costs altogether. I believe the real discussion going on is whether Netflix has a viable long-term business model. I believe they do, and I'm glad they got rid of DVDs.

jellicle 15y ago

Has anyone actually done the math here: 25 million customers at $10/month was the old calculus; 24 million customers at $16/month is the new calculus; I don't see any problem here. At all. (Okay, I'm handwaving because I'm too lazy to actually look up the revenue figures, but losing subscribers when you raise your prices is not necessarily a bad thing at all.)

brown9-2 15y ago
This is not an accurate estimation because not all of the old customers were on the same $10/month plan, and not all of the 24 million (forecasted) customers are on the $16/month plan. Netflix's own document lays out the forecast pretty well: http://files.shareholder.com/downloads/NFLX/1403529688x0x500395/7c72e777-75c5-4f7f-9640-5b06f8cc54e4/Guidance_Update_Sept_2011_final.pdf http://files.shareholder.com/downloads/NFLX/1403529688x0x500... (see Venn diagram). Too bad the CNN article doesn't delve into these details.
- nandemo 15y ago
  It's not accurate, but think about it: 25M to 24M is only a 4% decrease; $10 to $16 for the dvd+streaming plan is a 60% increase, and even if that translates to only (say) a 6% increase in average revenue per customer, they're safe.