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> So you are saying a company should never reinvest profits in the company to support another money losing business until it’s profitable? If it makes it impos

by cyberax 8mo ago

> So you are saying a company should never reinvest profits in the company to support another money losing business until it’s profitable? If it makes it impossible to set up a competitor? Absolutely, yes. > Should Netflix for instance not invested money from renting DVDs to invest in a streaming service? Netflix was not priced below the cost of production from the beginning. You're confusing sustainable pricing and paying off all the capital spending immediately at launch. A better example is Doordash when it was heavily subsidized by VC money: https://news.ycombinator.com/item?id=23216852 https://news.ycombinator.com/item?id=23216852 And it now faces several anti-trust lawsuits.

raw_anon_1111 8mo ago
Netflix very much was priced below the cost of production for years and had to borrow money to make Netflix originals.
- cyberax 8mo ago
  I'm not familiar with their originals economics, but the original streaming Netflix was not priced below the cost. As evidenced by them keeping the same subscription cost for years.
  - raw_anon_1111 8mo ago
    How is that “evidence” of anything? The “evidence” that they were charging less for subscriptions than it cost to run the streaming service is that they were borrowing billions of dollars to both license content and create new content over the course of years. Netflix borrowed $16 billion over a decades https://www.nytimes.com/2021/01/19/business/netflix-earnings-debt.html https://www.nytimes.com/2021/01/19/business/netflix-earnings... Because subscriptions didn’t make enough money to fund its business. Were they being “anti competitive”?
    - tovej 8mo ago
      Yes. They were. The US just hasn't enforced antitrust laws in decades.
      - raw_anon_1111 8mo ago
        So now a business shouldn’t be able to borrow money either to start a new initiative? Should they have instead charged customers enough from day one to fund growth? So the first 1000 or so customers should have been charged enough so they could spend an extra $16 Billion?
        cyberax 8mo ago
        If they're using their overwhelming size to lock out smaller competitors that can't put up a similar collateral? Probably a good idea. And it looks like Netflix simply needed to make the service a bit more expensive?
        raw_anon_1111 8mo ago
        A “bit” more expensive to cover $16 billion of expenses? So how would that have helped smaller competitors? Where were they going to get the money from to compete if not other lines of businesses or borrowing? Were they going to charge their first 10,000 customers $100,000 a year so they could fund development without either borrowing money or take it from existing businesses?
        cyberax 8mo ago
        Yes? Netflix had 20 million subscribers in 2010. At additional $50 per year per subscriber, that's $1B a year. More than enough to be profitable with regular loan financing at market rates. > So how would that have helped smaller competitors? Where were they going to get the money from to compete if not other lines of businesses or borrowing? By borrowing at market rates and pricing services to cover the loan payments. You're actually making a good argument why cross-financing should not exist at all and that we all would probably be better without it.

by cyberax 8mo ago

raw_anon_1111 8mo ago

Netflix very much was priced below the cost of production for years and had to borrow money to make Netflix originals.

cyberax 8mo ago
I'm not familiar with their originals economics, but the original streaming Netflix was not priced below the cost. As evidenced by them keeping the same subscription cost for years.
- raw_anon_1111 8mo ago
  How is that “evidence” of anything? The “evidence” that they were charging less for subscriptions than it cost to run the streaming service is that they were borrowing billions of dollars to both license content and create new content over the course of years. Netflix borrowed $16 billion over a decades https://www.nytimes.com/2021/01/19/business/netflix-earnings-debt.html https://www.nytimes.com/2021/01/19/business/netflix-earnings... Because subscriptions didn’t make enough money to fund its business. Were they being “anti competitive”?
  - tovej 8mo ago
    Yes. They were. The US just hasn't enforced antitrust laws in decades.
    - raw_anon_1111 8mo ago
      So now a business shouldn’t be able to borrow money either to start a new initiative? Should they have instead charged customers enough from day one to fund growth? So the first 1000 or so customers should have been charged enough so they could spend an extra $16 Billion?
      - cyberax 8mo ago
        If they're using their overwhelming size to lock out smaller competitors that can't put up a similar collateral? Probably a good idea. And it looks like Netflix simply needed to make the service a bit more expensive?
        raw_anon_1111 8mo ago
        A “bit” more expensive to cover $16 billion of expenses? So how would that have helped smaller competitors? Where were they going to get the money from to compete if not other lines of businesses or borrowing? Were they going to charge their first 10,000 customers $100,000 a year so they could fund development without either borrowing money or take it from existing businesses?
        cyberax 8mo ago
        Yes? Netflix had 20 million subscribers in 2010. At additional $50 per year per subscriber, that's $1B a year. More than enough to be profitable with regular loan financing at market rates. > So how would that have helped smaller competitors? Where were they going to get the money from to compete if not other lines of businesses or borrowing? By borrowing at market rates and pricing services to cover the loan payments. You're actually making a good argument why cross-financing should not exist at all and that we all would probably be better without it.