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>That's because they are, in fact, insanely profitable. They are publicly traded companies, go look for yourself. They hover around average profitability. >Th

>That's because they are, in fact, insanely profitable. They are publicly traded companies, go look for yourself. They hover around average profitability. >That's easy. Because it allows them to convert 50 years worth of future profits into an immediate payday. Which is only possible because their wireline network is worth billions of dollars, otherwise nobody would be willing to pay them that much for it. Then why are they selling it for such a low amount? If it is insanely profitable, it would have an insane price. >Their business model is defective. The vast majority of their costs comes from providing fast data service. The marginal cost of providing TV service on top of that is a small fraction of that. Which means they're significantly undercharging for internet service and overcharging for TV and phone service. First, you negliect that there a licensing costs to provide TV service. But I do agree they are undercharging for internet service. But can they just raise their prices? Will the market support a 100 dollar Comcast internet only bill? I'm not sure it will.

AnthonyMouse 12y ago
> They are publicly traded companies, go look for yourself. They hover around average profitability. What is "average" profitability supposed to mean? Comparing several ISPs and finding their profitability similar and therefore all "average"? You obviously can't reasonably compare them to tech startups or family owned restaurants or the like. But they're making billions of dollars. > Then why are they selling it for such a low amount? Still not sure how billions of dollars is possibly considered "a low amount." > First, you negliect that there a licensing costs to provide TV service. Netflix is also paying to license (or produce) its content and it delivers it with no commercials for $9/month. > But I do agree they are undercharging for internet service. But can they just raise their prices? Will the market support a 100 dollar Comcast internet only bill? I'm not sure it will. Hardly anybody even subscribes to internet-only service. All raising the price of something nobody subscribes to would do is discourage cord cutting. It gives people the choice between paying $120 for triple play as they do today or paying a total of $110 by paying $100 internet-only + $9 for Netflix + $1 for Magic Jack. And then maybe the second one becomes more popular because it's still less expensive, but not in a way that causes any kind of serious problem for the ISP.
- rhino369 12y ago
  >What is "average" profitability supposed to mean? Comparing several ISPs and finding their profitability similar and therefore all "average"? You obviously can't reasonably compare them to tech startups or family owned restaurants or the like. >But they're making billions of dollars. S&P500 average maybe. You can use a bunch of different ways, but they are pretty average by any measure. So what if they make billions, they have hundreds of billions of dollar of capital invested. Do you honestly think we should measure profits in nominal dollars? >Still not sure how billions of dollars is possibly considered "a low amount." Are you running a low IQ shtick or something? >Netflix is also paying to license (or produce) its content and it delivers it with no commercials for $9/month. Zero day license v. 6-9months after release.
  - AnthonyMouse 12y ago
    > You can use a bunch of different ways, but they are pretty average by any measure. They do significantly better than other utility companies and are significantly less volatile than most companies that provide the same ROI. > Zero day license v. 6-9months after release. Network programming is broadcast over the air for free from day zero, just by putting commercials in it, and for that $9/month Netflix is producing a fair amount of commercial-free zero day original content on top of what they're licensing. That's really not it. The math on this is very simple. It takes some number of dollars to operate a data network. It takes some number of dollars to license content. If you add these two numbers together, people are willing to pay more than the sum to get both of the things. It stands to reason that if the content is instead sold by some third party who assumes the cost of licensing the content, that cost can be removed from the cost of the data service while still allowing both to be profitable.
- rayiner 12y ago
  > But they're making billions of dollars. This is a willfully obtuse argument. The reference to cable companies being insanely profitable is usually in the context of their being monopolies or in the context of some argument about how they could invest more in networks, or charge their customers less. But Target makes billions of dollars--that doesn't mean they're not in a competitive market or could charge their customers a lot less. Investors look at rate of return per dollar invested. That number doesn't look very good when it comes to the wireline industry, which is a problem because it requires a lot of dollars to be invested.

AnthonyMouse 12y ago

> They are publicly traded companies, go look for yourself. They hover around average profitability. What is "average" profitability supposed to mean? Comparing several ISPs and finding their profitability similar and therefore all "average"? You obviously can't reasonably compare them to tech startups or family owned restaurants or the like. But they're making billions of dollars. > Then why are they selling it for such a low amount? Still not sure how billions of dollars is possibly considered "a low amount." > First, you negliect that there a licensing costs to provide TV service. Netflix is also paying to license (or produce) its content and it delivers it with no commercials for $9/month. > But I do agree they are undercharging for internet service. But can they just raise their prices? Will the market support a 100 dollar Comcast internet only bill? I'm not sure it will. Hardly anybody even subscribes to internet-only service. All raising the price of something nobody subscribes to would do is discourage cord cutting. It gives people the choice between paying $120 for triple play as they do today or paying a total of $110 by paying $100 internet-only + $9 for Netflix + $1 for Magic Jack. And then maybe the second one becomes more popular because it's still less expensive, but not in a way that causes any kind of serious problem for the ISP.

rhino369 12y ago
>What is "average" profitability supposed to mean? Comparing several ISPs and finding their profitability similar and therefore all "average"? You obviously can't reasonably compare them to tech startups or family owned restaurants or the like. >But they're making billions of dollars. S&P500 average maybe. You can use a bunch of different ways, but they are pretty average by any measure. So what if they make billions, they have hundreds of billions of dollar of capital invested. Do you honestly think we should measure profits in nominal dollars? >Still not sure how billions of dollars is possibly considered "a low amount." Are you running a low IQ shtick or something? >Netflix is also paying to license (or produce) its content and it delivers it with no commercials for $9/month. Zero day license v. 6-9months after release.
- AnthonyMouse 12y ago
  > You can use a bunch of different ways, but they are pretty average by any measure. They do significantly better than other utility companies and are significantly less volatile than most companies that provide the same ROI. > Zero day license v. 6-9months after release. Network programming is broadcast over the air for free from day zero, just by putting commercials in it, and for that $9/month Netflix is producing a fair amount of commercial-free zero day original content on top of what they're licensing. That's really not it. The math on this is very simple. It takes some number of dollars to operate a data network. It takes some number of dollars to license content. If you add these two numbers together, people are willing to pay more than the sum to get both of the things. It stands to reason that if the content is instead sold by some third party who assumes the cost of licensing the content, that cost can be removed from the cost of the data service while still allowing both to be profitable.
rayiner 12y ago
> But they're making billions of dollars. This is a willfully obtuse argument. The reference to cable companies being insanely profitable is usually in the context of their being monopolies or in the context of some argument about how they could invest more in networks, or charge their customers less. But Target makes billions of dollars--that doesn't mean they're not in a competitive market or could charge their customers a lot less. Investors look at rate of return per dollar invested. That number doesn't look very good when it comes to the wireline industry, which is a problem because it requires a lot of dollars to be invested.