Netflix

Sup? http://www.bloomberg.com/news/2011-07-12/netflix-increases-prices-for-dvd-streaming-plans-by-60-.html

The company is finished. I’ve already heard from a ton of folks who are going to cancel their accounts come late Aug.

ManMythLegend Wrote: ------------------------------------------------------- > The company is finished. I’ve already heard from > a ton of folks who are going to cancel their > accounts come late Aug. But will it be 60% of subscribers?

murders&executions Wrote: ------------------------------------------------------- > ManMythLegend Wrote: > -------------------------------------------------- > ----- > > The company is finished. I’ve already heard > from > > a ton of folks who are going to cancel their > > accounts come late Aug. > > > But will it be 60% of subscribers? Doesn’t have to be that high. A quick summary is they have 3 separate plans: 1) Unlimited Streaming for 8/month, 2) Unlimited DVDs for 8/month, and 3) Unlimited Streaming and Unlimited DVDS for 16/month. Most people prefer one or the other and won’t upgrade to the combo package. The people who do want both will look at other options in the market to satisfy their needs. I think is going to really going to hurt. I can’t wait to see their first quarterly after this policy takes place. Might do a little options earnings vol trade…

One reason I fear for Netflix is that their supplier, the film industry is so broken that they can’t seem to put out enough content for me to actually want a subscription.

The main argument for the short (which I got burned on) is the streaming margins… Market seems to like it this morning. I’m in the ManMyth camp on this one, but yesterday said it could still have some legs but I see greater downside risk than upside…

I am long Coinstar. I had to smile when the NFLX CEO said (paraphrasing) “the DVD is going to be around a long time.” That is good news for Redbox believers.

murders&executions Wrote: ------------------------------------------------------- > ManMythLegend Wrote: > -------------------------------------------------- > ----- > > The company is finished. I’ve already heard > from > > a ton of folks who are going to cancel their > > accounts come late Aug. > > > But will it be 60% of subscribers? Whoa whoa whoa. We don’t do detailed analysis here. Disclosure: love me some NFLX.

I will say that the old Netflix rates seriously undervalued the service, especially for people who view Netflix as a substitute for cable TV. Also, keep in mind that their subscriber base is growing at a ridiculous rate - in 2010 they added like 60% more users. Clearly, people are clamoring for this service, especially with the rapid proliferation of tablets and media-ready smart phones. I don’t know about you guys, but I’m not going to stand in front of this steam engine.

The problem is that their online content is garbage (unless you like “Wings” and “MacGyver”). As for the movies, last I checked they only have two movies of the Netflix top 100 movies available online and one is “Precious.” If their entire library was available online it would be worth it.

ohai Wrote: ------------------------------------------------------- > I will say that the old Netflix rates seriously > undervalued the service, especially for people who > view Netflix as a substitute for cable TV. Also, > keep in mind that their subscriber base is growing > at a ridiculous rate - in 2010 they added like 60% > more users. Clearly, people are clamoring for this > service, especially with the rapid proliferation > of tablets and media-ready smart phones. I don’t > know about you guys, but I’m not going to stand in > front of this steam engine. I remember reading some analysis (T2 Partners? not sure) that said that subscriber growth was going to stop because they were running out of people (people set = subscribers + former-subscribers + else), basically asserting that former-subscribers would never resubscribe. Of course they missed a lot of things, but most obviously they missed that the service is improving over time (significantly, imo).

ohai Wrote: ------------------------------------------------------- > I will say that the old Netflix rates seriously > undervalued the service, especially for people who > view Netflix as a substitute for cable TV. Also, > keep in mind that their subscriber base is growing > at a ridiculous rate - in 2010 they added like 60% > more users. Clearly, people are clamoring for this > service, especially with the rapid proliferation > of tablets and media-ready smart phones. I don’t > know about you guys, but I’m not going to stand in > front of this steam engine. So would you wager their customer base at end of Q4 will be 15% (60%/4) higher than it’s going be at end of Q3? Otherwise, what happened in the past doesn’t matter… They just increased their price 50%, it sounds like you love the product and that’s one of the reasons you’re bullish. I like the product, but streaming margins (the business you point to as their future) are going to be difficult to maintain (content providers can go direct or other entities that have yet to exist, perhaps direct through Xbox/PS3’s, other sites, etc…). Like I said, I can see it running up in the short-term, but the long-term headwinds are pretty substantial IMO to the areas you point to as their strength (streaming, and specifically, the margins on streaming). But… Perhaps I’m just scorned…

goes to eleven Wrote: ------------------------------------------------------- > I am long Coinstar. I had to smile when the NFLX > CEO said (paraphrasing) “the DVD is going to be > around a long time.” That is good news for Redbox > believers. I was long CSTR last year. I still really like the company. Could be an interesting pair trade. Short NFLX/Long CSTR…

LBriscoe Wrote: ------------------------------------------------------- > The problem is that their online content is > garbage (unless you like “Wings” and “MacGyver”). > As for the movies, last I checked they only have > two movies of the Netflix top 100 movies available > online and one is “Precious.” If their entire > library was available online it would be worth it. Anytime someone makes this statement, I can tell they don’t have kids. There are tons of options for kids. Every parent I’ve talked to about this places way more value in the streaming content than they pay for it. I would gladly pay $20 a month to keep my kid happy by having all the children’s shows and movies he could possibly ever want to watch at his command.

justin88 Wrote: ------------------------------------------------------- . > > I remember reading some analysis (T2 Partners? not > sure) that said that subscriber growth was going > to stop because they were running out of people > (people set = subscribers + former-subscribers + > else), basically asserting that former-subscribers > would never resubscribe. > > Of course they missed a lot of things, but most > obviously they missed that the service is > improving over time (significantly, imo). You also have to keep in mind that it won’t be too many more years before every TV that is sold will have internet capabilities and they will all have Netflix preloaded and many of them will come with a Netflix button on the remote.

murders&executions Wrote: ------------------------------------------------------- > LBriscoe Wrote: > -------------------------------------------------- > ----- > > The problem is that their online content is > > garbage (unless you like “Wings” and > “MacGyver”). > > As for the movies, last I checked they only > have > > two movies of the Netflix top 100 movies > available > > online and one is “Precious.” If their entire > > library was available online it would be worth > it. > > Anytime someone makes this statement, I can tell > they don’t have kids. There are tons of options > for kids. Every parent I’ve talked to about this > places way more value in the streaming content > than they pay for it. I would gladly pay $20 a > month to keep my kid happy by having all the > children’s shows and movies he could possibly ever > want to watch at his command. Speaking of kids, I believe Netflix doesn’t have a single Disney thing for streaming other than their garbage nature remake films. I went to stream The Lion King a few weeks ago for my son and you have to get it on DVD. WHAT???

I was wondering why Toy Story 3 was streaming since there has never been any other Disney stuff available.

Cable providers offer similar service, with HSP internet and phone, for around $100 if you time it right (meaning the marginal cost relative to $20 netflix + say $40 for internet if you can get it alone is $40 for cable, better ‘ondemand’ services, and tons of HD and other content plus phone which the value is minimal for most but still a value proposition). It will be interesting to see how this plays out - NFLX long-run has some good arguments on both sides…

ManMythLegend Wrote: ------------------------------------------------------- > Speaking of kids, I believe Netflix doesn’t have a > single Disney thing for streaming other than their > garbage nature remake films. I went to stream The > Lion King a few weeks ago for my son and you have > to get it on DVD. WHAT??? Disney has a long history of stuff like this. For a while they used to re-release their classic movies like Pinocchio to the theaters every 7-to-10 years, until VHS came around. http://www.pophistorydig.com/?p=45 “Pinocchio had been released to theaters in 1945, 1954, 1962, 1971, 1978, and 1984.”

Some of you guys are missing the big picture. A ton of their content that just barely could be classified as “current” is avail because of their $30mil deal with Starz. Starz has said that the deal has had a much bigger impact on their core business than they expected. Most analysts are pegging the number to renew this contract at $200 mil. Add to the fact a bunch of other contracts are coming due late 11, FY12, FY13 and rates HAD to go up, Netflix just dropped the ball big time mainly with loyalty recognition. Take me for example, I knew rates had to go up and I was planning to pay them but their lack of loyalty to existing customers is making me downgrade (DVD only)/ cancel for amazon Prime and be more diligent about my DVRing. Now take your avg Joe 6 yr subscriber who doesnt follow industry trends from his viewpoint he just got bent over the desk on price and after was slapped in the face by getting lumped in the same tier as a new subscriber in a cople of months. That in my opinion is why there is so much outrage, its not only price. Their strategy is messed for 4 main reasons. 1. they offered Zero loyalty to their customers. 2. They jumped the gun as streaming is a red headed step child as of right now. 3. Lack of bundle. How does that not make “business sense”? 4. Compitition has JUST started to heat up seriously. Amazon Prime. $79 bucks for fast delivery and a ton of streaming movies. I am personally shocked that they did this. They laid their whole hand out for everyone to see. If I were a head of a content provider and I had a bunch of deals coming due with Netflix I would make it VERY expensive or outright withhold streaming rights of the most desired content. Yes you would lose money in the shortrun but you would piss off a ton of Netflix customers who were basically forced into streaming. At the very least you would force Netflix into maintaining their DVD distribution network years longer than they want were margins are much lower. Same goes for ISP providers and hard caps on bandwith. I dont know if they will have the balls but this is the perfect time to twist the PR knife into Netflix a bit, especially with Dish’s aquisition of Blockbuster. Netflix gave their competitors the perfect opportunity to lure customers away from NFLX and towards other channels of distribution which are much more lucrative than getting their margins squeezed by Netflix.