I think there is plenty of growth opportunity for Netflix
1- After hours trading is notorious for volatility
2- HBO announcement today
3- Subscriber growth did not meet expectations
Are all likely affecting the stock. However when it's all said in done who else is competing with against netflix?
Based on the dollar value of an individual share or their market capitalization? Their current market capitalization (after the crash) is about $20 billion, which is less than $400 for each monthly subscriber they currently have. That's not too bad of a price, especially not for a company that's still growing at a rate of several million subscribers per quarter.
This is purely from a 30 second look, but if I had to make the case for Netflix being richly valued I'd go with:
1. Very high P/E ratio. Thus strong future growth is baked into price. So, a buyer of the stock today is already paying for strong growth.
2. Based on #1, the risk is higher as you're prepaying for future growth. And the future is uncertain.
3. Institutional ownership is already high, so you're more likely to see outflows than strong inflows. I don't like investing on this metric, but it does affect price during market fluctuations.
4. Price/Sales is high.
5. Low margin
I don't trade much, but if I did I'd stay away due to the lack of shorts, thus no short squeeze to play.
Of course, on the positive side it dominates its market, has strong growth, and generates free cash flow.
Again, I did not do a genuine analysis so I could be way off on some of the above.
Based primarily on the extraordinarily high price to earnings ratio and the complete lack of anything resembling consistent earnings growth. Metrics like revenue and subscriber numbers don't mean much if they can't reliably make a profit off of them. Don't get me wrong; I do think that Netflix (or something like it) represents the future of content delivery and that there is incredible room for growth. Unfortunately, the potential upside is already priced into the shares. They may have a first mover advantage, but they do have competition (Hulu, Amazon, et cetera). I think they would be a decent speculative bet at a PE of 20, but not at a PE over 100.
> However when it's all said in done who else is competing with against netflix?
Well, HBO, Amazon and Hulu in the US. In my country (the UK), there are several local competitors; Now TV, Sky, BT, 4oD, BBC iPlayer (sort of), Amazon. I would assume it's a fairly similar situation in most of the markets they operate in (e.g. HBO Nordic in Scandinavia).
That raises the question of what it means to "compete" with Netflix. All three you mention currently have severe deficits compared to Netflix.
HBO won't be available to non-cable/satellite subscribers until next year, has limited content, and at this point unknown pricing. (Seems unlikely to be less than Netflix, might end up being 2x Netflix.)
Amazon has limited content, a crappy UX, and a pricing perception problem (your only option is $99 up-front).
Hulu has very limited content, ads even for paying customers, and a crappy UX, all while charging the same amount as Netflix.
A cord-cutter is almost certainly going to be paying Netflix. They might pay some of the others, too, but maybe not, and probably not all of them. It seems unlikely they'd pay any of the others without paying Netflix.
Is it really competition when your competitor's customers are your customers?
> All three you mention currently have severe deficits compared to Netflix.
I agree to your points to a certain extent. However, you're forgetting that Netflix also has deficits to the other three. HBO, as I understand it, would most likely have up-to-date recent films, something Netflix severely lacks and people actually want. Amazon is bundled with Prime, a big draw for a lot of people which makes it's offering look more desirable in many ways. Hulu is free (except Hulu Plus). Probably most importantly, all three have unique content which is not available on Netflix (especially true of HBO).
> It seems unlikely they'd pay any of the others without paying Netflix.
I don't think this is necessarily true. With VoD services like these, people will use the ones which have the content they want to watch. As the 'incumbant', Netflix will have certain first mover advantages in terms of brand recognition, but this won't last forever and the market still has lots of room for growth.
>However, you're forgetting that Netflix also has deficits to the other three.
This is a pretty good point. I subscribe to both Hulu and Netflix, and I feel like they provide very different services. Netflix provides a large back-catalogue of movies and TV shows, while Hulu is more for watching things which are currently airing. If netflix was able to get episodes of shows on a real-time basis, instead seasons at a time the season after the season is over, it might be competing on a more direct basis with Hulu. As it stands, I feel like they are for different markets, and somebody who wants a Hulu subscription isn't going to be satisfied with Netflix.
Hulu is not free in any useful sense. You can play a limited selection of their content on a PC without a subscription, but full access and use on mobile devices, consoles, and things like Roku and Apple TV requires a Hulu Plus subscription at the same price as Netflix.
I'm not saying the other services don't have content people want that Netflix does not have, I'm saying they're going to want the content Netflix has, too.
> However when it's all said in done who else is competing with against netflix?
Amazon already with Prime. With HBO announcement, that's another big threat -- and if it means that more of the existing content producers (on whom Netflix relies for much of its library) are also going to take the same route, its a big problem for Netflix. Once it got real streaming competition (and thus, competitors for titles and exclusivity) and stopped even trying to big a universal library (because that wouldn't work anymore), Netflix -- and its competitors -- were essentially limited to being HBO but without the burden of cable (and without having yet built up the library of first-party content HBO has). But once HBO gets into that game, the opportunities got a lot narrower.
Free TV (stronger competation compared than in the US), Public TV, Sky, Watchever, Amazon to name a few here in Germany(a market traditionally difficult for Pay TV). Personally I think netflix has the way better technology but content wise they are all pretty mediacore at best.
On another note: I might be reading it wrong but if netflix made 60 million USD with 53 million users that would be $4 per user per year which seems little.
At this point I'm convinced at least one cryptocurrency is going to be very valuable in the distant future, I just have no idea if it'll actually be Bitcoin.
I'm with you, one would be so valuable that even if you bought a considerable amount in all of them, the net gain would easily overshadow the loss of the others. Kind of how VC money works btw...
Netflix will be in a stronger position as they build their library of content. IMO, the only compines in a really strong position in entertainment are the content producers and those that deliver the last mile.
It's not a zero sum game. The only limiting factor is how much really great content can be created. When the market for premium streaming matures it's going to effectively be what we always wished cable was. Netflix can only lose if they fail to keep going.
> When the market for premium streaming matures it's going to effectively be what we always wished cable was.
Which is what, exactly? A la carte programs? Netflix isn't that. A la carte channels? Netflix isn't quite that either.
Netflix is positioning itself as something between a streaming TV network (producing original content) and a streaming Time Warner (bundle all the content, acting as gatekeeper to the end consumer). I like Netflix, but I doubt it's long-term intent is to be the streaming utopia we've dreamt of.
In that context, Netflix currently enjoys the advantage of being one of the few popular streaming networks/content providers right now (along with Amazon Prime, and perhaps Hulu Plus in the U.S.). Moving forward, they could swallow up or crush new competition, consolidating their power and pushing them more into the Time Warner category. That would be very good for them, financially. Or competition could build up around them, relegating them to the streaming network category.
I used to be really bullish on Netflix, but then Amazon started giving Amazon Prime members streaming access to a huge collection of free TV and movies. The offerings aren't exactly the same and each platform does have its own exclusive shows, so a huge TV fan might want both. But for a lot of people, one is enough and if that one is Amazon Prime then you get free shipping of all your Amazon deliveries as a bonus! For those of us who had already become Prime members for the shipping, Netflix has even less of a hope of competing.
Due to its size, Amazon can also expect to extract an better selection of streaming titles from media companies.
I'm sure they're worried, but Netflix has a big lead on Amazon in the original content stakes. As a filmmaker I would much rather sign a deal with them than with Amazon, even for the same nominal dollar amount - Netflix has built an awful lot of industry good will over the last 10 years by treating producers fairly.
I had the same assumptions about Amazon Prime's video offering being a replacement for Netflix. In fact, that was my motivating factor in buying prime. Since then, I have used Amazon video only a few times and Netflix pretty much every day. Netflix has such better selection and platform support; Amazon video is a pain to use. Ironically, I now love Prime for the 2-day shipping and would happily renew it without the video offering.
It doesn't seem like a lot of people actually use Amazon's video thing, though. But besides that, I think Netflix has a real problem in that they are a thin layer of tech (OK maybe not so thin) over a huge amount of intellectual property. Not only do they not own that IP, the companies they license from can just keep increasing their rates as Netflix makes more money. They were really cleaning up for a while after their deal with Starz a few years back, but Starz wised up and demanded more money when the contract was up for renewal. I don't see how they get around this.
On the other hand, people do seem to just watch whatever is on Netflix. So, maybe they can get away with licensing a less-expensive mix of content plus of course their in-house stuff.
> Not only do they not own that IP, the companies they license from can just keep increasing their rates as Netflix makes more money.
HBO ran into the same problem (with a different delivery platform) once they ran into competition as a premium cable movie channel, and they responded much the same way Netflix is -- transitioning to increasingly prioritize first-party content. OTOH, when HBO didn't, there wasn't anyone doing basically the same thing on a different tech platform around -- which makes HBO Go being made available independently of cable a big threat to Netflix.
> On the other hand, people do seem to just watch whatever is on Netflix. So, maybe they can get away with licensing a less-expensive mix of content plus of course their in-house stuff.
Netflix being one of many "internet channels" with a limited library of mixed first- and third-party content is clearly where things are heading, the question is how they grow a subscriber base with more and more entrance to that space, some of which, like HBO, have a lot more experience in pretty much every aspect of that kind of operation except the internet delivery end.
> the question is how they grow a subscriber base with more and more entrance to that space, some of which, like HBO, have a lot more experience in pretty much every aspect of that kind of operation except the internet delivery end.
Sounds like HBO and Netflix could be good merger partners?
This is much more complicated than "content companies can raise prices at will".
Netflix makes ~$5.6 billion per year.
A big chunk of that goes to content licensing so they spend several billion dollars a year on content.
That revenue is pure profit for content companies.
If you're a CEO of content company and e.g. Netflix is willing $100 million a year for, say, license all seasons of "Friends", you can't simply say "I want $110 million" and expect Netflix to pay it.
If you're not willing to license for $100 million/year, then you're loosing $100 million/year of pure profit and shareholders like profit.
The more money Netflix has to spend, the more they can shop around so content companies don't have as strong of a negotiation position as many seem to believe.
And Netflix is being very smart by investing aggressively in their own content, which they'll own forever, which is an always growing asset.
> It doesn't seem like a lot of people actually use Amazon's video thing, though.
Amazon sent me snail mail a few months ago to remind me I got Amazon Instant Video with my prime membership and that I should use it some time, so I'm thinking you're probably right.
I don't know, I still know a lot of people who don't order anywhere near enough stuff online for Amazon Prime to be worth it. Honestly, these days I probably don't even buy something online more than every couple of months, although it probably only takes a few bigger packages a year to break even. As a "free" value-add to Prime shipping, Amazon streaming is nice (although I've never used it despite having Prime for years and not even having Netflix), but I don't think the package is anywhere near nice enough to immediately threaten Netflix.
I don't think Netflix has to worry about Amazon Instant Video at all. The problem with AIV is a total lack of consumer awareness. If I'm talking to a friend about the movie they saw last night, or what TV show they binge-watched over the weekend, they're almost always going to say "Netflix" (and it's not like "Amazon Instant Video" exactly rolls off the tongue). And there's not even any discussion about how there's an alternative. As far as the majority of consumers are concerned, Netflix is the only player in its category. It's basically like iPhone vs. Android in the US, but a lot, lot worse.
If we are making the comparison that they are iPhone vs. Android respectively (Netflix == iPhone && Amazon == Android) then we should expect that Amazon will eventually dominate the US market place, just like Android is doing now.
The comparison has nothing to do with the change in their market shares, or who will dominate in the future. I'm purely giving an example of how consumer awareness is completely different between nerds and the general population. Just because everyone on HN knows about AIV doesn't mean that the average consumer knows about it.
Predicting whether or not AIV will gain consumer awareness is a completely different matter, and I don't think that comparisons between iOS and Android have any place there, since the markets are completely different.
Android caught up because competition within the Android market brought prices down and features up, and encouraged consumer-attracting partnerships with carriers (cheaper phones on contract). This isn't relevant to the Amazon/Netflix knife fight.
If Amazon prime's streaming interface wasn't so terrible I might agree with you. Occasionally I try to watch it (I have Amazon Prime anyway) but they make it so hard to navigate that I usually give up after a few seconds. It is obvious it is not Amazon's first, second, or third concern.
This is the #1 reason why I still have Netflix. As of a few months ago when I used Amazon Instant, Netflix has auto-play while Amazon did not, Netflix automatically chooses between SD and HD while Amazon made you pick, and just a bunch of other things Netflix does right that Amazon does so so wrong.
Agreed! I can access Netflix and Amazon Prime Video on a Roku at home, and the Amazon interface is really bad. What might be called catalog "grooming" is bad too - associated shows for, say a TV series, might show up under the same entry, or it might be separate items - sometime there isn't even a common title keyword or phrase between the items.
I avoid Amazon unless the content is exclusive to that service. Even then, I rarely bother to search on Amazon for that exclusive content as Netflix provides more watchable material than my time budget anyway.
I was wondering if Amazon's poorly implemented interface on Roku was intentional. Now that you comment how much better it is on Fire TV, it seems that might be the case.
This strikes me as a poor decision, as Fire TV is akin to the "razor" with Amazon Prime memberships being the "blades" that should bring in the recurring revenue.
I haven't seen the Roku interface, but rather I use Netflix and Amazon both from my PS4. If a show/movie is available on Netflix I always go there first. Way better experience right now.
I've been a long time subscriber to Netflix however, from back when it was DVDs only, and their service used to be pretty terrible. Amazon is behind right now, but they will iterate and improve.
I really believe that Amazon in the long run will come out ahead of Netflix, but I'm not sure if that is a good thing. Amazon is becoming such a huge monopoly in so many ways that I don't see this as turning out well for consumers in the long run.
What's bad about it on Roku? All I do is find what I want to watch (on IMDB usually), add it to my watchlist, and then navigate to the watchlist in the Roku Amazon app. Seems pretty damn easy. The only thing they could improve, in my opinion, would be to allow me to start playback on the Roku from their website.
I'm going to pay $7-10 bucks a month for 3-4 services (I currently pay for Netflix, Amazon Prime, and Hulu) - there is plenty of crossover, but for < $30 a month, I'm getting plenty of what I miss w/o a $50 cable TV subscription -
Now if only someone could do something legally about live sports...
Sorry not relevant to the subject, but who is allowed to trade after-hours? How come some people are allowed to take advantage of trading while the general public is not allowed?
genuine question - how come when I submit an after hours trade through my bank it says "trading is closed, your order will be submitted first thing tomorrow" ?
It could be your bank just doesn't offer it. For most retail brokerage accounts you have to specifically request an extended "time in force" if you want to send orders outside of the core session.
Just an FYI, if you trade after hours remember to set your price (buy or sell). As it's after hours, there is no market price, and therefore if you offer to buy 100 shares another party can sell at any price they want. Same goes for the sell side.
It's your brokerage. For example, Tradeking allows trading from 8:00-9:30 ET and 4:00-5:00 ET. Some other brokerages, like Interactive Brokers, allow trading to 8:00 PM ET.
The term "after-hours" has become antiquated in trading. Pretty much every electronic exchange operates ~23 hours/day (1 or 2 few close periods for maintenance/book-keeping stuff).
Now you'd just refer to those time periods as "Asian hours" and "European hours." Also, remember there is not 1 stock market. There are somewhere around 50-60 exchanges where a company's stock may be traded (counting dark pools), and each of those may have different rules/open periods/etc.
At the top left of the chart set zoom to 1d. At the bottom left of the chart click settings and tick the box for "Extended Hours". That gets you volume data for the post market session. I didn't downvote you, but I do see these kinds of comments ("hey don't trust the post-market session") after earnings announcements a lot, and I usually try to cross-check the chart to see whether they're on point or not.
I was a day-trader for 15 years so I know how to find that info. I'll say it again, after the market closes, the professionals go home. Anything you see after that is by amateurs.
Ok the market just opened on 10/16 and NFLX is trading around $342, which is around $100 below yesterday's closing price but almost exactly equal to the after hours price from yesterday. The after hours trading was 100% real and not amateurs trading in a thin market.
Blame Popcorn Time. Why would people pay for far fewer selection and mediocre movies and tv shows when they can have unlimited access to every movie and tv show?
I just installed popcorn time, I tried a few tv shows but couldn't find many, or any, peers on many of them and the show wouldn't play well, with lots of buffering, or at all, or it was missing aired episodes in available seasons. No tv show on Netflix does this to be and that's why I pay. While the selection seems better on Popcorn Time, it's really just the most popular shows near the latest episodes that seem to work so the "extra" selection just made it a more frustrating experience.
it worked fine for me. although i watch movies more than tv shows. i think it works pretty good given that its free and they are constantly improving it.
I think people are missing the big picture on what happened... This is not that the market is giving up on Netflix. It's that most of Netflix's value is based on an enormous increase in growth.
Taking a look at their financials [0] their PE was 139 pre-announcement. It's still north of 100. Compare that with 27 of Google. Very high growth assumptions.
Another way to look at it is they are still up ~250% over the past year and a half.
When you're this highly priced, there is no room for mistakes or missing Wall Street expectations.
One other note... There is a lot of hedge fund activity on Netflix, which can increase the immediate pop before or after a hit.
That said... Speaking as a subscriber... I'm still paying, but I'm not using nearly as much as I used to, and I'm using Amazon Prime more and more.
I would say mostly about the lower subscriber growth.
When expectations are high, if expectations aren't met, the adjustment can be abrupt.
Time Warner (HBO + Warner Brothers + numerous cable channels) is in the same content/TV distribution business, $4.3b in profit, market cap of $62b.
Netflix, $0.2b in profit, $5b in REVENUE, market cap of $27b (well, now $20b).
Netflix is competing with Amazon streaming, Apple TV/iTunes, to a lesser extent Google, Hulu.
Also now HBO, they announced today they would start letting people subscribe over the Internet without a cable subscription, all the other channels are getting in the over-the-top streaming business.
Comcast + Time Warner Cable (different from Time Warner) are looking to merge and perform a cashectomy on Netflix via 'fast lanes', before TV subscriber losses from cord-cutting really start cutting into their flesh. (Can anyone doubt that's about to happen? Anyone who has compared the experience of e.g. Roku with a cable box can see over-the-top is a 10x improvement in UX at a lower price. And with even HBO available over-the-top, literally the only reason left to subscribe to cable is live sports.)
Growth is not a given. It's a tough landscape and no guarantee Netflix will be the last one standing.
$20b is still a lot of money for a company with no profits, in a fight for its life.
I'd add as a cable-cutter sports fan that even live sports is not a big deal without cable. Buy a HD antenna and you get ABC, CBS, NBC, and Fox, which covers at least the NFL and a bunch of other prominent sporting events. Buy mlb.tv if you're into baseball, NBA league pass if you're into basketball, or NHL center ice if you're into hockey - or just find live streams of the games online (but YMMV on the quality of course). Throw in a shared login with a friend for Comcast/DirectV/whatever, and you get ESPN/ESPN2, TBS, Fox Sports, NBCSN, and others.
very true...although HD over the air coverage is not universal and can be finicky even in areas with supposedly decent coverage. and not to mention pirate streams via e.g. sportlemon.
I disagree wholeheartedly as a fellow sports fan cable cutter. The problem with those sports packages is that you can't follow your home team. You can follow literally every other team, but not your own. As a White Sox fan, I would have missed probably >70% (a guess) of their games had I paid for the MLB.tv package.
ESPN's attempt to block World Cup in USA if you didn't have a cable was pretty easily circumvented. And then there's the option of using a buddy's cable login.
I only have experience with NHL Center Ice, but I've heard similar things about mlb.tv; those services suck terribly, like so much that you're left wondering if it's a deliberate choice.
In the case of NHL and MLB, here's what happens: you buy a season pass to the service for 160 dollars, and it lets you stream (with okay quality) out of market games. So when I was living in Rochester NY with my fiancee and we had a subscription to watch the Red Wings, we could watch all of their games except the games which got broadcast in Rochester (so all the games that were against the Buffalo Sabres) and all the games that were broadcast on national TV.
So it sounds a little crappy that you're missing an entire matchup, but it's actually worse than that; the entire post season is in your media market, no matter where you are. So if the Red Wings make it to the playoffs, as they have for the past twenty-odd years in a row, guess what! You spent a hundred and sixty dollars, and it didn't get you a pass to watch the playoffs, the most exciting games of the season.
And next season, you have to spend another 160, and go without watching the playoffs (or do as we did and spend a lot of time in a local sports bar).
Finding sketchy live-streams of games online is always a possibility (that's how I watched a number of playoff games that my fiancee wasn't interested in), but you're correct that the quality is incredibly variable and some of those streams are pretty sketchy.
We still haven't caved and bought cable, but NHL center ice is barely more of an option now that we're living in Santa Clara; if I want to start getting invested in the local San Jose Sharks, I'm shit out of luck because all those games would be in my market, and that still doesn't address the playoff issue.
Sports are pretty much the only reason I consider buying a cable subscription because the alternatives are honestly just really crappy, and I can't wait for the day that the leagues finally manage to negotiate a contract with broadcasters that allows for a reasonable way to stream games online.
Price increase killed their U.S. growth. Hulu makes over half their money from ads, I'd expect Netflix will eventually go down that road -- $4.99/mo or free with ads and $9.99 without.
I know the Netflix story is all about streaming now, but I'm kind of sad that according to the financials, Netflix's DVD section has halved its subscribers over the last two years.
That service definitely seems to be degrading, almost everything in my queue has become perpetually stuck on "very long wait," something rare for me of a couple years back. They're clearly winding things down.
I don't know what happens in a couple years for anyone who wants to see an old movie. The streaming libraries are still incredibly thin. New releases will be available somewhere, sure. But we're facing the death of access for film history buffs or hardcore genre fans.
> I don't know what happens in a couple years for anyone who wants to see an old movie
Your local library? I've found some have a surprisingly good selection, and library networks probably make most movies available within a few days' wait.
I wonder if things would have been better if the Qwikster spinout had happened. At least the Qwikster execs would be allowed to care about their business.
That sounds like building an ISP to take customers from Comcast. If you could get all the customers at once it would work, but otherwise the lack of scale would be hard to overcome.
Maybe we should convince Icahn to buy some Netflix stock...
This is pure fantasy, but I feel like a good solution would be for Netflix to legally be allowed to stream X concurrent sessions of a movie with X being limited at the number of physical copies they own. Perhaps if all concurrent sessions are being used you could schedule your session for a different time window.
It obviously wouldn't work for new content but might solve the issue for rare or older movies which you cannot find elsewhere.
A slightly less unpalatable solution might be a compulsory license where anyone could stream any movie [1] as long as they pay 70% of $5 to the studio.
[1] Any movie that has been released more than 90 days ago, etc.
The library near me actually has to pay licenses for digital copies of books that they then get to 'check out' z number of times rather than based on the number of physical copies they have.
An article about that very topic made the rounds on HN about a month ago. It was interesting. Basically, it argued that a lot of classic and niche movies will reach the verge of de facto extinction once the DVD business finally dies. Netflix's streaming selection is indeed quite thin, especially on genre movies and classic titles. Same thing with the selection on most streaming services, and even on a la carte digital download services like iTunes.
Netflix's DVD business has basically reached its point of exponential decline, and the only ones holding out seem to be the film buffs and aficionados. Even old folks are switching to streaming now.
It's an interesting time to be a film lover, and by "interesting," I mean it in the sense of that curse about living in interesting times.
My guess as to what happens next: we'll see the increasing breakout of streaming providers by genre or interest. Some genres will have big enough audiences to bear out the cost and logistics of running a business around them (for example, anime and Crunchyroll). Other genres might not be as lucky.
And then there's the black hole: titles only available on DVD, or even VHS, because the companies who made them went under. In a lot of these cases, nobody bothers acquiring the rights and remastering the films, because from a business standpoint, the payoff just isn't there.
In some cases that's actually hard to do. Rare and out-of-print DVDs can sell for hundreds, or even thousands of dollars. For the well-heeled collector, that's not a huge setback. For your average film buff, that's a tall order. Thus, Netflix's DVD service has been convenient for that segment.
I find myself using Amazon Instant Videos, Vudu, and Google Play Movies more and more, so, no wonder if I'm not the only one. The DVD service is a friction, I have it, but I have DVDs with me for over 6 months, and no time to watch them and get new ones. Before that, I had a DVD with me for nearly 2 years! Weirdly, Redbox Instant just died, so, this should've helped Netflix by a tiny bit, but still... Why are the movie studios so greedy? People still steal their movies and torrent them, so, I'm missing a lot of movies for which I could've paid a premium, but having kids, and all prevents me from watching them at the premiere, so, I rent them later and they make a lot less from me and many are like me, I'm sure. It's not about the price, it's all about the convenience, and I hope those old crooks get this once and for all. I'm sure if people had an option to watch a new movie without going to the theater, piracy would drop significantly, but I know there are people who'd always pirate even if the movie is $0.99 - people who don't value their time, nerves, and don't mind the risk of getting sued, I guess.
With so many players in the mix, I wonder if some consolidation is likely in the near future. Less streaming services with more content breadth is much more valuable to consumers than figuring out which services offer which content.
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[ 4.7 ms ] story [ 113 ms ] threadAre all likely affecting the stock. However when it's all said in done who else is competing with against netflix?
1. Very high P/E ratio. Thus strong future growth is baked into price. So, a buyer of the stock today is already paying for strong growth.
2. Based on #1, the risk is higher as you're prepaying for future growth. And the future is uncertain.
3. Institutional ownership is already high, so you're more likely to see outflows than strong inflows. I don't like investing on this metric, but it does affect price during market fluctuations.
4. Price/Sales is high.
5. Low margin
I don't trade much, but if I did I'd stay away due to the lack of shorts, thus no short squeeze to play.
Of course, on the positive side it dominates its market, has strong growth, and generates free cash flow.
Again, I did not do a genuine analysis so I could be way off on some of the above.
Well, HBO, Amazon and Hulu in the US. In my country (the UK), there are several local competitors; Now TV, Sky, BT, 4oD, BBC iPlayer (sort of), Amazon. I would assume it's a fairly similar situation in most of the markets they operate in (e.g. HBO Nordic in Scandinavia).
HBO won't be available to non-cable/satellite subscribers until next year, has limited content, and at this point unknown pricing. (Seems unlikely to be less than Netflix, might end up being 2x Netflix.)
Amazon has limited content, a crappy UX, and a pricing perception problem (your only option is $99 up-front).
Hulu has very limited content, ads even for paying customers, and a crappy UX, all while charging the same amount as Netflix.
A cord-cutter is almost certainly going to be paying Netflix. They might pay some of the others, too, but maybe not, and probably not all of them. It seems unlikely they'd pay any of the others without paying Netflix.
Is it really competition when your competitor's customers are your customers?
I agree to your points to a certain extent. However, you're forgetting that Netflix also has deficits to the other three. HBO, as I understand it, would most likely have up-to-date recent films, something Netflix severely lacks and people actually want. Amazon is bundled with Prime, a big draw for a lot of people which makes it's offering look more desirable in many ways. Hulu is free (except Hulu Plus). Probably most importantly, all three have unique content which is not available on Netflix (especially true of HBO).
> It seems unlikely they'd pay any of the others without paying Netflix.
I don't think this is necessarily true. With VoD services like these, people will use the ones which have the content they want to watch. As the 'incumbant', Netflix will have certain first mover advantages in terms of brand recognition, but this won't last forever and the market still has lots of room for growth.
This is a pretty good point. I subscribe to both Hulu and Netflix, and I feel like they provide very different services. Netflix provides a large back-catalogue of movies and TV shows, while Hulu is more for watching things which are currently airing. If netflix was able to get episodes of shows on a real-time basis, instead seasons at a time the season after the season is over, it might be competing on a more direct basis with Hulu. As it stands, I feel like they are for different markets, and somebody who wants a Hulu subscription isn't going to be satisfied with Netflix.
I'm not saying the other services don't have content people want that Netflix does not have, I'm saying they're going to want the content Netflix has, too.
Amazon already with Prime. With HBO announcement, that's another big threat -- and if it means that more of the existing content producers (on whom Netflix relies for much of its library) are also going to take the same route, its a big problem for Netflix. Once it got real streaming competition (and thus, competitors for titles and exclusivity) and stopped even trying to big a universal library (because that wouldn't work anymore), Netflix -- and its competitors -- were essentially limited to being HBO but without the burden of cable (and without having yet built up the library of first-party content HBO has). But once HBO gets into that game, the opportunities got a lot narrower.
On another note: I might be reading it wrong but if netflix made 60 million USD with 53 million users that would be $4 per user per year which seems little.
> Buy Bitcoin while it's cheap!
It has a P/E of over 130, and just reported slower than expected subscriber growth. Of what specific fundamentals do you speak?
https://www.google.com/finance?q=NASDAQ%3ANFLX
The story reported it was at 339. Looks like it's currently at 448.
Edit: Nevermind, didn't notice the "After Hours" price in tiny-text above the graph which shows similar numbers to those reported in the story.
Which is what, exactly? A la carte programs? Netflix isn't that. A la carte channels? Netflix isn't quite that either.
Netflix is positioning itself as something between a streaming TV network (producing original content) and a streaming Time Warner (bundle all the content, acting as gatekeeper to the end consumer). I like Netflix, but I doubt it's long-term intent is to be the streaming utopia we've dreamt of.
In that context, Netflix currently enjoys the advantage of being one of the few popular streaming networks/content providers right now (along with Amazon Prime, and perhaps Hulu Plus in the U.S.). Moving forward, they could swallow up or crush new competition, consolidating their power and pushing them more into the Time Warner category. That would be very good for them, financially. Or competition could build up around them, relegating them to the streaming network category.
Due to its size, Amazon can also expect to extract an better selection of streaming titles from media companies.
Netflix should be terrified.
On the other hand, people do seem to just watch whatever is on Netflix. So, maybe they can get away with licensing a less-expensive mix of content plus of course their in-house stuff.
HBO ran into the same problem (with a different delivery platform) once they ran into competition as a premium cable movie channel, and they responded much the same way Netflix is -- transitioning to increasingly prioritize first-party content. OTOH, when HBO didn't, there wasn't anyone doing basically the same thing on a different tech platform around -- which makes HBO Go being made available independently of cable a big threat to Netflix.
> On the other hand, people do seem to just watch whatever is on Netflix. So, maybe they can get away with licensing a less-expensive mix of content plus of course their in-house stuff.
Netflix being one of many "internet channels" with a limited library of mixed first- and third-party content is clearly where things are heading, the question is how they grow a subscriber base with more and more entrance to that space, some of which, like HBO, have a lot more experience in pretty much every aspect of that kind of operation except the internet delivery end.
Sounds like HBO and Netflix could be good merger partners?
Netflix makes ~$5.6 billion per year.
A big chunk of that goes to content licensing so they spend several billion dollars a year on content.
That revenue is pure profit for content companies.
If you're a CEO of content company and e.g. Netflix is willing $100 million a year for, say, license all seasons of "Friends", you can't simply say "I want $110 million" and expect Netflix to pay it.
If you're not willing to license for $100 million/year, then you're loosing $100 million/year of pure profit and shareholders like profit.
The more money Netflix has to spend, the more they can shop around so content companies don't have as strong of a negotiation position as many seem to believe.
And Netflix is being very smart by investing aggressively in their own content, which they'll own forever, which is an always growing asset.
Amazon sent me snail mail a few months ago to remind me I got Amazon Instant Video with my prime membership and that I should use it some time, so I'm thinking you're probably right.
I do agree that Amazon needs a real name for the service, though.
http://bgr.com/2014/07/01/android-market-share-2014/
TL/DR; Android market share in US = 61.9%/iPhone US market share in US = 32.5%.
Predicting whether or not AIV will gain consumer awareness is a completely different matter, and I don't think that comparisons between iOS and Android have any place there, since the markets are completely different.
I avoid Amazon unless the content is exclusive to that service. Even then, I rarely bother to search on Amazon for that exclusive content as Netflix provides more watchable material than my time budget anyway.
The video compression and streaming is also better.
This strikes me as a poor decision, as Fire TV is akin to the "razor" with Amazon Prime memberships being the "blades" that should bring in the recurring revenue.
I've been a long time subscriber to Netflix however, from back when it was DVDs only, and their service used to be pretty terrible. Amazon is behind right now, but they will iterate and improve.
I really believe that Amazon in the long run will come out ahead of Netflix, but I'm not sure if that is a good thing. Amazon is becoming such a huge monopoly in so many ways that I don't see this as turning out well for consumers in the long run.
I'm going to pay $7-10 bucks a month for 3-4 services (I currently pay for Netflix, Amazon Prime, and Hulu) - there is plenty of crossover, but for < $30 a month, I'm getting plenty of what I miss w/o a $50 cable TV subscription -
Now if only someone could do something legally about live sports...
Now you'd just refer to those time periods as "Asian hours" and "European hours." Also, remember there is not 1 stock market. There are somewhere around 50-60 exchanges where a company's stock may be traded (counting dark pools), and each of those may have different rules/open periods/etc.
This is different from options or margin trading, where only registered accounts can use it.
If you want to get stupider than this article, I've seen some stocks trade down 50% after hours but open normal the next day.
Besides, the whole market took a nosedive today.
Means nothing.
Note that, while you agree what I said is true for most cases, I was downvoted. What is this? Reddit?
https://www.google.com/finance?q=NFLX
At the top left of the chart set zoom to 1d. At the bottom left of the chart click settings and tick the box for "Extended Hours". That gets you volume data for the post market session. I didn't downvote you, but I do see these kinds of comments ("hey don't trust the post-market session") after earnings announcements a lot, and I usually try to cross-check the chart to see whether they're on point or not.
Taking a look at their financials [0] their PE was 139 pre-announcement. It's still north of 100. Compare that with 27 of Google. Very high growth assumptions.
Another way to look at it is they are still up ~250% over the past year and a half.
When you're this highly priced, there is no room for mistakes or missing Wall Street expectations.
One other note... There is a lot of hedge fund activity on Netflix, which can increase the immediate pop before or after a hit.
That said... Speaking as a subscriber... I'm still paying, but I'm not using nearly as much as I used to, and I'm using Amazon Prime more and more.
[0] https://www.google.com/finance?cid=672501
When expectations are high, if expectations aren't met, the adjustment can be abrupt.
Time Warner (HBO + Warner Brothers + numerous cable channels) is in the same content/TV distribution business, $4.3b in profit, market cap of $62b.
Netflix, $0.2b in profit, $5b in REVENUE, market cap of $27b (well, now $20b).
Netflix is competing with Amazon streaming, Apple TV/iTunes, to a lesser extent Google, Hulu.
Also now HBO, they announced today they would start letting people subscribe over the Internet without a cable subscription, all the other channels are getting in the over-the-top streaming business.
Comcast + Time Warner Cable (different from Time Warner) are looking to merge and perform a cashectomy on Netflix via 'fast lanes', before TV subscriber losses from cord-cutting really start cutting into their flesh. (Can anyone doubt that's about to happen? Anyone who has compared the experience of e.g. Roku with a cable box can see over-the-top is a 10x improvement in UX at a lower price. And with even HBO available over-the-top, literally the only reason left to subscribe to cable is live sports.)
Growth is not a given. It's a tough landscape and no guarantee Netflix will be the last one standing.
$20b is still a lot of money for a company with no profits, in a fight for its life.
ESPN's attempt to block World Cup in USA if you didn't have a cable was pretty easily circumvented. And then there's the option of using a buddy's cable login.
I only have experience with NHL Center Ice, but I've heard similar things about mlb.tv; those services suck terribly, like so much that you're left wondering if it's a deliberate choice.
In the case of NHL and MLB, here's what happens: you buy a season pass to the service for 160 dollars, and it lets you stream (with okay quality) out of market games. So when I was living in Rochester NY with my fiancee and we had a subscription to watch the Red Wings, we could watch all of their games except the games which got broadcast in Rochester (so all the games that were against the Buffalo Sabres) and all the games that were broadcast on national TV.
So it sounds a little crappy that you're missing an entire matchup, but it's actually worse than that; the entire post season is in your media market, no matter where you are. So if the Red Wings make it to the playoffs, as they have for the past twenty-odd years in a row, guess what! You spent a hundred and sixty dollars, and it didn't get you a pass to watch the playoffs, the most exciting games of the season.
And next season, you have to spend another 160, and go without watching the playoffs (or do as we did and spend a lot of time in a local sports bar).
Finding sketchy live-streams of games online is always a possibility (that's how I watched a number of playoff games that my fiancee wasn't interested in), but you're correct that the quality is incredibly variable and some of those streams are pretty sketchy.
We still haven't caved and bought cable, but NHL center ice is barely more of an option now that we're living in Santa Clara; if I want to start getting invested in the local San Jose Sharks, I'm shit out of luck because all those games would be in my market, and that still doesn't address the playoff issue.
Sports are pretty much the only reason I consider buying a cable subscription because the alternatives are honestly just really crappy, and I can't wait for the day that the leagues finally manage to negotiate a contract with broadcasters that allows for a reasonable way to stream games online.
That service definitely seems to be degrading, almost everything in my queue has become perpetually stuck on "very long wait," something rare for me of a couple years back. They're clearly winding things down.
I don't know what happens in a couple years for anyone who wants to see an old movie. The streaming libraries are still incredibly thin. New releases will be available somewhere, sure. But we're facing the death of access for film history buffs or hardcore genre fans.
Your local library? I've found some have a surprisingly good selection, and library networks probably make most movies available within a few days' wait.
I wonder what they could do better catering to a narrower market. I dropped Netflix DVD service, but I'd consider something better.
Maybe we should convince Icahn to buy some Netflix stock...
It obviously wouldn't work for new content but might solve the issue for rare or older movies which you cannot find elsewhere.
[1] Any movie that has been released more than 90 days ago, etc.
Netflix's DVD business has basically reached its point of exponential decline, and the only ones holding out seem to be the film buffs and aficionados. Even old folks are switching to streaming now.
It's an interesting time to be a film lover, and by "interesting," I mean it in the sense of that curse about living in interesting times.
My guess as to what happens next: we'll see the increasing breakout of streaming providers by genre or interest. Some genres will have big enough audiences to bear out the cost and logistics of running a business around them (for example, anime and Crunchyroll). Other genres might not be as lucky.
And then there's the black hole: titles only available on DVD, or even VHS, because the companies who made them went under. In a lot of these cases, nobody bothers acquiring the rights and remastering the films, because from a business standpoint, the payoff just isn't there.
Would love to read it if anyone can recall any search terms from the headline...
(I searched for "long wait" in comments from the last month since I remembered that that symptom was mentioned.)