Comments on: The economics of Netflix

By: dsucher

dsucher — Sat, 03 Apr 2010 21:00:06 +0000

Felix, Try the one-DVD-at-a-time plan for $8.99 plus tax and maybe that will help solve your issue.

By: Funisnotfinance

Funisnotfinance — Thu, 01 Apr 2010 15:53:19 +0000

I was a Netflix subcriber for 3+ years…until I purchased a blu-ray player. After waiting 2 months for several new releases in blu-ray, I tried a 2 week trial membership to Blockbuster and had no issues with blu-ray dvds. Now I imagine someone will either purchase the Blockbuster business or it will go out of business at some point, but they don’t seem to have the backlog that Netflix has developed. I looked into this stock as a short based on the postage issue as well as the potential for supply constraints creating disgruntled customers (such as myself). I don’t have the risk tolerance to jump in front of this freight train just yet, though.

By: offpeak34

offpeak34 — Thu, 01 Apr 2010 14:20:33 +0000

Felix, I am a longtime reader and can’t say I agree with you here. Looking at Netflix as a company w/ Post Office exposure is not acknowledging the key area in which Netflix is growing: digital content distribution. I wrote a little blog post in response to get the story going more: http://alatazerka.wordpress.com/2010/04/ 01/netflix-and-the-new-media-model/ .

Regards,
Elliot

By: Felix Salmon

Felix Salmon — Thu, 01 Apr 2010 12:46:38 +0000

It costs Netflix MUCH more than a nickel to stream a movie. That’s just the distribution cost; the big money is the sum they pay the studio. Which reportedly can be as much as $4.

By: albertsun

albertsun — Thu, 01 Apr 2010 06:31:48 +0000

I think there might be some tension between the profitability of content creators and distributors. When there is serious innovation in technology or process distributors generate the bulk of profits. Over time as technology and business processes mature, a larger share of economic value swings back towards creators of original content.

By: mscotthillis

mscotthillis — Thu, 01 Apr 2010 06:06:29 +0000

Their streaming service that runs over a variety of devices, most notably game consoles like the Xbox 360, is becoming more important than their snail-mail delivery. It costs Netflix about a nickel to stream a movie. I pay them the $20 or so a month and watch a dozen or a score of streamed movies while ordering 2-3 disks of new releases and stuff that isn’t yet in the streaming library. Pretty good economics for them, but the challenge is aggregation since the digital rights on movies have to be negotiated on a film by film basis.

By: HBC

HBC — Thu, 01 Apr 2010 00:49:42 +0000

Netflix? Nice company. Got that “we’re not Blockbuster” thing going for them but they’re still just a signal transporter, like AT&T, TWC or Comcast.

I’d buy a PS3 streaming subscription if only to see them put AT&T where it deserves, under the ground just like Blockbuster, and keep on down the line from there. Transporters trying to wag the dog are not my cup of tea.

Netflix needs a vertical to survive. Closing down Red Envelope was probably the honest thing for them to do when they did, but they still need something to call their own. Like buying MGM, maybe?

By: Story_Burn

Story_Burn — Thu, 01 Apr 2010 00:46:51 +0000

Netflix’s online rental option gets better by the week

By: grumblecakes

grumblecakes — Wed, 31 Mar 2010 23:50:14 +0000

The killer feature of Netflix for me has been their selection and the queue. They carry foreign films, classics, and TV series that used to be impossible to find at the store (the long tail). And when I read about a movie I’d like to see I’m almost certainly on the computer so I can queue it immediately. Then I don’t have to remember them on the spot at the store. The streaming works well, but the selection is poor (though the first 2 seasons of This American Life were excellent).

By: absinthe

absinthe — Wed, 31 Mar 2010 23:18:14 +0000

I think there’s also a lot less regret with the subscription/access model. There’s psychological trauma involved with dropping $5 on something terrible and driving it back; it’s less tangible when you didn’t pay for the movie itself and you just drop it back in the mail.

In another area, I think if Apple weren’t such a dominant player (and so opposed to it), we’d have already seen a reasonably successful music subscription service.

By: KidDynamite

KidDynamite — Wed, 31 Mar 2010 23:16:34 +0000

i would guess that the NFLX longs would take serious issue with your classification of NFLX as a “middleman” and a “delivery company.”

I have never had a position in NFLX, but something about that description disturbs me too – i mean, is AMZN just a middleman and a delivery company? Netflix seems to have pioneered a way to get you what you want very quickly and efficiently – and now they’re perfecting digital content delivery. I guess maybe their expertise is in supply chain management or something – but it certainly doesn’t seem as simple as just a delivery company.

speaking of which – would there be massive synergies, then, with UPS or FDX and NFLX??? natural fit!