Comments on: Can Netflix still win when cable TV loses? A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: samuel_c Thu, 22 Sep 2011 16:21:53 +0000 netflix doesn’t have enough new content to be a direct competitor to cable. It’s a niche add-on for most people. Thus the outcry over the price increase. Most people that use netflix aren’t ditching cable they are using them both. If you have to give up one, I suspect most will give up the one with the old content. It’s awesome its cool but you still can’t pay to watch a new movie. that’s gonna be the sweet spot if Hollywood will come to its senses. Sell the old stuff cheap as a buffet and offer new releases on a pay per view. If netflix can’t negotiate that they’ll die. I believe hollywood wants them to die so this could be a long slow death.

By: samuel_c Mon, 19 Sep 2011 15:08:59 +0000 Netflix competes with cable who provide the pipe for them to function. They are trying to capitlilize on hollywood selling content for less. Why is everyone surprised they are taking a hit.

Hollywood and the cable companies have a vested interest in killing netflix, at least short term. Even if the 1.94 billion dollars that hollywood wants for it’s content is cut in half it’s almost 200 million more than netflix made last year. I think we are just starting to see the result of the war on netflix. Don’t underestimate hollywoods ability to destroy anyone that threatens thier old business model. Like it or not they control the content netflix needs to survive. With DVD’s there are options to bypass them. Streaming doesn’t have that option.

By: TFF Mon, 19 Sep 2011 00:57:48 +0000 “I can say with confidence that in 5, 10, and 20 years that Walmart will still be the #1 retailer in the U.S. and that Amazon will still be the #1 online retailer.”

Right. And those positions offer them a platform from which to market DVD lending and/or streaming. Would also look for competition from Google (infrastructure is in place), Microsoft (XBox TV?), or Apple (could push through iTunes store?). If the business is profitable, and content streaming certainly SHOULD be profitable, then others will look to elbow in.

“First mover advantages can be pretty tough to overcome.”

Are they selling the brand? Or are they simply a retail outlet with some easily replicable technology? Is there any reason for customers to stick with Netflix once somebody else offers a comparable product at a superior price?

By: FelixSalmon Sun, 18 Sep 2011 23:55:23 +0000 @y2kurtus, nice try. For one thing, I’m afraid I don’t get to Portland ME very often, least of all to collect on bets. And for another thing, doubling in 5 years is a growth rate of less than 15% per year — very low indeed, by Netflix standards. I’m not saying for a minute that Netflix’s audience is mature and will grow no further. But I’ll tell you this: if Netflix’s audience and cost have both doubled in five years’ time, the share price will be significantly lower than it is today.

By: y2kurtus Sun, 18 Sep 2011 01:47:39 +0000 @ TFF “y2kurtus, the better question is whether or not Netflix has an unassailable moat.” I don’t own any NFLX (or anything else with a 40P/E)… but as a customer I find their selection of content pretty rich for the price. I’ve only been a customer for 3 months but there has never been a moment that my wife and I could not find something that the kids wanted to watch or that we wanted to watch.

The Moat is clearly not unassailable… anyone who owns content can stream. I would be shocked if big content owners like Disney did not get into a streaming business in a big way. Walmart’s moat comes from it’s scale. Ditto Amazon. I can say with confidence that in 5, 10, and 20 years that Walmart will still be the #1 retailer in the U.S. and that Amazon will still be the #1 online retailer.

First mover advantages can be pretty tough to overcome. Warren Buffet once boosted that that if god offered him 100 billion dollars and told him to wrestle #1 global cola share away from Coke that he would give the lord his money back… for it simply could not be done.

By: TFF Sat, 17 Sep 2011 11:44:34 +0000 “I think people vastly underestimate the value of “free” childerns content on demand.”

y2kurtus, the better question is whether or not Netflix has an unassailable moat? They are (rightfully) attempting to shift their business to streaming, yet in doing so they will face increasing competition from other streamers.

Even after this decline, they are trading at a 40 P/E. If their business takes seven years to mature, then they will need to increase profits by 6-8 times over that period. All while abandoning the established revenue stream and shifting to a new business model, under pressure from Google, Amazon, the studios, the networks, and anybody else who hopes for a piece of the action (Walmart?).

They might pull it off, but it is a major challenge. Remember that “value” is determined not merely by utility but also by competition.

By: y2kurtus Sat, 17 Sep 2011 00:55:36 +0000 Felix loves to post open wagers so I’ll put one out there for him.

Five years from today NFLX will have twice the customers paying twice the current price.

Wager = full course dinner for yourself and a guest with my wife and I at the restaraunt of your choice in Portland, ME. (We’ve got half a dozen that have earned national props!)

I think people vastly underestimate the value of “free” childerns content on demand. I think half of the kids stuff on NFLX is from Public broadcasting an so was free at one time. The ability to flip through 100 options an pick something kid at the moment of our choosing is massively underpriced at $9/month.

P.S. @joshh I will dance in the streets the day I can pay ESPN $10/month instead of paying Comcast $80!

By: joshh Fri, 16 Sep 2011 19:03:15 +0000 How about a story about why NFLX is 90% institutionally owned? What people don’t realize is that Netflix is using the price increase to show the studios and networks that we would rather have streaming than DVDs. They are trying to kill the DVD.

If cable was serious about keeping subscribers, they would offer channels a la carte. Better yet, why can’t I just pay ESPN directly? Cable is just a middleman.

By: TFF Fri, 16 Sep 2011 14:59:05 +0000 Finster, the lower population density in the US is a big part of the reason why cable/telephone are so expensive. Only Sweden, Finland, Norway, and Iceland have a lower population density — and I wouldn’t be surprised if there were government subsidies for telecom in at least some of those countries.

Agreed that the unregulated monopolies are also a piece of that, however.

By: Finster Fri, 16 Sep 2011 12:36:05 +0000 I recently had a conversation with a US NC resident about pricing of cable and land line telephone there. It’s ridiculous. It’s 200-1000% of fees in Germany or Skandinavia or most EU countries.

Cable companies have become regional monopolies that like all underregulated monopolies destroy price discovery. I can’t comment on Net Flix as I have not researched the stock, but currently access to them is limited by cost of cable internet access or mobile phone data streaming. Those two bottlenecks can exert pricing power over access to Net Flix content. Both need to be taken into account before you can calculate the full cost of having access to NF for poor households.