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Netflix Expects To Be Unprofitable In 2012
PolygamousRanchKid writes with an article in CNN Money about Netflix's prospects in 2012. From the article: "Netflix warned in its last earnings report that it expects to be unprofitable 'for a few quarters' starting at the beginning of 2012. The primary culprit is Netflix's pricey plan to expand its streaming video service into the United Kingdom and Ireland, but a wave of subscribers jumping ship hasn't helped. The filing also revealed that Netflix is in the process of raising $400 million from investors to help bulk up its cash stash. While that will give Netflix more money to invest in content, secondary offerings are sometimes considered ominous signs."
Upon reading the headline, I was hoping it was because people were getting off their couches and becoming more active. Alas, that is not the case; Netflix is expanding their sedentary lifestyle to the UK and Ireland.
Folks, it's a measly $8/month for unlimited TV and movies. How enticing is that? You know what's even cheaper? GETTING OFF YOUR BUTTS AND MOVING! Instead of asking the family "What do you want to watch tonight?" ask "Where should we walk to tonight?"
Netflix should be taxed like tobacco and liquor: it's a destructive, disease causing force causing people to fall to pieces. Have a brutally painful subluxation from a 10 hour movie marathon? Sure, that can be fixed before it causes a life-threatening illness. It'll cost you more than the $8 you spend on Netflix. Minimum of $30/visit for probably 2-4 visits a week for at least a couple of weeks.
It's like an alcoholic or smoker having to pay for a liver or lung transplant. Just Say No to all the modern "entertainment delivery systems" that are designed to make you complacent, fat, and unhealthy. The system DOES NOT want you healthy! It wants you as a consumer of medical poisons until death. It wouldn't be suprising to discover that the BigPharma players are investors in things like liquor, tobacco and Netflix: those things deliver life-long pill-popping & insulin-shooting customers by the millions. The proper alternatives of eating well, being active, and receiving targetted chiropractic adjustments don't make them their billions in pain-delivered profits.
Chiropractic Saves Lives!
They need more content...I watched nearly all the good movies over one winter off work.
Qwikster will be profitable. Oh, wait...
Anytime I ran any kind of "rational valuation" calculation on NFLX based on subscribers, income, potential for growth, etc. the market seemed to be out-pricing my ideas by a factor of 3 to 7... NFLX has been a very expensive stock for a very long time, I'm surprised it took this long for the bubble to deflate.
Still a good business model, when they aren't spouting off idiotic ideas about breaking it.
Is it a place where I can watch the latest Hollywood movies for free? Like Megaupload or Videobb?
Who got upset over their subscriptions going up a tiny amount. If those people wanted to protest something really gouging, it'd be the gas prices. Or the costs of medicine. Or fuck, go out and yell at the government or the banks.
They lost a lot of subscribers due to their split-service gap, and they look to be having content issues...
However, they still seem in a good position to me. The service is fundamentally good, they still have a lot of ratings from users to help determine what content makes sense for them to buy, and (most importantly) they have a LOT of paths into the home - just about any device you can name supports Netflix.
They are in a rocky spot now but I just can't see who can replace them easily, or even reach the position they currently hold within a year or two.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
They had it coming. Oatmeal Netflix parody:
http://theoatmeal.com/comics/netflix
I'm not a lawyer, but I play one on the Internet. Blog
I understood when they had to raise prices. The studios have gotten crazy greedy on the whole streaming thing and their costs have gone through the roof. Netflix streaming is still BY FAR the best deal around. You can watch the entire runs of shows like Battlestar Galactica (original AND new, even 1980), The X-Files, Twin Peaks, Firefly, Family Guy, etc (many of them in HD, no less). Nothing else even comes close to the selection or quality of Netflix's streaming library.
But I'm a lot LESS sympathetic with some of their bonehead moves--like trying to separate their by-mail/streaming divisions with annoying separate websites and queues (a move destined to serve little purpose other than pissing off loyal customers like me) and paying $40 million for a bunch of shitty Dreamworks streaming rights (a move that's only going to encourage the greed of the other studios in the future).
SJW: Someone who has run out of real oppression, and has to fake it.
They face very stiff competition from other companies with much deeper pockets, so they are going to have it tough for a while. I like Netflix (their latest snafu with splitting the DVD rental / streaming plans didn't affect me - I'm streaming only), and as a technophile, I'm pleased that they have gone to great lengths to support such a diverse range of hardware. A lot of companies wouldn't have bothered with Wii, XBox, Android, etc. Netflix's decision to split off their DVD rental was simply waaaaay too early. That is an inevitability of course - anyone with the least bit of foresight can see that demand for physical media is going to drop off a great deal in the near future. However, Netflix must provide a mechanism to bolster the streaming support since the movies offered online are so hit and miss, and the only choice is DVD for now.
Take Lord of the Rings for example. Did you know that you can watch The Two Towers online, but not the first or third movies? Now what in the world is that about??? As long as that sort of garbage is going on, customers need a single unified interface and billing to get movies in whichever format is available.
Better known as 318230.
Here we go again. Netflix (streaming) is going to follow the same path as Tivo. Innovate at the beginning, then get to a point where you have trouble growing your audience. Then bigger companies, such as the cable companies, come in with a comparable product, and eat your lunch, because they already have a relationship with the customer, and deeper pockets than you which will help them bid up content license prices. This makes the streaming side of NFLX negative growth in the middle term, as they have the same problem in other countries, despite their efforts to expand.
The disk mailing side of the company is already saturated from a customer base side. Increasing postal rates and the eventual end to saturday delivery will make the service less viable. Eventually the postal service will go to every-other-day delivery of first-class mail, in order to reduce the number of carriers and mail trucks by 30 to 40 percent. The disk mailing side of NFLX is therefore a revenue stock now (with that revenue being eatten by the streaming side), and negative growth in the future. Sell...
I want to ride the wave of Netflix serving content at a loss for my own profit. Is there an example (preferably Eclipse) Google TV project demonstrating an app that accesses the Netflix catalog and streaming content?
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make install -not war
I know that Bob is a regular troll here, but I'm a sucker and will respond anyway.
As an active individual I have no desire to adjust my life around a television schedule, nor pay $50+ a month for a cable service that I rarely use. Cutting that expense to $8 a month makes much more sense for a casual TV/movie consumer. It allows me to not worry about getting "behind" in a series as I can watch it at my own pace, and leave the house at any time without concern about what I am missing. It allows me to have down time when I need it (and as you should very well know, having relaxing time is very important for physical and mental health).
That turned to crap by pursuing both at once.
Netflix had ALWAYS planned to ditch their DVD service in favor of streaming; the original idea was to be done by 2007.
But the general infrastructure did not progress as fast as had been forecasted.
So divesting themselves of their DVD side was the logical progression. Except that their entire plan was ill-formulated and just altogether sloppy. Poorly timed, too, considering their loss of Starz and such.
Raising fees to accomodate the general paradigm shift - where the majority of their consumers and money were now mostly only streaming - was also smart. It was, on the whole, much more profitable and growth-sustaining even with a very, very modest assumption of potential customer losses.
But doing both of these very large "PR-disasters in the making" within such close proximity of each other?
Jesus, that's a special level of incompetence right there.
I think they have a couple problems. First their library isn't great. It's $8 a month for all the b movies you can watch. They'd be better off raising the prices and consistently having new movies in stock. Indeed, I hope they are going unprofitable to get more content.
I think their second problem is that if you have cable, your On Demand is probably as good as Netflix and if you get a premium channel, it comes with an On Demand that blows Netflix out of the water.
I wish Netflix was going to give the cable companies a run for their money. I think it would be great if the service provider wasn't so tied to the content providers, but I guess Netflix isn't in a position to take them on at this time.
Democracy Now! - your daily, uncensored, corporate-free
Netflix clearly wants to get out of the DVD business and into the more profitable streaming-only business. Netflix could have just raised its streaming+DVD prices a little for a little while, say +$2 for 6 months. Then started charging a little more for DVD deliveries, while offering a rebate to streaming-only customers. After a few months of that structure, they'd have a distinct streaming-only customer group. Then they could have raised prices on streaming or DVD independently. Voila! Two distinct, differently priced products, each profitable, with DVD delivery able to be wound down while making the streaming-only product look better.
Instead they did it in a way that told their customers that they had to take whatever Netflix shoved at them. "Where ya gonna go?" Well, many went, and the brand is damaged even for those who stayed.
It's not too late for Netflix to do the underlying biz transformation right. But the marketing and corporate execs who backed the debacle should take a big hit. The marketing people should probably go, unless the corp execs want to give them a second chance on something like what I described. But probably they should go. There's never any reason to keep a marketer unless they're really a star (which is extremely rare) - there are plenty of non-stars who can take a crack at the next marketing bungle.
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make install -not war
If I could sort Netflix streamers by ratings (or by anything other than Netflix's lame categories), it wouldn't bother me that 99% of the streamers are crap. And if I could weight other people's ratings by raters who rate similarly to how I rate, then I might better find crap that I'd like anyway.
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make install -not war
A large part of their problems, ironically, can be blamed on iTunes. Or rather, what iTunes did.
Apple came into the market and swept a massive position of power and influence right out from under the music (or rather, content) industry's feet. Apple gained a novel and unrivaled position to dictate the terms of negotiation.
They're still stinging from that.
As a byproduct, they were far more 'prepared' for Netflix. Well, not prepared, as the industry is ancient, slow, bloated and generally can't see "the next big thing" until it's already slapped them across the face and taken their daughter out to dinner.
They were more Apprehensive, really.
They may not have known if Netflix would be a success (by-mail services could never be a threat, and when the streaming came about, similar "on demand" services were rather mediocre) but they knew well enough to keep the reigns on a potentially unwieldy beast.
So Netflix' (possibly unexpected to the Industry) fast growth and explosion in the public mindshare did not end up giving them anywhere near the same control and leverage for negotiations with content owners and producers. Netflix did not secure a completely dominant position, and were unable to supplant the general DVD purchase/rental and theater-going parts of the industry, or at least nowhere near as successfully as iTunes snowballed over CDs.
As such, they're entirely at the whim of industry conglomerates that view them now as something of an enemy, or an annoyance that is profitable enough not to deserve a swat yet.
If the industry wasn't so generally inept, there would have been an MPA-aligned style service already out and Netflix would be deprived of most of its content almost immediately.
Then bigger companies, such as the cable companies, come in with a comparable product, and eat your lunch, because they already have a relationship with the customer
But what kind of relationship is that? It's not a good one.
TiVo was wiped out because all they could fundamentally do is offer a slight improvement to the cable box, once the cable companies started also including a DVR that was it. They couldn't offer additional content, just extra convenience.
Netflix is more than that, they offer a vast array of content that each cable company in turn would have to seek rights for to use the same way. The cable companies can't get a leg up on Netflix in terms of pricing or content because content providers have no motivation to treat them differently or charge them less.
Also Netflix offers a service that I can easily watch on an iPad/iPhone or Roku box or AppleTV or computer, and cable companies are only just starting to think about that stuff. But they will be hampered by the desire to have people watch content on THIER network, not just an arbitrary one. Netflix is the only cable-like company not bound to old-school physical network thinking.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
I have no problem with them raising their prices if they kept up with a good selection of movies but they don't. I have looked for movie after movie to only find it is either not available at all or DVD only. Their selection at best is sad. Most the movies are from the 90s and 80s with very few newer movies. I am not going to keep paying more and more for the same quality of service or less. You want to raise my price fine, give me a better selection. I'm done with them. They can keep their inflated prices and crappy selections.
The Netflix streaming library is poor. There is not much there worth watching, unless you are in the mood for an old movie, and then it is still a coin toss if you can find what you want. Expansion to the UK and Ireland will not bring profitability. Expanding content will.
I pay for the Nexflix streaming, but only because I have a 4 year old and the selection of content for that age range is decent and worth the price.
If you want profitability, look at tiered streaming pricing. Add a couple of bucks a month for a plan that has access to new content. Drop a couple of bucks a month for a tier that is only kid's programming. Create a low price tier with access only to the old stuff. Keeping your "one size fits none" model will continue your death spiral. It is pretty obvious that the "take it or leave it" approach you took has far too many choosing the "leave it" option.
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Netflix streaming is $7.99 for an entire *month* compared to the cable companies who charge $5.99 *per* movie or $12.99 and up for movie channels such as Showtime or Cinemax. So explain again how cable companies are competition to Netflix??
Netflix has had a perfect storm of problems including a buyback of shares when the price was in the $200's. Just like Amazon if you put money into the long-term profitability of the business it's going to hurt the bottom line *short term*. Wall St only cares about the short term hence Netflix trading in the low $70's while Amazon with a recent high of $246.71 is trading in the high $180's.
Every BluRay player, PS/3, Xbox, Wii, Roku, Netflix-enabled HDTV, iPad, Kindle Fire, Nook Color/tablet sold is a potential customer. The recent trend has been to ditch cable and go with Netflix and Hulu-plus to save money.
You can watch the entire runs of shows like Battlestar Galactica (original AND new, even 1980)
If Netflix are relying on Battlestar Galactica 1980 as a way to draw in customers, that explains why they're doing so badly :).
Don't talk about greedy this or greedy that. Netflix is not a not-for-profit, they are greedy too. A lot of social scientists agree that men are mostly egotistical and driven by greed.
I rarely respond to comments. Also, don't ask for clarifications: a brain and Google are faster, believe me!
Netflix has yet to offer video games or adult movies. Both those avenues will bring in tons of cash.
The reason for the NetFlix nosedive.
My guess is that they signed some deal with the content providers that they'd pay them for streaming their movies based on the number of Netflix customers ...
So, you unload the DVD customers to a separate company, and suddenly, they don't have to pay for the people who never would've been able to stream in the first place.
Of course, if this were the case, they should've said something ... telling the customers that it was a move to screw over the distributors might've given them some goodwill rather than just piss people off.
Build it, and they will come^Hplain.
This was done, because the studios were trying to devour the DVD business income in their negotiations for streaming content.
Hey you made $400 million, We want $200 million. But streaming only accounted for $40 million. So how do you keep the studios from digging into the pockets of the DVD side to gouge for streaming.
You split the company. Then the profits are held separately.
They just botched the explanation of why.
I wish I could say I am going to lose money the next several years, please give me 400 million to tie me over!
In NYC, the government has actually created a black market for tobacco, complete with all the crime that comes with it. How did they do it? By making it too expensive to legally acquire tobacco -- same as any other instance of prohibition -- except that this isn't full prohibition, but some kind of quasi-prohibition where it's both legal and illegal.
This is what prohibition does (create a black market), whether you're talking about "sin taxing" or outright criminalization. If you look a little closer, you'll realize that creating a black market -- and all the violence and injustice that comes with it -- is actually more profitable than taxing and regulating. It simply depends on the drug and whether or not they can "pull it off". They tried it with alcohol and actually succeeded for 10 years until the people started waking up to the violence and the root cause of it all.
What they are doing in NYC is testing the waters, not reducing the number of smokers. They are looking for the sweet spot between legalized/regulated (tax revenue) and criminalized/prohibited (law enforcement revenue) that will simply rake the most money through the business of government.
Not quite as romantic as you pictured, is it? Don't think for a second that prohibitionists and "drug warriors" are after anything but cold hard cash, because you're fooling yourself.
Maybe Netflix should worry about offering content people actually want to watch instead of expanding in to new markets. I know Netflix Canada sucks... Dated movies, B-Grade movies and kids movies do not appeal to people who have video on demand subscriptions with their cable company. For $12 a month I get unlimited access to my cable companies video on demand library, which includes newly released videos.
So Netflix' (possibly unexpected to the Industry) fast growth and explosion in the public mindshare did not end up giving them anywhere near the same control and leverage for negotiations with content owners and producers.
You can't really directly compare the movie and the music industry when it comes to exerting leverage. There are simple fundamental differences in the cost and structure.
1) Movie studios are going to react much differently when the summer "blockbuster" they produced for 100 Million is now available for rent for $1.00 than a record label who spent $100 K producing a record that is sold for $1 a track.
2) Content. A wider variety of consumption options exerts leverage on the producer to come up with something interesting to attract audience and dollars. The music industry currently offers 1000x more content choice than the movie industry.
3) Democratization of Content Production. Any band can affordably record, produce and distribute content in a digital format, which rids them of the middle-man labels. iTunes as a publishing medium was a viable option for some small and independent labels to publish content. No real option exists in the film industry, and it's not a matter of medium or availability (i.e. YouTube). It's a matter of talent and the amount of talent from various disciplines to produce a film (writing, directing, acting, music, cinematography). In other words, the bar of entry to the public is lower in the music industry, where that garage bands who know 3 chords can write a throwaway catchy tune and capture and audience. Trying to write a "3 chord tune" as a film and capture an audience comes off as someone's horrid home movie. It can be done and has been done before, it is just exeedingly rare.
You really can't blame Netfix for not being able to exert leverage in an industry that has (when compared to music) limited content, higher production costs and very little relative democratization of content production.
There's competing streaming video from Amazon, which can stream both rentals and streaming versions of DVDs you buy from them, and audio. It's also not hard to imagine a significant expansion of video for iTunes.
Both of them are pay-per-view, at prices (set by the content providers) that are WAY too high.
Note that Apple just dropped rentals... the prices the studios want are not reasonable.
There's also Hulu+, and it's pretty clear that Google is trying to integrate YouTube movie streaming into G+.
Hulu+ is focused on TV, and a very limited set of TV. People complain about Netflix not having enough content? Try Hulu! Also Hulu is prone to removing older stuff, where Netflix tries to keep as much older TV content around as possible.
G+ is a total wild card but they face a massive uphill battle in device distribution. Google TV unit sales have been abysmal and companies are scaling back integration. And they face EXACTLY the same content price issues that Netflix faces, only again without any kind of wide TV subscriber base or device support.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The whole reason why so many people never caught on to Netflix was the lack of up to date movies, all these b budget old movies are not cutting it...sounds like they should have gotten the content first, before making a name for themselves as being useless movie provider....once your reputation is made as xxx...changing it costs even more!
Sorry. As a former NetFlix customer who left because of their policies, I had to gloat.
"I believe in Karma. That means I can do bad things to people all day long and I assume they deserve it." : Dogbert
Adult movies? Really? Who pays for porn?
Once the generic Internet plebes figure out that you can get it for free they won't be paying jack shit. Pay-for-porn itself is dying.
Porn is like open-source, it wants to be free (amateur).
Now they have gone the way of all growth-oriented companies: they are chasing profits uber allen. Because of this, they see innovation as a way to profit, as opposed to a good thing in itself.
Currently hooked on AMP
The lack of content in Canada is staggering.
So I looked for "Idiocracy". Then I looked for "The day after tomorrow". Then I looked for "Hitman" (and so many others). Then I clicked the cancellation button. What pissed me off besides the lack of content was the fact that now they don't even have the decency to return 'not available". No, the result for "Hitman" should not be "The Day of the Jackal".
So now I go out more. I am reading more. Hell, I actually went bike riding last week. And it is not about the $7.99/month, but it feels better to grab a cup of coffee and go for a walk for an hour instead.
Oh come on, don't tell me you didn't like that episode where the Galactica superkids formed a Bad News Bears-esque little league team. The fact that that episode didn't win the series an immediate Emmy is just a travesty.
SJW: Someone who has run out of real oppression, and has to fake it.
There's greedy and then there's crazy greedy.
SJW: Someone who has run out of real oppression, and has to fake it.
Nothing else legal even comes close to the selection or quality of Netflix's streaming library.
FTFY
Give me Classic Slashdot or give me death!
We dropped them not when they doubled our fees, but when they piled onto that the fact that we'd have to use two different user interfaces to interact with our services.
Rather than put up with that added level of unnecessary complexity that had no benefit to us as users (and only to bean counters who wanted to keep the buckets separate solely to have two shells under which to hide money), we just turned them off.
It doesn't matter that they've reversed on the latter. We're not going to go through the trouble of signing back up only to have the sword of damocles hanging over our heads - what would be the next huge inconvenience we'd be threatened with?
No one would pay for it directly, but if they add it to the service, it would probably gain them millions of subscribers because that extra incentive. I would also suspect the Adult Film industry would probably be a lot easier to work with over licensing considering as you said, everything is already virtually free. They will always take something over nothing.
Well, with video chains falling like flies, perhaps they media corps will have to reconsider a bit.
Many small chains have disappeared over the past few years. Blockbuster is gone. I've heard rumours that some of the other bigger chains are set to follow.
Sure they can screw with Netflix now, they still control the content. But when Netflix becomes the major source of distribution, they'll have a lot of push back against the media corps, similar to what has happened with iTunes and CD's, etc.
The studios have gotten crazy greedy on the whole streaming thing and their costs have gone through the roof.
Sure, but how could we fight back against a studio price hike without harming Netflix? That's a really unfortunate position for both Netflix and its customers.
Perhaps if they disable the "history" feature.
My GF has a much different taste in movies than I do, and sometimes watches shows with my niece as well, so my history and suggestions are often skewed towards musicals and cartoons.
It took me awhile to figure out how "my big gay wedding" ended up in the list. I'm pretty sure many husbands wouldn't want to share with their wives that they watched the latest "girls gone wild" last Friday, or have the relatives come over and then pop on Netflix, only to have the history display with bold titles and a nice graphic that the last watched show was "Barely legal co-eds 3" or something of the sort.
You can watch the entire runs of shows like Battlestar Galactica (original AND new, even 1980),
I was trying to finish the last bits of Galactica last year, and was unbelievably frustrated that they didn't stream any of the x.5 seasons. I have disk service too, but it was annoying to get partway through season 4 and then have to wait for disks all of a sudden. I hope they've fixed that since then.
Adult movies? Really? Who pays for porn?
Someone has to, you worthless parasite.
The recording/music industry boasted standard profits before taking iTunes into account.
After taking it into account, they have sold more music and made more money than any other decade in history.
When they say they are being harmed by digital sales, they are 100% lying.
As I said before, if this conglomerate of rights-holders and content producers wanted, they could withhold everything they needed to stop newer ideals in their tracks; if that failed, they could simply legislate their way to total control.
Videogames really aren't that profitable really. Takes way longer to recoup each game purchased than movies. Gamefly for instance has been struggling to survive since a scratched or snapped disk costs them way more than a DVD.
Maybe that's true, but you didn't pick a verry good example, since Hulu has BG too.
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
He could also work at Microsoft. Do your time then your 100 day break.
Oh, yes, video-game streaming :)
Actually, I am surprised that they do not offer VGs. Blockbuster has been doing it for a while and that must be far more profitable as games tend to linger for a longer time than a movie.
As far as adult movies - that could backfire. As another poster below pointed out -- they have history/suggestions mechanisms and many accounts may be used by more than one person. Even with non-adult offerings, I find that inconvenient.
I find the compulsory TV license in G.B to be perplexing. I calculated the exchange and found it almost exactly what I'm paying Netflix for unlimited streaming and 1 blu-ray disk at a time. I can see many Britons dumping their TV, buying a nice big computer monitor and hooking it up to any one of the many devices that will play Netflix. I'm sure a streaming account in G.B. will be cheaper than the Auntie Beeb's TV tax. How long until Parliament pass laws to harm Netflix's success there?
Netflix streaming is still BY FAR the best deal around.
Selection-wise, perhaps. But it really isn't if you have bandwidth caps. You can't watch that many movies/shows in HD if your limit is 20-30gb a month and you use your internet for other things than media streaming.
~Syberz
My wife and I watched the entire series this past summer and it was all via netflix streaming.
this is amazing to think that a company can blow up to $300 a share, drop to $60 a share and then announce it will become unprofitable (all within 2 years)... it seems we are at a time now where these companies such as netflix, social networking sites, etc. are quickly blowing up a massive bubble that can't be too far from a pop. I mean people are paying a market cap of $6+ billion for Linked in, i mean its a good site but come on they will never generate the profits to warrant that kind of pricing.