Netflix Q1 Results - Loss of another 1 million Disc Subs

Lee Stewart · 04-25-2012, 07:46 AM

Quote:

Originally Posted by PSound

Again, you simply do not know what you are talking about.

You did not even understand the simple concept around COGS, cost of sales, cost of revenues, etc. Heck, you didn't even know they existed despite it being a core requirement of an income statement (in one name or another) because you did not have enough basic knowledge to even know what to Google.

You are trying to assert knowledge based purely on the results of your latest Google search. It is pointless to engage you on this topic because you are uninformed, and incapable of admitting such.

LMFAO! So you finally give in huh? You have corrected your previous mistakenly used term . . . costs of revenue . . . which I quoted AS YOU TYPED IT and now you use . . cost of revenues. And is there a term called . . . cost of revenue? That doesn't appear in any of those 10-Q links but you freely used it in many of your previous posts. I am sure you won't any longer now that you know the proper terminology.

And again, Cost Of Sales does not necessiarily mean the same as Cost of Revenues. As I said, there are companies that have zero dollars in sales but 100's of millions of dollars in revenue. It is dependent on how a company generates it's income as to which applies.

Are you ready to tackle Fixed versus Variable Costs now? Don't think for a moment that all the nonsense you previously posted is correct . . . far from it!

**bruceames** · 04-25-2012, 07:54 AM

Quote:

Originally Posted by PSound

I think they have accepted that the customer is leaving OD and are building/spending accordingly.

If the OD rental market as a whole was growing, it might be different. It isn't.

Even your comment above about not being able to go to a B&M store because it is not there demonstrates this. The OD rental market is retracting. The shifts we are seeing are a symptom of that shift - not the cause.

Certainly as the market contracts, the business reactions that companies must make will continue that spiral. It is what it is.

And take a look at the earnings info again. Netflix spent more on OD by mail (as a function of revenue) in Q1 than in Q4. That did not prevent the decline in subs, nor (based on the number of free subs) do much to spur gross growth.

BTW... I do believe that disc by mail will adjust itself to the right level of interest for OD by mail, and then see a much slower organic decline. We have seen major drop-offs in recent quarters as OD by mail rightsizes its sub numbers after being artificially inflated by bundling with streaming.

I could even see seasonal growth bumps, but the trend of declines will slowly continue.

Again, OD rental is not declining nearly as much as Netflix disc by mail is. OD rental declined only 3 percent last year. People are leaving B&M for Redbox for convenience (and more locations), but there's no reason to leave disc by mail for Redbox other than new releases being available which aren't at Netflix because they aren't stocking them.

It's very simple. Netflix is exacerbating the disc by mail decline.

PSound · 04-25-2012, 08:07 AM

Quote:

Originally Posted by bruceames

Again, OD rental is not declining nearly as much as Netflix disc by mail is. OD rental declined only 3 percent last year.

First off, OD rental declined far more than that. We know the reporting is off. Either last year will be adjusted downward, or this year will see a steep drop-off to account for two years worth of decline.

Second - Yes, Netflix OD by mail is declining faster. That is because those sub numbers (and revenue) were artificially inflated by the inclusion of streaming.

OD by mail decline will level off some once the sub number has adjusted back to the levels of actual consumer demand purely for OD by mail starting at $7.99

Quote:

People are leaving B&M for Redbox for convenience (and more locations), but there's no reason to leave disc by mail for Redbox other than new releases being available which aren't at Netflix because they aren't stocking them.

It's very simple. Netflix is exacerbating the disc by mail decline.

Interesting. No where in there do you think price plays a role in kiosk success. Not even over B&M. I believe kiosk pricing plays a major role in its success, and any discussion competition certainly must highlight price.

**bruceames** · 04-25-2012, 08:31 AM

Quote:

Originally Posted by PSound

First off, OD rental declined far more than that. We know the reporting is off. Either last year will be adjusted downward, or this year will see a steep drop-off to account for two years worth of decline.

Second - Yes, Netflix OD by mail is declining faster. That is because those sub numbers (and revenue) were artificially inflated by the inclusion of streaming.

OD by mail decline will level off some once the sub number has adjusted back to the levels of actual consumer demand purely for OD by mail starting at $7.99

Interesting. No where in there do you think price plays a role in kiosk success. Not even over B&M. I believe kiosk pricing plays a major role in its success, and any discussion competition certainly must highlight price.

The DEG report says 3 percent, so that's what we should go on, don't you think? Unless you have some better info...

I don't think price plays a very large role in Redbox's success. Sure, at $2.00 or $2.50 they would get fewer rentals, but a buck is not a deal breaker for most people. Especially for those hot off the press movies that they are anxious to see at home.

Redbox success is because of convenience over B&Ms and the number of locations at places where people routinely go for other reasons. You have to make a special trip to a B&M store.

PSound · 04-25-2012, 08:34 AM

Quote:

Originally Posted by bruceames

The DEG report says 3 percent, so that's what we should go on, don't you think? Unless you have some better info...

The DEG is the best we have, but we know there are going to be some major shifts in H1. Feel free to quote the 3% for now.... but it does not reflect market reality and we both know it.

Quote:

I don't think price plays much a role in Redbox's success.

Probably a conversation killer right there. I do believe price plays a big role in Redbox success.

**bruceames** · 04-25-2012, 08:47 AM

Quote:

Originally Posted by PSound

The DEG is the best we have, but we know there are going to be some major shifts in H1. Feel free to quote the 3% for now.... but it does not reflect market reality and we both know it.

Well apparently you know more than I do. I'm not going to speculate on how far off the DEG may be with their numbers.

Quote:

Probably a conversation killer right there. I do believe price plays a big role in Redbox success.

Fine. But again, $1 or $2, with prices that low it's not going to make a huge difference. Both are very cheap and attractive. B&M pricing was very cheap as well before they went under. Did it help much? And Netflix is actually cheaper than Redbox if you take advantage of it.

Don't kid yourself. It's because of the combination of convenience and availability of new release titles.

PSound · 04-25-2012, 11:14 AM

Quote:

Originally Posted by bruceames

Well apparently you know more than I do. I'm not going to speculate on how far off the DEG may be with their numbers.

To be clear, I don't think their raw numbers are wrong. But we know that how they allocated last year (lumping together OD subs and streaming subs) is going to cause some major shifts this year - or require them to re-report last years numbers.

Quote:

Fine. But again, $1 or $2, with prices that low it's not going to make a huge difference. Both are very cheap and attractive. B&M pricing was very cheap as well before they went under. Did it help much? And Netflix is actually cheaper than Redbox if you take advantage of it.

Don't kid yourself. It's because of the combination of convenience and availability of new release titles.

I disagree. B&Ms are much more convenient (IMO) with a wide range of discs. They were buried due to price.

**bruceames** · 04-25-2012, 11:20 AM

Quote:

Originally Posted by PSound

I disagree. B&Ms are much more convenient (IMO) with a wide range of discs. They were buried due to price.

Huh? How are B&Ms more convenient when you have to make a separate trip to go there? With a kiosk, you literally have to walk about 2 steps out of your way. And most consumers want the latest releases. Something of which Redbox has.

If price is so critical, then why are customers actually paying on average double what the one day rental price is?

PSound · 04-25-2012, 12:05 PM

Quote:

Originally Posted by bruceames

Huh? How are B&Ms more convenient when you have to make a separate trip to go there? With a kiosk, you literally have to walk about 2 steps out of your way. And most consumers want the latest releases. Something of which Redbox has.

Say what you will about Blockbuster, but you could always walk in and know the latest release was there. Locations could handle more than one customer at a time. Their breadth was far beyond what Redbox could do.

And Redbox is only two steps out of your way if you are already there - to rent or to return. Otherwise it is still a trip.

Quote:

If price is so critical, then why are customers actually paying on average double what the one day rental price is?

Double is still far cheaper than new release rates at B&Ms.

The really big benefit of kiosks is price. Kiosks have studio enforced delays like Netflix. They have other inherent issues with the simple interface (ability to only serve one customer at a time).

The benefit of kiosks is the efficiencies in space and staff that allow them to set retail pricing so low.

Kosty · 04-25-2012, 02:35 PM

Quote:

Originally Posted by PSound

Again, you simply do not know what you are talking about.

You did not even understand the simple concept around COGS, cost of sales, cost of revenues, etc. Heck, you didn't even know they existed despite it being a core requirement of an income statement (in one name or another) because you did not have enough basic knowledge to even know what to Google.

You are trying to assert knowledge based purely on the results of your latest Google search. It is pointless to engage you on this topic because you are uninformed, and incapable of admitting such.

I think that is being grossly unfair to Lee Stewart. Over the years he clearly has shown that he understands those concepts.

Just because he is disagreeing with you does not make him stupid or incapable of understanding those issues.

Kosty · 04-25-2012, 02:38 PM

Quote:

Originally Posted by bruceames

You can't visit a B&M store if it doesn't exist (within a reasonable driving distance). The consumer has no choice there.

B&M stopped being profitable because they lost enough business and because of price erosion in their rentals. It was a dying model, and much of it had to do with consumers going to Netflix.

Now they are going to Redbox because that's where the new releases are. Netflix either doesn't stock enough, or they are affected by the 30/60 day window. But it goes beyond that in the reasons I stated above.

In Netflix's case, they are helping the consumer along in leaving OD. That's what they want actually. Surely you can see that.

Exactly.

You can't look at the decline in brick and mortar stores that both Netflix disc by mail and Redbox $1 a night kiosks helped kill off and say that's proof that the Netflix disc by mail program would have declined as fast if it was managed better by Netflix.

To state otherwise just seems to be defending Netflix management and agreeing with them that disc by mail should be replaced as soon as possible by streaming.

Kosty · 04-25-2012, 02:49 PM

Quote:

Originally Posted by bruceames

Again, OD rental is not declining nearly as much as Netflix disc by mail is.

OD rental declined only 3 percent last year. People are leaving B&M for Redbox for convenience (and more locations), but there's no reason to leave disc by mail for Redbox other than new releases being available which aren't at Netflix because they aren't stocking them.

It's very simple. Netflix is exacerbating the disc by mail decline.

I do not see how one can deny that.

It will be interesting to see what the DEG stats say for the 1Q when we get them and how the Netflix disc by mail decline compares to Redbox growth and to the physical rental category as a whole.

As I said before its easy to find disgruntled former Netflix customers sho would have stayed with their disc by mail service if it had a bit more attention or resources given to it in the past few years.

Its been fairly obvious for a while that they had been taking profits from disc by mail and shortchanging the customer service and physical inventory there to plow those profits into building up streaming.

I have stayed as a streaming customer with Netflix but I and many others could have stayed as disc by mail customers too with more profits to Netflix if they had paid more attention to that side of the business.

Kosty · 04-25-2012, 03:24 PM

Quote:

Originally Posted by bruceames

Huh? How are B&Ms more convenient when you have to make a separate trip to go there? With a kiosk, you literally have to walk about 2 steps out of your way. And most consumers want the latest releases. Something of which Redbox has.

If price is so critical, then why are customers actually paying on average double what the one day rental price is?

PSound is completely missing the point that Redbox is so convienient because their kiosks are located at supermarkets drug stores and on their way to almost anay consumer errand. You can throw a disc to return or rent while on your other shopping trips instead of a separate distinct trip to a video store that you rented the item from.

You literally can almost can return it anywhere at multiple locations you were already going. Right by the door, two steps like you said.

The value for Redbox is not only the low price to rent but also the low marginal cost for one more day. Most rentals are over two days on average and its easy enough to say its only another $1.10 or $1.50 to keep it out one more day and I'll return it to Walmart tomorrow when I go out shopping there anyway.

The average return price per event ends up being a lot more than just their single daily rate, but it enables consumers to make that choice willingly, unlike with the old late fees for video stores.

Kosty · 04-25-2012, 08:19 PM

Quote:

Coinstar's Redbox Gaining DVD Business From Netflix

By PATRICK SEITZ, INVESTOR'S BUSINESS DAILY
Posted 01:12 PM ET

Coinstar shares were up 2.6% in midday trading Wednesday near 65.10, marking its second day of gains following Netflix's disappointing first-quarter report.

Coinstar is due to report its Q1 results after the market close Thursday. The Bellevue, Wash.-based company already preannounced better-than-expected results on April 12, thanks to higher sales and profitability from its Redbox unit.

At the midpoint of its guidance, Coinstar expects core earnings per share of $1.38, up 200% from a year earlier, on sales of $568 million, up 34%, for the March quarter.

In Q4 2011, Redbox accounted for 86% of the company's sales. Coinstar's legacy coin-counting business and other ventures contributed the remaining 14% of sales.

Coinstar said its Q1 results reflected better-than-anticipated demand at Redbox, particularly in February and March, and acceptance of its movie rental price increases. Redbox raised the price of DVD rentals from $1 a night to $1.20 a night starting last October.

Redbox also is picking up DVD revenue at the expense of Netflix, which is slowly phasing out that business. Netflix said late Monday that its U.S.-only DVD-by-mail service lost 1.08 million subscribers in the first quarter. It ended Q1 with 10.09 million DVD subscribers and expects to have 9.15 million as of June 30.

Netflix is focusing its attention on providing streaming video service. Coinstar intends to enter the streaming video business later this year in a joint venture with Verizon Communications (VZ).

http://news.investors.com/article/60...vd-decline.htm

Kosty · 04-26-2012, 04:11 PM

Quote:

Netflix’s ‘Lukewarm’ Latin America Holiday

26 Apr, 2012
By: Erik Gruenwedel

In addition to foreign expansion challenges, Netflix traffic growth in the United States appears to be peaking

Netflix continues to top streaming video traffic during peak viewing times in the United States across wired broadband connections but is experiencing growing pains outside North America, according to a new report, Global Internet Phenomena Report: 1H 2012, from bandwidth management firm Sandvine.

When factoring upstream and downstream traffic during a 24-hour period, Netflix represents 24.4% of peak video traffic, compared with 14.2% for file-sharing service BitTorrent. Netflix comprises 32.9% of peak hour traffic, up 0.2% from the last report in September. That peak streaming traffic is projected to decline to 32.5% in the second half of the year.

Notably, Netflix drives 33% of capacity infrastructure (data) costs — a reality not lost upon cable operators such as Comcast, which recently bowed a proprietary SVOD service that doesn’t impact a subscriber’s monthly data usage cap.

Netflix CEO Reed Hastings, in a recent Facebook post, decried Comcast’s apparent competitive move in violation of federal net neutrality guidelines.

Meanwhile, Netflix’s prowess in the United States and successful launch in Canada hasn’t been replicated thus far in Latin America, Mexico and the Caribbean — a reality company officials acknowledged in April 24 financials. The Los Gatos, Calif.-based streaming service launched operations in the United Kingdom and Ireland in January.

Sandvine said that when measuring bandwidth usage, Netflix’s reception in Latin America has been “lukewarm” at best. The SVOD service accounts for just 0.75% of the region’s streaming traffic on fixed access networks (such as cable and satellite), and 0.73% on mobile.

Notably, the usage levels still rank Netflix the 13th largest source of peak hour traffic on both fixed and mobile access networks.

Unlike in the United States, where there is substantial broadband penetration, relatively large disposable income with credit card usage, myriad Netflix-enabled consumer electronics devices and limited competition, in Latin America the environment could scarcely be more different, according to the report.

“Since few Latin American subscribers have access to the high speeds, consistent quality and large usage allowances available on cable or DSL connections, Netflix faces an uphill battle for the time being,” the report reads.

In Latin America, many countries have limited deployment of fixed access networks, so subscribers often rely on mobile connections as the primary Internet access. Since few subscribers have access to the high speeds, consistent quality and large usage allowances available on cable or DSL connections, Netflix faces a challenge.

In addition, content offerings in Latin America (and other foreign territories) are significantly smaller than in the United States, often lacking marquee titles. Regional content is paramount in Latin America with subtitles (in Spanish and Portuguese) key to consumer adoption. Still, Sandvine said Latin America offers “tantalizing” growth possibilities with a substantial consumer base.

In the United Kingdom and Ireland, network and credit card issues pale in comparison to the reality that Netflix faces competition from Amazon-owned LoveFilm Instant, satellite TV BSkyB’s SkyGo platform and BBC’s iPlayer, among others. Indeed, the iPlayer accounts for 6.4% of peak period streaming traffic. Since launching, Netflix represents 2% of the streaming traffic.

Regardless, Netflix also faces increased domestic competition from YouTube (the second-largest source of peak downstream traffic, at 13.8%), Hulu, HBO Go, Amazon Prime, Comcast Xfinity Streampix, Dish Network's Blockbuster@Home and traditional TV networks streaming their content to game consoles and other devices, according to the report.

Additional business challenges from increased content licensing costs have the potential to impact the content catalogue. Those companies that already own vast content libraries (i.e. Comcast’s NBC Universal) and can control or influence licensing will play a particularly interesting role in the developing market of SVOD, the report said.

“All of these services face a tremendous uphill battle to knock Netflix off its perch, and many will have to overcome the same licensing issues as Netflix, so don’t expect Netflix to fall from the top spot anytime soon,” the report reads.

http://www.homemediamagazine.com/net...-holiday-27094