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Is The SEC Investigating Netflix?

TowerGrove
12-14-2011, 09:46 PM
While Netflix has quite often been in the news these days, typically in connection with some spurious take out rumor or another, most likely spread by infamous flip flopping longs largely underwater on the name, there could be other, more sinister news lurking underneath the surface. As Disclosure Insight, an organization that among other activities submits FOIA requests to various regulators and compiles the data to expose companies that may have undisclosed regulatory proceedings against them, the SEC just may be investigating the fallen from grace and zero barrier of entry video steaming company (for which the imminent USPS bankruptcy will be merely the finally nail in the coffin).

From Disclosure Insight, which has gone "off paywall" after one week:

Whether or not you think Netflix is in play, those with an interest in the name will surely want to take note of this data point we published for clients on 5-Dec-2011. It is based on data we acquired from the SEC under the Freedom of Information Act regarding Division of Enforcement investigative activity.

http://www.zerohedge.com/news/sec-investigating-netflix

TowerGrove
12-14-2011, 09:52 PM
More On Netflix's 'Undisclosed SEC Investigation'

Zero Hedge broke news this morning that Netflix (NFLX) is apparently the target of an "undisclosed SEC investigation." Upon hearing the report and letting out one giant yawn, I emailed Netflix's VP of Corporate Communications, Steve Swasey. Here's the exciting exchange:


Maybe it's just because I tend to follow Netflix more closely than the rest of the world, but, for some reason, I often have something tangible to add to the company's story that goes unreported elsewhere.

As usual, Netflix opens itself up to speculation when it issues a "no comment." Although that could be a better approach than letting CEO Reed Hastings put his foot in his mouth. In any event, I have yet to see anybody bring up something reported by the Puget Sound Business Journal back in September regarding Netflix and the SEC.

Stephen E. F. Brown captured a scoop that everybody else seems to have missed. Shortly thereafter, I summarized Brown's work and added my two cents to the report that the SEC was badgering Netflix about how it discloses subscriber metrics, particularly churn. Here's the meat of Brown's September story:

In late April, two months after Netflix filed its 2010 annual report with the SEC, regulators wrote the company asking it to disclose more detail about who subscribes to what (DVD by mail or online streaming plans or both) and about “rates of churn or any other statistics that would better enable investors to understand your business.”

... Investors, the SEC was saying, like to know how many customers quit Netflix service during a particular quarter or year, since the company’s business model is built on attracting as many customers as possible...

But Netflix disagrees. “With respect to various operational metrics, management has evolved its use of these metrics as the business has evolved,” it wrote the SEC in response. Because it is so easy to quit and then restart a Netflix subscription, it said, “the churn metric is a less reliable measure of business performance, specifically consumer acceptance of the service.”

The company told the SEC it planned to stop reporting churn for fiscal year 2012.

The SEC wrote back in late June, saying investors do indeed need to know about churn rates.

Netflix counterpunched again, saying that in a single year as many as a third of the people who buy a subscription are people who’ve quit that same year.

"We do not require long term commitments from our subscribers,” it wrote in July.

In its latest reply, the SEC kept its cards close to its chest. “We have completed our review of your filing. We remind you that our comments or changes to disclosure in response to our comments do not foreclose the Commission from taking any action with respect to the company or the filing and the company may not assert staff (i.e. SEC staff) comments as a defense in any proceeding,” regulators wrote in a terse, single-paragraph letter.

Of course, there's a chance that this is all this morning's report is about. However, Netflix's "no comment" leaves open the possibility that it's about something more. Given the myriad issues that surround this company's balance sheet, Is It Live or Is It Memorex conference calls, corporate communications or lack thereof, public discourse regarding shorts, options compensation, misguided stock buybacks and generally broken business model, nothing would surprise me.

Either way, I'm always baffled as to why the media and Wall Street picks up on one story at a particular time, but not on a similar, more specific story at another time. When Brown went public with explicit details on the SEC churn investigation in September, I was one of the few - maybe even the only - media members to follow up. Today's story basically says nothing precise other than there is some sort of inquiry and it makes repeated headlines while dinging the stock. Go figure.

This news only adds to the laundry list of reasons to, at the very least, not be long NFLX. Once 2012 losses come closer into view, I expect the stock to resume the next leg of its downward spiral. Of course, I will be watching out for guidance from the company, particularly regarding its subscriber situation in December. For what it's worth Netflix is heavily courting people to re-subscribe or take another free trial on the house.
http://seekingalpha.com/article/313905-more-on-netflix-s-undisclosed-sec-investigation

Looks like more troubled waters could be ahead with this possible government investigation.

Lee Stewart
12-15-2011, 07:47 PM
http://img716.imageshack.us/img716/5936/secj.jpg (http://imageshack.us/photo/my-images/716/secj.jpg/)

http://img823.imageshack.us/img823/3448/sec1b.jpg (http://imageshack.us/photo/my-images/823/sec1b.jpg/)

PSound
12-15-2011, 08:08 PM
Any commentary on if the investigation is real, and what is being investigated: Or is this speculation inside of a rumor?


Because I am pretty sure there are rumors (and in some cases more than rumors) of SEC investigations into every major studio, none of which has ever been discussed on these (or any other) Home Theater forum.

Kosty
12-15-2011, 10:27 PM
Any commentary on if the investigation is real, and what is being investigated: Or is this speculation inside of a rumor?


Because I am pretty sure there are rumors (and in some cases more than rumors) of SEC investigations into every major studio, none of which has ever been discussed on these (or any other) Home Theater forum.

None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

The accounting practices and some recent stock sales to raise cash have been legitimate concerns on the parts of many investors and experts observing Netflix in the recent past and may have an impact on Netflix in future operations or in deals to acquire content.

You can ignore those all you want but those concerns exist and are currently in the news and they do affect Netflix in one way or another.

It seems like its just another obstacle that they will have to negotiate along the way as I hope they do.

PSound
12-15-2011, 11:33 PM
None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

Really?

Please, let me know what the rumors and investigations are for the studios and how that compares to exactly what the SEC is investigating at Netflix.

Links and supporting docs please.

Kosty
12-16-2011, 01:36 AM
Really?

Please, let me know what the rumors and investigations are for the studios and how that compares to exactly what the SEC is investigating at Netflix.

Links and supporting docs please.

You brought that issue up and its up to you to provide the evidence supporting your assertion not me.

Its obvious that Netflix business practices and accounting issues have been recently questioned so any articles about SEC investigations seem timely and justified. The simple fact that media is bringing up those issues make it relevant to discussion unlike possible other SEC investigations on the studios that have not been reported.

Ray Von Geezer
12-16-2011, 02:13 AM
[B]Any commentary on if the investigation is real, and what is being investigated: Or is this speculation inside of a rumor?

Because I am pretty sure there are rumors (and in some cases more than rumors) of SEC investigations into every major studio, none of which has ever been discussed on these (or any other) Home Theater forum.Clearly it goest beyond rumour, the question is what is being investigated. Rocco Pendola over at SeekingAlpha (who has been uncannily accurate in predicting Netflix's woes) wonders whether it's to do with the SEC's dissatisfaction with the information Netflix provides to investors, something they've been vocal about in the past. He approached Netflix for clarification and recieved a simple "no comment". If there's nothing in it, I'd really expect Netflix to comment pretty soon to limit the damage, in the wider press which is reporting on this if not to Mr. Pendola.

I think it's a little odd that you think stuff like this shouldn't be discussed on sites like these, after regularly promoting them using nothing more than their stock price and corporate practices. Perhaps you only feel this type of discussion is appropriate when it rings positive?

Ray Von

TowerGrove
12-16-2011, 06:12 AM
Clearly it goest beyond rumour, the question is what is being investigated. Rocco Pendola over at SeekingAlpha (who has been uncannily accurate in predicting Netflix's woes) wonders whether it's to do with the SEC's dissatisfaction with the information Netflix provides to investors, something they've been vocal about in the past. He approached Netflix for clarification and recieved a simple "no comment". If there's nothing in it, I'd really expect Netflix to comment pretty soon to limit the damage, in the wider press which is reporting on this if not to Mr. Pendola.

[B]I think it's a little odd that you think stuff like this shouldn't be discussed on sites like these, after regularly promoting them using nothing more than their stock price and corporate practices. Perhaps you only feel this type of discussion is appropriate when it rings positive?

Ray Von

Now Ray, :hithere: You know it only should be discussed if it conforms with ones own staunch ideological views and other opinions and comment are to be tossed aside as poppycock.

Its not all purple bunnies and unicorns in Netflixland.

Obviously SEC has some issues with Netflix. That in and of itself is newsworthy.

PSound
12-16-2011, 08:28 AM
You brought that issue up and its up to you to provide the evidence supporting your assertion not me.

My assertion is that this is speculation inside a rumor and that SEC investigations are generally not news unless the investigated topic is of something material.


Indeed this case is being pimped, including by Home Media Magazine and on at least two discussion forums, despite the fact that at least two majors currently are under "undisclosed SEC investigation" and have never been put forth as 'news' - certainly not by Home Media Magazine.

And the reason they are generally not put out as news is because there is nothing to report until some actual news about what is being investigated is known. Otherwise, it is rumor inside of speculation on a topic that generally has to do with the SEC getting clarification on HOW reporting is done.

Its obvious that Netflix business practices and accounting issues have been recently questioned so any articles about SEC investigations seem timely and justified. The simple fact that media is bringing up those issues make it relevant to discussion unlike possible other SEC investigations on the studios that have not been reported.

The fact that it is coming up and being pushed is what is interesting to me. Meanwhile, just about every major studio is either involved (or was recently involved) in SEC investigations that have never been published or discussed on these forums.

Granted, once Cinram (via Home Media Magazine) published it I could have guessed you would be pimping the story and hard.

That is really the sort of activity I am pointing out. Basically people fishing for anything negative about streaming, even in the case like this where there is absolutely nothing to discuss since it is not clear if there is an active investigation happening and absolutely zero idea what it is about.


When Home Media Magazine and its PR team start reporting on other undisclosed SEC investigations on companies in the Home Media chain, including studios who have been involved in investigations including being advised to change how they report their income, then I will take this as just normal reporting.

But that will never happen. Simply because investigations are opened often and usually end up in minor changes to SEC reports. And because Home Media Magazine and their PR cronies are more interested in generating FUD about the tech and companies that impact their paying PR client Cinram.


If I were to speculate, I would guess this investigation has to do with reporting churn vs reporting net sub additions. But again, it could be anything.

PSound
12-16-2011, 08:29 AM
Obviously SEC has some issues with Netflix. That in and of itself is newsworthy.

How newsworthy is Lionsgate undisclosed ongoing SEC investigation?

Kosty
12-16-2011, 09:00 AM
My assertion is that this is speculation inside a rumor and that SEC investigations are generally not news unless the investigated topic is of something material.


Indeed this case is being pimped, including by Home Media Magazine and on at least two discussion forums, despite the fact that at least two majors currently are under "undisclosed SEC investigation" and have never been put forth as 'news' - certainly not by Home Media Magazine.

And the reason they are generally not put out as news is because there is nothing to report until some actual news about what is being investigated is known. Otherwise, it is rumor inside of speculation on a topic that generally has to do with the SEC getting clarification on HOW reporting is done.



The fact that it is coming up and being pushed is what is interesting to me. Meanwhile, just about every major studio is either involved (or was recently involved) in SEC investigations that have never been published or discussed on these forums.

Granted, once Cinram (via Home Media Magazine) published it I could have guessed you would be pimping the story and hard.

That is really the sort of activity I am pointing out. Basically people fishing for anything negative about streaming, even in the case like this where there is absolutely nothing to discuss since it is not clear if there is an active investigation happening and absolutely zero idea what it is about.


When Home Media Magazine and its PR team start reporting on other undisclosed SEC investigations on companies in the Home Media chain, including studios who have been involved in investigations including being advised to change how they report their income, then I will take this as just normal reporting.

But that will never happen. Simply because investigations are opened often and usually end up in minor changes to SEC reports. And because Home Media Magazine and their PR cronies are more interested in generating FUD about the tech and companies that impact their paying PR client Cinram.


If I were to speculate, I would guess this investigation has to do with reporting churn vs reporting net sub additions. But again, it could be anything.

I did not even mention the HMM story at all here or at another site.

I was only defending towergrove here against your rather pointed directed comment at her for even daring to mention the negative story about Netflix.

Once again its part of a persistent pattern of you to flail around and attack the poster or the source of information you do not like.

Your persistent conspiracy theories and your meme of Home Media Magazine being manipulated by their PR client Cinram makes you look silly at times. towergrove who started this comment certainly was not influenced by anyone and yet you persistently comment on here motivations as well. The HMM story was not even mentioned at all.

PSound
12-16-2011, 09:05 AM
I did not even mention the HMM story at all here or at another site.

I was only defending towergrove here against your rather pointed directed comment at her for even daring to mention the negative story about Netflix.

Once again its part of a persistent pattern of you to flail around and attack the poster or the source of information you do not like.

Your persistent conspiracy theories and your meme of Home Media Magazine being manipulated by their PR client Cinram makes you look silly at times. towergrove who started this comment certainly was not influenced by anyone and yet you persistently comment on here motivations as well. The HMM story was not even mentioned at all.

So do you care to answer the basic point regarding Home Media Magazine (Cinrams PR firm) deciding to publish and push the Netflix SEC investigation and not make any statement on Lionsgate?

I understand if you opt to not directly comment.

Ray Von Geezer
12-16-2011, 09:20 AM
No surprise from this worthy at the typical diversionary response - despite the coverage on TheStreet, SeekingAlpha, StreetInsider, Barron's, The Washington Post etc, the old stalking horse gets dragged out as camouflage. "If in doubt, attack HMM!" still seems to be the rallying cry, no matter how irrelevent to the topic :yippee:

Back on topic though - 4 Possible Reasons Why Netflix may be under SEC investigation (http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation)

More interesting commentary on this story from Mr Pendola.

Ray Von

PSound
12-16-2011, 10:44 AM
None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

Really?

Please, let me know what the rumors and investigations are for the studios and how that compares to exactly what the SEC is investigating at Netflix.

Links and supporting docs please.

You brought that issue up and its up to you to provide the evidence supporting your assertion not me.

Actually you brought up the concept that what is being investigate with Netflix is materially different than what has been (or is being) investigated with Netflix.

That is a nice PR story for some parties, but it in no way reflects reality. We don't have information on what is exactly being investigated.


So I will ask again since you asserted "None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises":

Please, let me know what the rumors and investigations are for the studios and how that compares to exactly what the SEC is investigating at Netflix.


Because right now it appears that stating differences between those investigations is pure PR FUD.

Kosty
12-16-2011, 10:49 AM
So do you care to answer the basic point regarding Home Media Magazine (Cinrams PR firm) deciding to publish and push the Netflix SEC investigation and not make any statement on Lionsgate?

I understand if you opt to not directly comment.

Where has a story on Lionsgate being under SEC investigation been published and how exactly would that be of interest to the home entertainment industry or retailers?

Netflix is having a direct impact on the industry and is noteworthy if its being investigated for accounting issues due to its stress financially while Lionsgate is just one of many studios that are not as dynamic in recent impact as Netflix has been.

I can find no recent stories on Lionsgate and SEC investigations while I find plenty on Netflix and the SEC now.

Its just typical of you to attack the source to deflect things you do not want to hear.

Kosty
12-16-2011, 10:51 AM
This is the only story at HMM on the subject. That seems to be hardly pushing the issue.


Rumor: Netflix May Be Subject of SEC Investigation
15 Dec, 2011
By: Chris Tribbey



Shares of Netflix were down slightly Dec. 15 after the website Disclosure Insight suggested that the company was the subject of an undisclosed Securities and Exchange Commission investigation.

“In a letter dated [Dec. 1], we received information from the SEC suggesting this company was involved in unspecified SEC investigative activity,” the site reported. “We found no disclosure of the same as of this date.”

The site reported it acquired the information under a Freedom of Information Act request.

Netflix did not immediately respond to a request for comment.


http://www.homemediamagazine.com/netflix/rumor-netflix-may-be-subject-sec-investigation-25902

PSound
12-16-2011, 12:09 PM
I can find no recent stories on Lionsgate and SEC investigations while I find plenty on Netflix and the SEC now.

Wait a minute... How can you say:

None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

when you have zero idea what the investigation is about for Netflix and are not even aware of the Lionsgate investigation?


Did you just make this up?

None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

Since if you are not even aware of the investigation (or what is being investigated), then you are making false statements.

You are speculating on what the investigation is in both cases, while simultaneously asserting they are inherently different.



So again: explain how you can state that either, both or none of these investigations are of different "levels" when you have not one shred of information about what is being investigated. Or were you just making crap up.

PSound
12-16-2011, 12:11 PM
This is the only story at HMM on the subject. That seems to be hardly pushing the issue.

Anything Cinram/HMM publishes has always been defended by you, including when they published false executive quotes.

Obviously we have different criteria for journalistic integrity, at least when it comes to the agenda that Cinram/HMM are pushing.

TowerGrove
12-16-2011, 12:41 PM
How newsworthy is Lionsgate undisclosed ongoing SEC investigation?

In my opinion it's Very newsworthy. Post the topic, add some article links and get the conversation started about it. :confused:

Although I know nothing about Lionsgate and their issues I would be interested to learn more.

TowerGrove
12-16-2011, 12:49 PM
No surprise from this worthy at the typical diversionary response - despite the coverage on TheStreet, SeekingAlpha, StreetInsider, Barron's, The Washington Post etc, the old stalking horse gets dragged out as camouflage. "If in doubt, attack HMM!" still seems to be the rallying cry, no matter how irrelevent to the topic :yippee:

Back on topic though - 4 Possible Reasons Why Netflix may be under SEC investigation (http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation)

More interesting commentary on this story from Mr Pendola.

Ray Von

Yes, and why wouldn't a magazine like Home Media Magazine, a publication that deals with and discusses home video industry news bring up an article like Netflix and the SEC issues? Wouldn't they bring something like this up? I mean Netflix is part of the home video industry I wouldn't expect Good Housekeeping or Woman's Day to discuss such a topic!:what:

PSound
12-16-2011, 12:54 PM
In my opinion it's Very newsworthy. Post the topic, add some article links and get the conversation started about it. :confused:

Here is the source of all the Netflix hub-bub:

"Netflix Inc. (NFLX- $66.37 Mkt. Cap.- $3.7 B) Possible, Undisclosed SEC Investigation. In a letter dated 1-Dec-11, we received information from the SEC suggesting this company was involved in unspecified SEC investigative activity. We found no disclosure of the same as of this date."

Here is the same source discussing Lionsgate:

Lions Gate Entertainment Corp. (LGF- $6.96 Mkt. Cap.- $955 mm) New SEC Data Point Re-affirms Risk of Involvement in an Undisclosed SEC Investigation. In a letter dated 13-Sep-10, the SEC confirmed that this company was somehow involved in an active and ongoing investigation that appeared undisclosed at the time. In a letter dated 25-Aug-11, we received new information from the SEC suggesting, again, this company was involved in unspecified SEC investigative activity. We continue to find no disclosure of the same as of this date.

http://www.disclosureinsight.com/news/undisclosed-sec-investigations/companies-risk-undisclosed-sec-probes-0


Now the big difference is the reaction. Because both say basically the same thing: There may be an investigation and we don't know what it is about.

And that is what I am saying. There is really no news yet. Not until we find out more - which we may never find out if the investigation is something as simple as the SEC wanting Netflix to continue reporting churn in 2012.

PSound
12-16-2011, 12:57 PM
Yes, and why wouldn't a magazine like Home Media Magazine, a publication that deals with and discusses home video industry news bring up an article like Netflix and the SEC issues? Wouldn't they bring something like this up? I mean Netflix is part of the home video industry I wouldn't expect Good Housekeeping or Woman's Day to discuss such a topic!:what:

I don't recall Home Media Magazine reporting on Cinram when they received fines for basically setting up an old style "owe my soul to the company store" setup - where they imported cheap labor and then put them in debt by charging rent 3x higher than market value.

And there is zero doubt Cinram is a key player in the Home Video chain.

Why wouldn't they bring something like this up?

Ray Von Geezer
12-16-2011, 01:00 PM
Wait a minute... How can you say:



when you have zero idea what the investigation is about for Netflix and are not even aware of the Lionsgate investigation?


Did you just make this up?



Since if you are not even aware of the investigation (or what is being investigated), then you are making false statements.

You are speculating on what the investigation is in both cases, while simultaneously asserting they are inherently different.



So again: explain how you can state that either, both or none of these investigations are of different "levels" when you have not one shred of information about what is being investigated. Or were you just making crap up.What the hell are you talking about?

What he just said is that he can find no-one who reported on an SEC investigation of Lions Gate. I just tried the same thing on Google News, using a range of 16/12/2009 - 16/12/2011 using various search strings - "SEC investigation", "SEC probe" etc and got "No results found". The same thing for Netflix gives about 10 results from SeekingAlpha, The Washington Post, TheStreet and so on.

It appears that any Lions Gate investigation didn't raise the same level of speculation.

Really though, I don't understand what your point is at all. "No-one talked about Lions Gate, so no-one should talk about Netflix" maybe, is that it? Or is it just an excuse to divert from the topic and segue into another one of your completely irrelevent HMM rants to try and bury any organisation or individual that dare express an opinion that deviates from your own.

Ray Von

TowerGrove
12-16-2011, 02:13 PM
I don't recall Home Media Magazine reporting on Cinram when they received fines for basically setting up an old style "owe my soul to the company store" setup - where they imported cheap labor and then put them in debt by charging rent 3x higher than market value.

And there is zero doubt Cinram is a key player in the Home Video chain.

Why wouldn't they bring something like this up?


Not sure have you asked them?:what:

PSound
12-16-2011, 04:04 PM
Kosty:

Do you care to clarify how you can state:

None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

when you have demonstrated that you have zero knowledge or information about other SEC investigations (or even the Netflix one), including the one that I have pointed out from the SAME SOURCE as the Netflix news?

Lions Gate Entertainment Corp. (LGF- $6.96 Mkt. Cap.- $955 mm) New SEC Data Point Re-affirms Risk of Involvement in an Undisclosed SEC Investigation. In a letter dated 13-Sep-10, the SEC confirmed that this company was somehow involved in an active and ongoing investigation that appeared undisclosed at the time. In a letter dated 25-Aug-11, we received new information from the SEC suggesting, again, this company was involved in unspecified SEC investigative activity. We continue to find no disclosure of the same as of this date.

http://www.disclosureinsight.com/news/undisclosed-sec-investigations/companies-risk-undisclosed-sec-probes-0

Kosty
12-16-2011, 04:14 PM
Kosty:

Do you care to clarify how you can state:



when you have demonstrated that you have zero knowledge or information about other SEC investigations (or even the Netflix one), including the one that I have pointed out from the SAME SOURCE as the Netflix news?



http://www.disclosureinsight.com/news/undisclosed-sec-investigations/companies-risk-undisclosed-sec-probes-0

I see news of the possible SEC investigation being talked about at Seekingalpha and page after pages of hits just doing a simple Google search on "Neflix SEC investigation' gets pages and pages of hits and nothing at all on Lionsgate SEC investigation.

What in the hell are you talking about? Of course HMM would find it news worthy as a mention if its being mentioned in all sorts of investor articles at theStreet Seekingalpha Barrons investmentu, disclosureinsight The Washington Post and dozens of blogs and investor forums and it already has affected Netflix's stock prices.

Its news whether or not you want to deny it or blame someone for mentioning it.

Its not towergrove's or my fault or HMM's fault that the possible mention of a SEC investigation is bigger news concerning Netflix than it was for that studio because of all of the other recent developments with Netflix in the past year.

Dave J
12-16-2011, 04:23 PM
I didn't realize this forum was looking for or needed a news editor.

Might I suggest someone start a thread about the SEC investigating Lionsgate so Psound can post about it there without further derailing this one?

PSound
12-16-2011, 04:27 PM
....

You still have not answered the question.

You made a definitive statement:

None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

However, you have zero news about what the SEC investigation is about regarding either Netflix or Lionsgate. So explain to me how you can take similar news about an undisclosed investigation into Netflix and Lionsgate and definitely state that they are not at the same level.

Because right now it appears to be PR BS to make that statement.

PSound
12-16-2011, 04:31 PM
BTW.. here is the difference between speculation on a rumor, and news:

Comcast chief to pay $500,000 antitrust fine

Brian Roberts, chief executive of Comcast, has settled charges with the US justice department that he violated reporting requirements when he acquired more than $100m in voting shares in the company over a two-year period. He will pay a $500,000 civil fine.

The justice department’s antitrust division filed a civil lawsuit in US District Court alleging that Mr Roberts violated requirements to notify authorities before acquiring voting shares, which were part of his compensation package. The fine was limited to $500,000 because the violation was “inadvertent and technical ... and was apparently due to faulty advice from outside counsel”, according to a Federal Trade Commission statement.

http://www.ft.com/intl/cms/s/0/334d620e-2818-11e1-91c7-00144feabdc0.html#axzz1gju2SgVI

PSound
12-16-2011, 04:38 PM
Interesting:

https://www.google.com/search?q=Lionsgate+SEC+investigation

Far more than zero hits, and this in the 3rd result:

Lions Gate Entertainment Corp. (LGF- $6.96 Mkt. Cap.- $955 mm) New SEC Data Point Re-affirms Risk of Involvement in an Undisclosed SEC Investigation. In a letter dated 13-Sep-10, the SEC confirmed that this company was somehow involved in an active and ongoing investigation that appeared undisclosed at the time. In a letter dated 25-Aug-11, we received new information from the SEC suggesting, again, this company was involved in unspecified SEC investigative activity. We continue to find no disclosure of the same as of this date.

http://www.disclosureinsight.com/news/undisclosed-sec-investigations/companies-risk-undisclosed-sec-probes-0

Ray Von Geezer
12-16-2011, 07:14 PM
Interesting:

https://www.google.com/search?q=Lionsgate+SEC+investigation

Far more than zero hits, and this in the 3rd result:



http://www.disclosureinsight.com/news/undisclosed-sec-investigations/companies-risk-undisclosed-sec-probes-0It's the notification from the same site that TheStreet and other sites referenced as the source of the Netflix story, the only interesting thing is that it's the best Google result you could find to post, and it's the one you'd already posted.

Again, where's any evidence of a news source reporting on the investigation that could have triggered any discussion, like reports by TheStreet, Washington Post, SeekingAlpha have here? If your point (assuming there actually is one in all this irrelevent diversionary talk of Cinram, Comcast, HMM etc) is that no-one picked up on the Lions Gate investigataion, surely you're overjoyed that several sites have run the Netflix story?

I'll tell you what would be interesting though. I've read your comments in another thread here where you say that one of the reasons you believe a statement from a Sony executive is because there are rules executives have to follow when making statements directly relating to their financial performance, by which I presume you mean rules imposed by agencies such as the SEC.

Netflix execs told investors that they were primarily a streaming company, using their chosen metric of streaming hours watched as evidence. They've recently admitted that their reliance on that metric was a mistake, and in their Q4 projections they show that their domestic disk rental business will actually generate five or six times more profit than the streaming side, on half the number of subscribers. They've also admitted that metric was material in them following a course of action which lost them millions of subscribers and wiped 80% off their stock price, no doubt hammering a lot of investors in the process.

If you believe a Sony exec could be held to account for overstating sales of a single title by a few thousand, don't you think Netflix could face the same sanction for making those statements to investors?

Ray Von

luclin999
12-18-2011, 12:22 AM
I commented many months ago about Netflix spin and PR claims not matching up with their financials and wondered if "years down the road" the public would be up in arms with the SEC for taking so long to go after them.

However now it looks like the SEC is a bit faster on the draw this time and I say good for them... Looks like the SEC is learning from their mistakes of the past several years.

luclin999
12-18-2011, 12:29 AM
Netflix execs told investors that they were primarily a streaming company, using their chosen metric of streaming hours watched as evidence. They've recently admitted that their reliance on that metric was a mistake, and in their Q4 projections they show that their domestic disk rental business will actually generate five or six times more profit than the streaming side, on half the number of subscribers. They've also admitted that metric was material in them following a course of action which lost them millions of subscribers and wiped 80% off their stock price, no doubt hammering a lot of investors in the process.


All "mistakes" :rolleyes: on Netflix part which I tried to point out to folks last Jan-April. Hell, I even warned PSound directly that investing in Netflix at that point in time was a bad idea.

It was all very obvious to anyone willing to take the time to dig into their reports even then that their claims to investors were complete hogwash. It was very clear that Netflix' comments at the time were nothing more than smoke and mirrors deigned solely to generate PR and attract more investors.

luclin999
12-18-2011, 12:38 AM
Interesting:



No.. Not really.

What -is- interesting however are the lengths that you are going to, to avoid having to actually deal with the topic at hand.

Ie.. Netflix' continuing issues relating to their false claims and outright blunders of the past 12 months.

PSound
12-18-2011, 08:54 AM
No.. Not really.

What -is- interesting however are the lengths that you are going to, to avoid having to actually deal with the topic at hand.

Ie.. Netflix' continuing issues relating to their false claims and outright blunders of the past 12 months.

So tell me... what are the details of the SEC investigation. If you have that information then there is something to discuss.

If you don't, then this is all speculation inside a rumor.

TowerGrove
12-18-2011, 09:19 AM
So tell me... what are the details of the SEC investigation. If you have that information then there is something to discuss.

If you don't, then this is all speculation inside a rumor.

I am the original creator of this thread and I would like to chime in...

This story has been posted on many financial NEWS websites like SeekingAlpha, The Washington Post, TheStreet. There are many stories posted in the news that are originally discussed with little or no details. As the news leaks or further information is revealed to the press I'm sure we will find out more about the Netflix SEC investigation in the future. Does this make the story less or more newsworthy? That of course is a matter of opinion.

I would like to point out that if "I" think something is newsworthy, "I" will create a thread for discussion about said topic. You can do exactly the same with the Lionsgate story, if you choose.

Its my choice to post the story its your to read or not read said post.

PSound
12-18-2011, 09:30 AM
I am the original creator of this thread and I would like to chime in...

This story has been posted on many financial NEWS websites like SeekingAlpha, The Washington Post, TheStreet. There are many stories posted in the news that are originally discussed with little or no details. As the news leaks or further information is revealed to the press I'm sure we will find out more about the Netflix SEC investigation in the future. Does this make the story less or more newsworthy? That of course is a matter of opinion.

I would like to point out that if "I" think something is newsworthy, "I" will create a thread for discussion about said topic. You can do exactly the same with the Lionsgate story, if you choose.

Its my choice to post the story its your to read or not read said post.

And again..

Is there ANY information on what this investigation might be about? Any more or less than on the Lionsgate SEC investigation?


I appreciate if you find this to be news. However, it is hard to find this interesting in the context of a discussion forum as the nature of the "news" (rumor inside of speculation) there is not much to discuss. We don't know the breadth or the topic of the rumored investigation. No more than we know the breadth or topic of the rumored investigation into Lions Gate.


Which is why I point out the BS PR nature of comments surrounding a topic like this. I mean how can someone make a definitive statement like the investigation into Netflix is a different "level" than into studios (like Lions Gate) when no one here (or reported in the news) has ANY information about the scope or topic of the investigation? In the context of what we know, it is a downright false and misleading statement.

TowerGrove
12-18-2011, 09:42 AM
And again..

Is there ANY information on what this investigation might be about? Any more or less than on the Lionsgate SEC investigation?


I appreciate if you find this to be news. However, it is hard to find this interesting in the context of a discussion forum as the nature of the "news" (rumor inside of speculation) there is not much to discuss. We don't know the breadth or the topic of the rumored investigation. No more than we know the breadth or topic of the rumored investigation into Lions Gate.


Which is why I point out the BS PR nature of comments surrounding a topic like this. I mean how can someone make a definitive statement like the investigation into Netflix is a different "level" than into studios (like Lions Gate) when no one here (or reported in the news) has ANY information about the scope or topic of the investigation? In the context of what we know, it is a downright false and misleading statement.

476 views for this story. 476 were interested enough to click on the story. They will make their personal opinion of weather they find this interesting or not.

I do not follow Lionsgate, sorry. :offtopic But I do see that you have a fascination with the company. Maybe they can send you some logo wear, a hat or a t-shirt or something. :D

Im not going anywhere so you can be 100% sure that when I find out more about this story it will be posted in this forum.

PSound
12-18-2011, 10:05 AM
476 views for this story. 476 were interested enough to click on the story. They will make their personal opinion of weather they find this interesting or not.

I do not follow Lionsgate, sorry. :offtopic But I do see that you have a fascination with the company. Maybe they can send you some logo wear, a hat or a t-shirt or something. :D

Im not going anywhere so you can be 100% sure that when I find out more about this story it will be posted in this forum.

I hope you do post something when there is more news.

Because right now there really isn't any news other than speculation around a rumor.


If this was real news, then there would be real discussion around it rather than false and misleading PR driven statements about it being at a different "level" from existing investigations... when in these cases there is zero information on the breadth or topic of what is being investigated.



BTW... instead of just following the Yahoo news NFLX ticker, you want to keep up with some of these sources for a more broad view of the larger trends in the industry.

http://www.deadline.com/hollywood/

http://latimesblogs.latimes.com/entertainmentnewsbuzz/

http://www.twice.com/

http://www.multichannel.com/

And to lesser extent:

http://www.dslreports.com/

Beyond the obvious WSJ, Variety, etc.

1stSilverado
12-18-2011, 12:04 PM
All "mistakes" :rolleyes: on Netflix part which I tried to point out to folks last Jan-April. Hell, I even warned PSound directly that investing in Netflix at that point in time was a bad idea.

It was all very obvious to anyone willing to take the time to dig into their reports even then that their claims to investors were complete hogwash. It was very clear that Netflix' comments at the time were nothing more than smoke and mirrors deigned solely to generate PR and attract more investors.

I am sure that you are the only one who has/had an investment in Netflix. PSound has openly stated that he has no emotional or monetary investment in Netflix, so IF you told him not to invest, he listened.
If your claim that Netflix lied at the investors call, then that is some jail time. Serious investigations would have to take place by now, lets see if you're right.

PSound
12-18-2011, 12:34 PM
I am sure that you are the only one who has/had an investment in Netflix. PSound has openly stated that he has no emotional or monetary investment in Netflix, so IF you told him not to invest, he listened.
If your claim that Netflix lied at the investors call, then that is some jail time. Serious investigations would have to take place by now, lets see if you're right.

If the SEC investigations turn out to be something serious, we will certainly find out and it will be news (big news). But right now there is absolutely zero information to support that.


The one piece of info we know about Netflix and the SEC is in relation to Netflix opting to no longer report churn in 2012.

And my personal opinion is that they should go ahead and continue to report it. I think the net adds is the more important metric going forward, but also reporting churn is also a good idea.

PSound
12-18-2011, 12:39 PM
PSound has openly stated that he has no emotional or monetary investment in Netflix, so IF you told him not to invest, he listened.

I am interested in Netflix business and their model because it relates directly to Home Video present and future.


I have not previously or presently (and have no immediate future plans) to directly invest in them, or any company related to Home Video / Home Entertainment. And that has absolutely nothing to do with what Luclin or any other speculator states.

TowerGrove
12-18-2011, 02:59 PM
I hope you do post something when there is more news.

Because right now there really isn't any news other than speculation around a rumor.


If this was real news, then there would be real discussion around it rather than false and misleading PR driven statements about it being at a different "level" from existing investigations... when in these cases there is zero information on the breadth or topic of what is being investigated.



BTW... instead of just following the Yahoo news NFLX ticker, you want to keep up with some of these sources for a more broad view of the larger trends in the industry.

http://www.deadline.com/hollywood/

http://latimesblogs.latimes.com/entertainmentnewsbuzz/

http://www.twice.com/

http://www.multichannel.com/

And to lesser extent:

http://www.dslreports.com/

Beyond the obvious WSJ, Variety, etc.

I subscribe to all of the above, thanks for the suggestion though.

Kosty
12-18-2011, 03:04 PM
I am interested in Netflix business and their model because it relates directly to Home Video present and future.


I have not previously or presently (and have no immediate future plans) to directly invest in them, or any company related to Home Video / Home Entertainment. And that has absolutely nothing to do with what Luclin or any other speculator states.

I have always appreciated your statements of that nature.

I think its inappropriate for others to comment on any investments that you or others may make and I feel that your honestly believe and express your point of view without regard to any financial stake or business affiliation that you have with regards to Netflix.

I think its a bit out of bounds to make a mention of it now against you. Others may disagree with your assessment and defense of Netflix without being personal about it.

1stSilverado
12-18-2011, 03:17 PM
I am interested in Netflix business and their model because it relates directly to Home Video present and future.


I have not previously or presently (and have no immediate future plans) to directly invest in them, or any company related to Home Video / Home Entertainment. And that has absolutely nothing to do with what Luclin or any other speculator states.

It is just the same old story of claims that you are paid or financially invested. Still going on and has leaked over here now. Why were you banned from "that other place" again;).

bruceames
12-18-2011, 05:53 PM
I'm not really qualified to judge whether these rumors are newsworthy. Just because news sites pick up the story doesn't mean it is, and we all know their thirst in digging up anything negative about Netflix.

Some people may not find it very newsworthy (or not at all and just rumors with no substance) and they're entitled to their opinion just as much as anybody else.

Of course, I am interested to find out if their will be any substance to the rumor and if they are "cooking their books".

PSound
12-18-2011, 07:17 PM
I'm not really qualified to judge whether these rumors are newsworthy. Just because news sites pick up the story doesn't mean it is, and we all know their thirst in digging up anything negative about Netflix.

Some people may not find it very newsworthy (or not at all and just rumors with no substance) and they're entitled to their opinion just as much as anybody else.

Of course, I am interested to find out if their will be any substance to the rumor and if they are "cooking their books".

I certainly agree with that. If there is any falsehoods with their accounting, then I am sure we will hear about it.



Having worked a fair bit with budgeting and accounting for COGS, I really don't see much in their accounting that looks suspect.

Whether you pre-pay and then account for the costs when service or product is delivered (like typical inventory management), or contract for materials and then pay closer to the period where the final product is delivered to clients, you still only account for product costs when the revenue is recognized.

Indeed, one of the typical misnomers I see in describing Netflix is counting contracts for content as "debt". Debt is a specific financial state.

Having contracts to pay and receive material required to drive revenue (Cost of Good / COGS) is not debt. No more than Boeing is in "debt" to suppliers it has contracts out with to provide materials for airplane construction. Those materials are simply Cost of Goods related to revenue.

And having ~ $3.5 billion in booked streaming contracts to deliver streaming revenue (COGS) across several years when quarterly domestic streaming revenue (even without growth) is in the $462 - $477 million range does not look out of line to me.

PSound
12-18-2011, 07:32 PM
Right after I typed that last post, I decided to check out Netflix IR site to see what their latest info was. They used to have a FAQ answer that discussed what was recognized (and how), but they now have a slideshow with explicit detail for how it shows up in their financials.

Go to http://ir.netflix.com/ and check out the slideshow at the bottom of the page. It is not "simple", but it is certainly not magic if you have some accounting experience related to COGS (they call it COST OF REVENUES: SUBSCRIPTION).

Ray Von Geezer
12-18-2011, 07:49 PM
And again..

Is there ANY information on what this investigation might be about? Any more or less than on the Lionsgate SEC investigation?

I appreciate if you find this to be news. However, it is hard to find this interesting in the context of a discussion forum as the nature of the "news" (rumor inside of speculation) there is not much to discuss. We don't know the breadth or the topic of the rumored investigation. No more than we know the breadth or topic of the rumored investigation into Lions Gate.You're welcome to your own opinion on what is "interesting in the context of a discussion forum", but of course it's very subjective. If you'd like to be the arbiter of what is or isn't up for discussion you'd probably be better off setting up your own forum or blog. For example, I can see four or five threads you've posted just on the first page of this forum with zero replies but I don't think you should be condemned for, or prevented from, posting them just because no-one apparently found them interesting enough to discuss.

I think that's what your mistake here has been - spending so much time arguing that it shouldn't be discussed, and derailing the topic off into allsorts of irrelevent arguments and accusations about why it shouldn't be discussed, that it makes it difficult for you to pronounce on what is valid discussion. I mean, you keep complaining about speculation, but what's wrong with speculation? We all speculate all the time, you as much as anyone, and speculation can lead to a lively and informative debate. Attempting to quash and/or censor speculation does not foster healthy discussion.

Take TowerGrove's second post in this thread, the one with the piece from Rocco Pendola where he clearly speculates that the investigation may be (or have been) something as trite as the SEC's dissatisfaction with the way Netflix has presented churn. That's a fairly balanced point, one you apparently agree with and could have discussed there and then, but didn't actually address until after you'd made 15 or so posts about why this topic shouldn't be discussed at all.

All you've done in this case is hindered anyone who does want to participate from doing so by flooding the thread with irrelevent arguments about unrelated companies and your personal conspiracy theories. I'm a noob here :hithere: but from what I've seen of the site and its "guardians" that isn't the type of behaviour they promote.

Cheers,

Ray Von

PSound
12-18-2011, 08:06 PM
Right after I typed that last post, I decided to check out Netflix IR site to see what their latest info was. They used to have a FAQ answer that discussed what was recognized (and how), but they now have a slideshow with explicit detail for how it shows up in their financials.

Go to http://ir.netflix.com/ and check out the slideshow at the bottom of the page. It is not "simple", but it is certainly not magic if you have some accounting experience related to COGS (they call it COST OF REVENUES: SUBSCRIPTION).

I would point out the distinct difference between when costs hit the Balance Sheet vs the Income Statement.

It may be counter-intuitive for people familiar with personal finance, but who have not dealt directly with accounting for COGS.

bruceames
12-18-2011, 08:31 PM
You're welcome to your own opinion on what is "interesting in the context of a discussion forum", but of course it's very subjective. If you'd like to be the arbiter of what is or isn't up for discussion you'd probably be better off setting up your own forum or blog. For example, I can see four or five threads you've posted just on the first page of this forum with zero replies but I don't think you should be condemned for, or prevented from, posting them just because no-one apparently found them interesting enough to discuss.

I think that's what your mistake here has been - spending so much time arguing that it shouldn't be discussed, and derailing the topic off into allsorts of irrelevent arguments and accusations about why it shouldn't be discussed, that it makes it difficult for you to pronounce on what is valid discussion. I mean, you keep complaining about speculation, but what's wrong with speculation? We all speculate all the time, you as much as anyone, and speculation can lead to a lively and informative debate. Attempting to quash and/or censor speculation does not foster healthy discussion.

Take TowerGrove's second post in this thread, the one with the piece from Rocco Pendola where he clearly speculates that the investigation may be (or have been) something as trite as the SEC's dissatisfaction with the way Netflix has presented churn. That's a fairly balanced point, one you apparently agree with and could have discussed there and then, but didn't actually address until after you'd made 15 or so posts about why this topic shouldn't be discussed at all.

All you've done in this case is hindered anyone who does want to participate from doing so by flooding the thread with irrelevent arguments about unrelated companies and your personal conspiracy theories. I'm a noob here :hithere: but from what I've seen of the site and its "guardians" that isn't the type of behaviour they promote.

Cheers,

Ray Von

Ray, I don't think Psound is trying to hinder anyone from participating. If it comes off to some that way, then they are getting the wrong impression. His opinion is that it's not newsworthy, and he expressed that. It's not at all a knock against Tower for posting it, he's just giving his opinion. And since it's a negative opinion regarding the thread, he's taking flak for it. But positive or negative opinions are equally welcome here, and as a general rule, are equally informative as well.

Ray Von Geezer
12-18-2011, 09:06 PM
Ray, I don't think Psound is trying to hinder anyone from participating. If it comes off to some that way, then they are getting the wrong impression. His opinion is that it's not newsworthy, and he expressed that. It's not at all a knock against Tower for posting it, he's just giving his opinion. And since it's a negative opinion regarding the thread, he's taking flak for it. But positive or negative opinions are equally welcome here, and as a general rule, are equally informative as well.I think all opinions should be welcomed, but I think there's a big difference between expressing an opinion and attempting to shout down or discredit anyone else for expressing their own opinion. By his second or third post in this thread we had a direct accusation of "pimping" against one contributor who had done nothing more than express his own opinion, invoking a rounded attack on HMM. Putting my own opinion of HMM aside, that still seems to me a pretty strange target considering they only reported what other, far more influential and widely read, agencies had reported.

As I said earlier, he did eventually address one of the points in one of the speculative articles Tower posted, and in fact agreed with it. All I'm really saying is that IMO the topic could have been addressed in that way originally, even including his opinion that it's not newsworthy, without all the personal accusations and flailing finger pointing.

"Your house, your rules" though :). I've said my bit and you'll hear no more from me unless unless addressed, or if it's directly related to the topic :cool:

Ray Von

Ray Von Geezer
12-18-2011, 09:07 PM
Double post shock horror.

bruceames
12-18-2011, 09:39 PM
I think all opinions should be welcomed, but I think there's a big difference between expressing an opinion and attempting to shout down or discredit anyone else for expressing their own opinion. By his second or third post in this thread we had a direct accusation of "pimping" against one contributor who had done nothing more than express his own opinion, invoking a rounded attack on HMM. Putting my own opinion of HMM aside, that still seems to me a pretty strange target considering they only reported what other, far more influential and widely read, agencies had reported.

As I said earlier, he did eventually address one of the points in one of the speculative articles Tower posted, and in fact agreed with it. All I'm really saying is that IMO the topic could have been addressed in that way originally, even including his opinion that it's not newsworthy, without all the personal accusations and flailing finger pointing.

"Your house, your rules" though :). I've said my bit and you'll hear no more from me unless unless addressed, or if it's directly related to the topic :cool:

Ray Von

Show me where someone in this thread was trying to shout anyone down for posting their opinion. I don't see it.

BTW, this is everyone's "house", and the rules here are no different here really than anywhere else.

Kosty
12-18-2011, 10:46 PM
Show me where someone in this thread was trying to shout anyone down for posting their opinion. I don't see it.

BTW, this is everyone's "house", and the rules here are no different here really than anywhere else.


I think these sort of comments quoted below at on the first page were the ones that Ray was referring to there.

They certainly seem to some that they are an attempt to "shout down" the discussion of this topic that it seems someone does not want discussed.

They do not seem to be so much a discussion of the issue but an attempt to discourage discussion of the issue.

Those also do not seem to be the comments of someone that is encouraging the discussion of the issue but seem to be an attempt to "shout down" the discussion of the issue by deflection accusation or other means.

You may feel free to disagree.


Any commentary on if the investigation is real, and what is being investigated: Or is this speculation inside of a rumor?


Because I am pretty sure there are rumors (and in some cases more than rumors) of SEC investigations into every major studio, none of which has ever been discussed on these (or any other) Home Theater forum.

Really?

Please, let me know what the rumors and investigations are for the studios and how that compares to exactly what the SEC is investigating at Netflix.

Links and supporting docs please.

Now Ray, :hithere: You know it only should be discussed if it conforms with ones own staunch ideological views and other opinions and comment are to be tossed aside as poppycock.

Its not all purple bunnies and unicorns in Netflixland.

Obviously SEC has some issues with Netflix. That in and of itself is newsworthy.

My assertion is that this is speculation inside a rumor and that SEC investigations are generally not news unless the investigated topic is of something material.


Indeed this case is being pimped, including by Home Media Magazine and on at least two discussion forums, despite the fact that at least two majors currently are under "undisclosed SEC investigation" and have never been put forth as 'news' - certainly not by Home Media Magazine.

And the reason they are generally not put out as news is because there is nothing to report until some actual news about what is being investigated is known. Otherwise, it is rumor inside of speculation on a topic that generally has to do with the SEC getting clarification on HOW reporting is done.



The fact that it is coming up and being pushed is what is interesting to me. Meanwhile, just about every major studio is either involved (or was recently involved) in SEC investigations that have never been published or discussed on these forums.

Granted, once Cinram (via Home Media Magazine) published it I could have guessed you would be pimping the story and hard.

That is really the sort of activity I am pointing out. Basically people fishing for anything negative about streaming, even in the case like this where there is absolutely nothing to discuss since it is not clear if there is an active investigation happening and absolutely zero idea what it is about.


When Home Media Magazine and its PR team start reporting on other undisclosed SEC investigations on companies in the Home Media chain, including studios who have been involved in investigations including being advised to change how they report their income, then I will take this as just normal reporting.

But that will never happen. Simply because investigations are opened often and usually end up in minor changes to SEC reports. And because Home Media Magazine and their PR cronies are more interested in generating FUD about the tech and companies that impact their paying PR client Cinram.


If I were to speculate, I would guess this investigation has to do with reporting churn vs reporting net sub additions. But again, it could be anything.


So do you care to answer the basic point regarding Home Media Magazine (Cinrams PR firm) deciding to publish and push the Netflix SEC investigation and not make any statement on Lionsgate?

I understand if you opt to not directly comment.


Actually you brought up the concept that what is being investigate with Netflix is materially different than what has been (or is being) investigated with Netflix.

That is a nice PR story for some parties, but it in no way reflects reality. We don't have information on what is exactly being investigated.


So I will ask again since you asserted "None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises":

Please, let me know what the rumors and investigations are for the studios and how that compares to exactly what the SEC is investigating at Netflix.


Because right now it appears that stating differences between those investigations is pure PR FUD.

Anything Cinram/HMM publishes has always been defended by you, including when they published false executive quotes.

Obviously we have different criteria for journalistic integrity, at least when it comes to the agenda that Cinram/HMM are pushing.

You still have not answered the question.

You made a definitive statement:



However, you have zero news about what the SEC investigation is about regarding either Netflix or Lionsgate. So explain to me how you can take similar news about an undisclosed investigation into Netflix and Lionsgate and definitely state that they are not at the same level.

Because right now it appears to be PR BS to make that statement.

PSound
12-18-2011, 10:55 PM
I think these sort of comments quoted below at on the first page were the ones that Ray was referring to there.

Kosty:

You made a direct assertion that the information around the rumored investigation around Netflix was materially different than the rumored investigation around other chains in the Home Video market, including other studios.

None of those "rumors" reached the level of speculation here or possibility go to the core of some of the business practices of those other enterprises.

Do you care to support your DIRECT ASSERTION of a material difference between a material "level" of investigation between rumored investigation between Netflix and Lions Gate?

Or do you want to continue to push unsubstantiated FUD, as in your last post (as it supports the general push of Cinram/HMM)?

Pleas provide data/links that are not FUD.

Kosty
12-18-2011, 10:59 PM
Honestly, I think towergrove and Ray and I would like to get some information on the issue from PSound and others that may know more about the details with Netflix than others may know.

I personally want Netflix to succeed and prosper and be around for awhile as I think the other participants in this thread do as well. Its not just "pimping" bad news on Netflix or bad talking Netflix streaming its a desire to know more about the issue. Like it or not the possible SEC investigation to Netflix is a news story, it gets more credibility as it dovetails in with the recent missteps that we have seen this year from the company and its and interesting issue to discuss and not just be ignored or shouted down.

Show me where someone in this thread was trying to shout anyone down for posting their opinion. I don't see it.

BTW, this is everyone's "house", and the rules here are no different here really than anywhere else.

I think all opinions should be welcomed, but I think there's a big difference between expressing an opinion and attempting to shout down or discredit anyone else for expressing their own opinion. By his second or third post in this thread we had a direct accusation of "pimping" against one contributor who had done nothing more than express his own opinion, invoking a rounded attack on HMM. Putting my own opinion of HMM aside, that still seems to me a pretty strange target considering they only reported what other, far more influential and widely read, agencies had reported.

As I said earlier, he did eventually address one of the points in one of the speculative articles Tower posted, and in fact agreed with it. All I'm really saying is that IMO the topic could have been addressed in that way originally, even including his opinion that it's not newsworthy, without all the personal accusations and flailing finger pointing.

"Your house, your rules" though :). I've said my bit and you'll hear no more from me unless unless addressed, or if it's directly related to the topic :cool:

Ray Von

bruceames
12-18-2011, 11:04 PM
I think these sort of comments quoted below at on the first page were the ones that Ray was referring to there.

They certainly seem to some that they are an attempt to "shout down" the discussion of this topic that it seems someone does not want discussed.

They do not seem to be so much a discussion of the issue but an attempt to discourage discussion of the issue.

Those also do not seem to be the comments of someone that is encouraging the discussion of the issue but seem to be an attempt to "shout down" the discussion of the issue by deflection accusation or other means.

You may feel free to disagree.


Again, there is nothing here but an opinion. And most of those posts were directed at you, which you seemed to have an equal part in. We take out the usual Psound vs. Kosty bickering and there is basically nothing. Certainly nothing against the rules here.

As for "encouraging the discussion", that does not necessarily mean being on the "same page" as other people. Like I said, all relevant opinions are welcome here, even the ones that aren't popular. :hithere:

PSound
12-18-2011, 11:06 PM
Honestly, I think towergrove and Ray and I would like to get some information on the issue from PSound and others that may know more about the details with Netflix than others may know.

Perhaps you are being willfully ignorant on the most basic point: NO ONE KNOW WHAT IS BEING INVESTIGATED OR THE SCOPE OF THE INVESTIGATION.

That is the entire point of stating that this is not bigger news than any SEC investigation at this point. There is simply not enough info.

Based on the date of the initial (rumored) investigation, the most likely explanation is in regards to reporting churn.

Most players in the Home Video chain have been investigated by the SEC at one point in time, including having to change how they do financial reporting. The difference with Netflix is that there is there seems to be a definite concerted effort (supported by paid PR dollars) to attack NFLX.

bruceames
12-18-2011, 11:09 PM
Honestly, I think towergrove and Ray and I would like to get some information on the issue from PSound and others that may know more about the details with Netflix than others may know.

I personally want Netflix to succeed and prosper and be around for awhile as I think the other participants in this thread do as well. Its not just "pimping" bad news on Netflix or bad talking Netflix streaming its a desire to know more about the issue. Like it or not the possible SEC investigation to Netflix is a news story, it gets more credibility as it dovetails in with the recent missteps that we have seen this year from the company and its and interesting issue to discuss and not just be ignored or shouted down.

Maybe it's because there's not much TO discuss, other than the newsworthiness of the topic?

I'm all ears guys, let's hear what you got.

Kosty
12-18-2011, 11:14 PM
Kosty:

You made a direct assertion that the information around the rumored investigation around Netflix was materially different than the rumored investigation around other chains in the Home Video market, including other studios.



Do you care to support your DIRECT ASSERTION of a material difference between a material "level" of investigation between rumored investigation between Netflix and Lions Gate?

Or do you want to continue to push unsubstantiated FUD, as in your last post (as it supports the general push of Cinram/HMM)?

Pleas provide data/links that are not FUD.


I just do not see those other investigations getting as much notice as the Netflix SEC issue here. Nor do I see any other SEC investigations having any relevance here at all. The only thing I can gather is that your personal opinion is that all of this is a big to do over nothing as I think you are asserting that SEC investigations are commonplace and even if this is more than a rumor being spread somehow to damage Netflix that eventually it will probably be either a minor technical issue or something that will be not serious enough to affect Netflix in the long run.

I doubt understand how you can assert though that this is a big PR push by Cinram or somehow HMM as they only had a small mention of it that is a small tiny bit of the press that this issue has received.


The reason I said its materially different here is that its already adding to the media reporting on Netflix and is another investor issue for Netflix to contend with. Netflix is a more unique company in the home entertainment industry than a mini major studio as Netflix does unique things and controls a entire industry segment instead of being a smaller studio that has other larger companies doing the same thing.

Plus any mention of SEC involvement in Netflix financials seems to be aimed more at the core of its business and viability than any issue with studio accounting could be in terms of affecting the entity involved.

Its not so much the "level" of the seriousness of the accusations as its another PR and investor confidence issue that Netflix has to navigate and comes along after the string of recent missteps have already rocked their stock price and business strategy this year. So its another bit of bad news for them to navigate.

If you think its probably minor in scope and linked to how they accounted for user churn or other smaller issues than accounting for future obligations then I and others appreciate your take in that regard. I personally hope that you are right in that regard and it turns out to be a minor or nonexistent issue, but without this thread and the discussion here we would not have gotten your more expert opinion and take on the matter.

I personally hope you are right and it amounts to nothing but I and others think its an appropriate topic for discussion and I am glad to see your views on the matter.

Kosty
12-18-2011, 11:28 PM
Maybe it's because there's not much TO discuss, other than the newsworthiness of the topic?

I'm all ears guys, let's hear what you got.


Well some of the issues were brought up here.

Reporting of customer churn

Reporting of contract obligations for content higher than stated

Reporting of Starz content removal of Sony Disney and other content as temporary instead of stating that it was long term.

Deliberate understatement of other risk factors or obligations.


Again all that is besides the simple fact that it is just more bad news for Netflix that the company seemingly is not confronting head on and is responding back in any coordinated PR fashion.





4 Possible Reasons Why Netflix May Be Under SEC Investigation


12 comments | December 16, 201


Disclosure Insight, the outlet that broke the latest alleged Netflix (NFLX)/SEC story, suggests in a Tweet that it's not rumor or speculation. They consider it fact that the SEC is indeed investigating Netflix:
http://static.seekingalpha.com/uploads/2011/12/15/12724-132395945169269-Rocco-Pendola_origin.png


In fairness to Netflix, the letter Disclosure Insight refers to does not go quite that far. You can read it for yourself at Zero Hedge's website. All you can cleanly and objectively conclude from that letter is that there might be or might have been some type of investigation. A letter printed "on govt letterhead" does not change the meaning of the language the Branch Chief of the SEC's Office of FOIA (Freedom of Information Act) Services used.

I think it's important to make that clear.

With that said, thanks to Netfix's "no comment" on the issue, all we can do is speculate as to the reason(s) why the SEC might be looking into the company:

http://static.seekingalpha.com/uploads/2011/12/15/12724-132395953295862-Rocco-Pendola_origin.png



With the company mum, I use this article to consider plausible areas of concern for the SEC.

Churn. For whatever reason, Stephen E. F. Brown's report from September that the SEC was not happy with how Netflix reports - and chooses not to report - subscriber metrics, specifically churn, flew under the radar.

(For a time, early Thursday morning, the link to that story appears dead. I can only assume it's a coincidence). You can read my summary of that back and forth between Netflix and the SEC here. The existence of this seemingly legitimate story leads me to believe that it could be the subject of the alleged undisclosed investigation.

Footnote 9. If you read Netflix's quarterly reports, you probably pay close attention to footnote 9. It's so important to any discussion involving Netflix that I include the entire section on Streaming Content from Q3's footnote 9, Commitments and Contingencies:

http://static.seekingalpha.com/uploads/2011/12/15/12724-132396235738489-Rocco-Pendola_origin.png

Footnote 9 has sat at the heart of my Netflix bear case since the beginning of 2011.

Not only does it clearly lead you to the conclusion that Netflix employs a broken business model, it makes it incredibly difficult for analysts and investors to make sense of the company's expenses.

Consider the roughly $2.1 billion in streaming content obligations that come "due after one year and through three years." That's incredibly imprecise. We have no idea when each chunk of that $2.1 billion will hit. Netflix provides no color as to when those expenses will touch down, other than through the broad regular guidance it issues.

To be fair, Netflix does not know, upon signing a contract, exactly how these expenses will shake out. Quite a bit surely depends on when a programmer or studio makes a television show or movie available to Netflix. That said, I would be shocked if Netflix does not have more visibility on the timing than it reports.

Bottom line, Netflix needs to play its costs close to the vest, on one hand, for competitive reasons. On the other, however, it's legiitmate to ask just how close is too close with regard to the company's obligation to provide the public with clear insight into the future of its business.

This issue presents a bit like the one about churn. Netflix, apparently, expressed its strategic reasons to the SEC as to why it reports subscriber metrics as it does. According to Stephen Brown's report from September, the agency was not happy with Netflix's response. While all companies deserve wiggle room on what and how they choose to report statistics germane to their businesses, it's logical to conclude that the SEC could have similar questions for Netflix regarding off-balance sheet obligations as it does churn. With churn, the SEC seems to think the public needs to know more than Netflix discloses. I would not be surprised if they feel the same way about content debt.


Reed Hastings Vs. Whitney Tilson. Any time you go public, like Netflix CEO Reed Hastings did on Seeking Alpha in December 2010, about the trajectory of your company's stock, you open yourself up to regulatory scrutiny. By now, Hastings telling Tilson to cover his short has become the stuff of legend.

Fellow Seeking Alpha contributor Slim Shady summed things up quite nicely in a late October "letter" he penned to Tilson:

http://static.seekingalpha.com/uploads/2011/12/15/12724-132396448036123-Rocco-Pendola_origin.png

Well, Slim, we might have our answer.



The "Temporary Removal" Of Starz Movies. I'm not sure if this qualifies as plausible deniability or playing dumb, but, often, it's the Netflix way. When Starz (LSTZA) removed Sony (SNE) movies from Netflix streaming in June, the company took to its blog calling the move "temporary."

It was clear from a mile away that there was more to the story. In fact, within days of Netflix's take on the situation, others chimed in with the rest of the story. Here's the play-by-play I posted of the dust settling on Seeking Alpha:

http://static.seekingalpha.com/uploads/2011/6/21/12724-130867920533818-Rocco-Pendola_origin.png

While it's important to review the Bloomberg video and AP story I refer to in that article, it's equally important to pay attention to what I bring up next:

Have a look at the "Risk Factors" Netflix lists in its most recent annual report. I hope that, from this moment on, I am never again accused of not being fair to Netflix, despite my bearishness on the stock and concerns over transparency, accounting and corporate governance at the company. Netflix clearly states risk that obviously associates itself with the loss of the Sony streaming films.

http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation


Here's the key portion of that excerpt (although I encourage you to read the entire paragraph as well as all of the risk factors listed in the official filing):

As such, we are completely dependent on the studio or other content distributor to license us content in order to access and stream content. Many of the licenses provide for the studios or other content distributor to withdraw content from our service relatively quickly. Because of these provisions as well as other actions we may take, content available through our service can be withdrawn on short notice (emphasis added).

It appears that Netflix does cover itself in official SEC documents for instances, such as Starz pulling Sony movies from its service. That said, its public reaction to the news, calling it a "temporary removal," could have raised the eyebrows of the SEC.

Does burying that warning in the risk factors section of an annual report meet the company's obligation to properly inform investors about material events, particularly when the far-more public stance was that this was nothing more than a "temporary" issue?

Again, I would shocked if somehow Netflix did not know about the trigger clause the AP reported. The company's use of the word "temporary" begs skepticism, primarily because Starz ended up pulling the plug all together, announcing the news in not-so-flattering fashion on September 1st:

This news just broke at 4:40 p.m., Eastern Time, Wednesday. Starz Entertainment will no longer discuss contract renewal with Netflix. Once the current agreement between the two companies ends on February 28, 2012, it's all over. Netflix will no longer be able to stream Liberty Starz content. Here's the rationale from the LSTZA press release:

This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content. With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business.

In the present article, I detail just four possible reasons why the SEC may be investigating Netflix. The company opens itself up to this speculation by offering yet another "no comment" to a sensitive issue.

In the SEC's letter to Disclosure Insight, it notes that the watchdog requested information on "any investigation related to Netlfix, Inc., since November 2010." While this does not mean that the investigation, assuming there even is one, started at that space in time, it raises the curious question as to why former Netflix CFO Barry McCarthy chose to step down in December 2010.

The company line, relayed by Hastings in his Seeking Alpha letter to Tilson, was that McCarthy knew he would never be CEO at Netflix, therefore he wanted to be free to explore bigger opportunities. Interestingly, McCarthy, to my knowledge, does not hold a CEO role. Rather, he is a partner at Technology Crossover Ventures, the firm that recently invested $200M in Netflix.

Shortly after McCarthy left Netflix, it's VP of Investor Relations, Deborah Crawford, resigned. This news came, quietly, in April 2010. While the departures of McCarthy and Crawford might just be examples of the normal turnover that happens within high-level management teams, the timing, without much clarification from Netflix, prompts the question of whether or not they could be associated with a possible SEC inquiry.

Without much of a public statement on the issue, yet again, we're left to wonder about what's really going on. While whatever the SEC might be looking into could be small potatoes, something tells me that this does not end well for Netflix.

Disclosure: I am short NFLX.

Additional disclosure: I am long NFLX June 2012 $40 put options.


http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation

PSound
12-18-2011, 11:31 PM
OK.


Any discussion from other who have not already disclosed that they are short NFLX (either honestly or after the fact)?

Kosty
12-18-2011, 11:36 PM
I really am not sure if any of those possible issues are that critical or not or if they are even plausible factors for sanctions and SEC actions.

But the very nature that this is again another discussion of possible bad things for Netflix just as the company was starting to move away from the recent PR disasters seem to make it something that's worth discussing.

PSound, I honestly would like to get your take on the seriousness of those possible issues would be or how likely you would think they would things that the SEC plausibly would have issues with that Netflix would have to content within the the future.

Kosty
12-18-2011, 11:42 PM
OK.


Any discussion from other who have not already disclosed that they are short NFLX (either honestly or after the fact)?

How about the actual response from the SEC that said they were withholding some FOI request documents because they were exempt because they were complied for law enforcement purposes?


http://htmlimg2.scribdassets.com/po5lfvpq81avvr2/images/1-f04613bc02.jpg

Kosty
12-18-2011, 11:49 PM
BTW, the digital edition of Home Media Magazine is up and they expanded the digital article to include the Verizon takeover rumor as well.

It hardly looks to me that they are trying to PR push the bad news side of the story by having the possible SEC investigation as the last paragraphs there in the article. They just seem to be doing what is appropriate to mention that its in the recent news about Netflix which is something their audience would be interested in knowing about.

http://i41.tinypic.com/n3vgyc.jpg

http://www.nxtbook.com/nxtbooks/questex/hom399876HCL/index.php?startid=Cover1&WidgetId=null&BookId=1847275de6440f0977803f37e5c8181a#/3/OnePage

PSound
12-19-2011, 12:36 AM
Again... any factual data about what the breadth and depth of what is under the speculation about what is under investigation.... or is is pure FUD about what may benefit Cinram/HMM and their PR folks.

It seems like the same could be speculated about Lions Gate, except it would not benefit Cinram/HMM PR people.

Kosty
12-19-2011, 12:50 AM
Again... any factual date about what the breadth and depth of what is under the speculation about what is under investigation.... or is is pure FUD about what may benefit Cimram/HMM and their PR folks.

It seems like the same could be speculated about Lions Gate. except how it could benefit Cinram/HMM PR people.

*sigh* I suppose that that comment was directed my way or to towergrove or Ray Von.

I just tried in earnest to get your honest take on the matter and it seems clear that is not your attention at all.

Just so you know I did not even start nor is there a thread on this issue at the other site at all as I think towergrove Ray Von and I actually thought that since you were the local subject matter expert that we might actually might be able to get your honest take on the issue here.

If I or HMM or someone else was trying to PR push the story it would seem to be more of a effective effort than no thread at all at HDD and a minor mention in the last paragraph of a single story at HMM that also mentioned Netflix's stock price increasing on a more positive rumour.

Kosty
12-19-2011, 12:55 AM
Again... any factual date about what the breadth and depth of what is under the speculation about what is under investigation.... or is is pure FUD about what may benefit Cimram/HMM and their PR folks.

It seems like the same could be speculated about Lions Gate. except how it could benefit Cinram/HMM PR people.

I just mentioned some issues.

Seriously, I would really like your opinion on how serious those issues would be to Netflix is they were the ones under investigation.


Well some of the issues were brought up here.

Reporting of customer churn

Reporting of contract obligations for content higher than stated

Reporting of Starz content removal of Sony Disney and other content as temporary instead of stating that it was long term.

Deliberate understatement of other risk factors or obligations.


Again all that is besides the simple fact that it is just more bad news for Netflix that the company seemingly is not confronting head on and is responding back in any coordinated PR fashion.

PSound
12-19-2011, 07:11 AM
I just mentioned some issues.

Seriously, I would really like your opinion on how serious those issues would be to Netflix is they were the ones under investigation.

The point is... anything related to an SEC investigation is pure speculation at this time.

A better question would be: after reviewing the very detailed information on how streaming costs are accounted for in the slideshow at http://ir.netflix.com/ and Netflix SEC reports (or reports to investors), do you see anything specific that does not appear to be on the level?


To have a broad "what if" that ignores widely available info is pure FUD. Indeed, the entire point of FUD is to introduce unsubstantiated Fear/Uncertainty/Doubt into the conversation. To constantly push something that has no meat is classic PR FUD, particularly from people who do not disclose their personal and/or professional relationship with organizations that may benefit from said FUD (for example Home Media Magazine who is contracted by Cinram for PR work).

bruceames
12-19-2011, 08:40 AM
Because right now it appears that stating differences between those investigations is pure PR FUD

Speculating on the differences is NOT FUD. FUD is an overused term and really is a defense mechanism designed to discourage those from saying things one does not want to hear. Any speculation can be construed as FUD, and speculative comments are welcome here as is any relevant opinion.

Also, let's be respectful and not derail the thread further with more PR FUD/whore talk please. Thanks.

TowerGrove
12-19-2011, 08:51 AM
Click on the white triangle with the red border, on the lower left side of the post, and type in a description in the pop-up box that appears and press send report. :hithere:

Bruce I forget that you are in fact not just a moderator but a "Super Moderator". Do I still need to report this issue since you know about my complaint?

TowerGrove
12-19-2011, 08:53 AM
BTW, the digital edition of Home Media Magazine is up and they expanded the digital article to include the Verizon takeover rumor as well.

It hardly looks to me that they are trying to PR push the bad news side of the story by having the possible SEC investigation as the last paragraphs there in the article. They just seem to be doing what is appropriate to mention that its in the recent news about Netflix which is something their audience would be interested in knowing about.

http://i41.tinypic.com/n3vgyc.jpg

http://www.nxtbook.com/nxtbooks/questex/hom399876HCL/index.php?startid=Cover1&WidgetId=null&BookId=1847275de6440f0977803f37e5c8181a#/3/OnePage

Thanks for posting Kosty my paper subscription has lapsed, I would not have seen this otherwise.

Cygnus
12-19-2011, 09:25 AM
I can agree with this. Even Pendola commented (http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation)that:


Now, again, we're not 100% certain that an investigation exists. Nothing official has come out and actually made that clear. My guess is that there is, but I do not know and, if anybody else does, they have not gone public with definitive statements.


The point is... anything related to an SEC investigation is pure speculation at this time.

bruceames
12-19-2011, 09:31 AM
Bruce I forget that you are in fact not just a moderator but a "Super Moderator". Do I still need to report this issue since you know about my complaint?

No, it's already been reported and handled. I meant for future reference. ;)

PSound
12-19-2011, 10:07 AM
Speculating on the differences is NOT FUD. FUD is an overused term and really is a defense mechanism designed to discourage those from saying things one does not want to hear. Any speculation can be construed as FUD, and speculative comments are welcome here as is any relevant opinion.

Also, let's be respectful and not derail the thread further with more PR FUD/whore talk please. Thanks.

We have to disagree on what is construed as FUD.

Constant injection of unsubstantiated rumors and conjecture in an attempt to paint a specific story is FUD.

For example, if someone constantly posted that a studio (or a group of studios) was about to pull support for OD (or BD) with zero direct information supporting that view, then I would consider that FUD.

Any specific pushed narrative without specific supporting information is FUD (IMO).

PSound
12-19-2011, 10:22 AM
I can agree with this. Even Pendola commented (http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation)that:

From the beginning I have stated that this topic is speculation about a rumor, and nothing has changed that viewpoint.

Indeed, I find it odd that attempts to address some actual available meat (Netflix accounting method for streaming content) is universally ignored by those who wish to court the "speculation of a rumor".


Speculation and rumor generally do not stand up well to information, logic and data and thus info must be ignored if the goal is speculation and rumor.

TowerGrove
12-19-2011, 10:31 AM
Well some of the issues were brought up here.

Reporting of customer churn

Reporting of contract obligations for content higher than stated

Reporting of Starz content removal of Sony Disney and other content as temporary instead of stating that it was long term.

Deliberate understatement of other risk factors or obligations.


Again all that is besides the simple fact that it is just more bad news for Netflix that the company seemingly is not confronting head on and is responding back in any coordinated PR fashion.






http://seekingalpha.com/article/314257-4-possible-reasons-why-netflix-may-be-under-sec-investigation

Thanks for posting the above seeking alpha article Ray and Kosty. Lots of good reading for sure!

Ray Von Geezer
12-19-2011, 11:28 AM
Show me where someone in this thread was trying to shout anyone down for posting their opinion. I don't see it.

Granted, once Cinram (via Home Media Magazine) published it I could have guessed you would be pimping the story and hard.

....

Anything Cinram/HMM publishes has always been defended by you, including when they published false executive quotes.

Obviously we have different criteria for journalistic integrity, at least when it comes to the agenda that Cinram/HMM are pushing.

....

It seems like the same could be speculated about Lions Gate, except it would not benefit Cinram/HMM PR people.And yes, I did see the original version of that last sentence :dunce:. For the record, I have no links to any media or home entertainment organisation, either by employment or investment, and I'll happily provide information to a trusted 3rd party such as yourself Bruce that'll show that pretty conclusively.

I'd call that clearly trying to "shout someone down", by means of trying to discredit/discount their opinion. I can't really see what other reason there'd be to post so vehemently about HMM/Cinram, can you?

Up to the point he brought it up, HMM was nothing to do with this thread, and I for one hadn't even realised they'd reported it. It being brought up wouldn't even have been so bad (bar the personal attacks) if he'd had any willingness to discuss why he'd brought it up, at least three people asked the question (inc. myself) and pointed out it had been reported first by at least 4 other reputable sources, or at least sources I've never heard implicated as members of the fearsome military/optical disk complex which apparently lies behind all the anti-Netflix conspiracy theories :lol:

Basically, in the absence of any willingness to discuss the topic, a willingness to discuss any of his opinions would have been welcome. Instead we got the usual smear tactics, no attempt at discourse outside of his own accusations, and broad brush condemnation of anything he doesn't agree with as "FUD".

Maybe it's because there's not much TO discuss, other than the newsworthiness of the topic?

I'm all ears guys, let's hear what you got.I thought the article I posted from SeekingAlpha "4 Possible Reasons Why Netflix May Be Under SEC Investigation", speculating on what could be behind any investigation, could have been grist to that mill. Plenty of room for discussion about why the author could be right or wrong for anyone who seriously values discussion, but of course it got buried under the whitewash of accusation, and when it was reposted got met with

Any discussion from other who have not already disclosed that they are short NFLX (either honestly or after the fact)?

Ray Von

bruceames
12-19-2011, 11:44 AM
Ray, thanks for posting that Seekingalpha article. Interesting read and plenty of food for thought/speculation. If someone cries FUD, then just ignore them and carry on with those who do want to discuss the topic of the OP. I was just saying the he has a right to his opinion as well, and if anyone dislikes it or their posts so strongly, then I would recommend the ignore feature.

Back on topic, I too have been wondering how Netflix will be able to sustain a respectable level of content and keep the streaming price even in the ballpark of what it is now. It's not a sustainable model and in the end the price should end up comparable to what cable/sat is.

TowerGrove
12-19-2011, 12:45 PM
Ray, thanks for posting that Seekingalpha article. Interesting read and plenty of food for thought/speculation. If someone cries FUD, then just ignore them and carry on with those who do want to discuss the topic of the OP. I was just saying the he has a right to his opinion as well, and if anyone dislikes it or their posts so strongly, then I would recommend the ignore feature.

Back on topic, I too have been wondering how Netflix will be able to sustain a respectable level of content and keep the streaming price even in the ballpark of what it is now. It's not a sustainable model and in the end the price should end up comparable to what cable/sat is.

It would be difficult in my opinion in this current economic climate for Netflix to raise their pricing even the slightest without a customer backlash like the one we saw earlier this year when prices were raised to what many would call a slight increase.

PSound
12-19-2011, 01:08 PM
Back on topic, I too have been wondering how Netflix will be able to sustain a respectable level of content and keep the streaming price even in the ballpark of what it is now. It's not a sustainable model and in the end the price should end up comparable to what cable/sat is.

Do you believe that is true for HBO? How about Starz and Showtime?

Because ultimately HBO sees less ARPU for it's customer than Netflix does, and Starz and Showtime significantly less per customer.

Kosty
12-19-2011, 01:23 PM
Ray, thanks for posting that Seekingalpha article. Interesting read and plenty of food for thought/speculation. If someone cries FUD, then just ignore them and carry on with those who do want to discuss the topic of the OP. I was just saying the he has a right to his opinion as well, and if anyone dislikes it or their posts so strongly, then I would recommend the ignore feature.

Back on topic, I too have been wondering how Netflix will be able to sustain a respectable level of content and keep the streaming price even in the ballpark of what it is now. It's not a sustainable model and in the end the price should end up comparable to what cable/sat is.

It depends on what they try and get as content.

Obviously Netflix can not afford to pay for recent movies with only subscription revenues as a method to pay for that content. The studios are willing to give them older content and older theatrical movies and TV shows that they cannot sell to anyone else.

The trick for Netflix is to give the impression they have enough stuff or the older stuff is worth paying for even if it does not contain much current movies. They can ignore the issue and hope consumers either do not notice or emphasize the depth of what they have for long tail content.

PSound
12-19-2011, 04:17 PM
So does anyone have an opinion on how services like HBO, Showtime and Starz which all see lower ARPU per sub than Netflix streaming and who oftentimes have lower domestic sub numbers are not set to have the same fundamental issue with content acquisition costs?

For example: Starz LLC (which includes Starz and Encore with approximately 19 million and 33 million subscribers respectively) generated $389 million in revenue in Q3 2011. Keep in mind that not all of that revenue is even from subscriptions (although most of it is).

Meanwhile, Netflix is projected to drive ~ $462-$477 million in domestic streaming sub revenue in Q4 2011 with 20.0 - 21.5 million subs.

Now from taking a quick look at those basic numbers: Do people expect Starz to go out of business soon because they won't be able to secure or pay for content to keep their subscribers? How does Netflix having higher revenue with less subs make it compare negatively to Starz?

PSound
12-19-2011, 04:30 PM
And just for fun so you can see the sort of prices that MSOs charge for access to channels (figure that they also want to take a cut so the channels eventually see less than this per sub, ie ARPU):

PREMIUM SERVICES
HBO The Works® (7 channels, and HBO Latino****)
$4.00

CINEMAX® (3 channels)
$3.50

SHOWTIME UNLIMITED® (5 SHOWTIME® channels, The Movie Channel®, FLIX® and Sundance Channel®)
$5.00

SHOWTIME®, FLIX® and Sundance Channel® (7 channels including 5 SHOWTIME® channels)
$4.10

SHOWTIME® (5 SHOWTIME® channels)
$3.00

Starz® Super Pack† / Encore® (12 channels including all 6 theme channels)
$3.75

Starz® / Encore® + 3 Themes† (9 channels)
$3.30

Starz® / Encore® + 1 Theme† (7 channels)
$3.00

Starz® / Encore® (6 channels: 2 Starz®, 1 Starz® Edge East, 1 Starz InBlack® Movies and 2 Encore)
$2.50

Encore® + 6 Themes† (8 channels)
$1.95

Encore® + 3 Themes† (5 channels)
$1.35

Encore® + 1 Theme† (3 channels)
$0.95

Encore® (2 channels: East and West)
$0.75

http://astec.tv/white_paper/smatvcard.pdf

chipvideo
12-19-2011, 05:48 PM
What do those numbers mean Psound? Say it costs me $15.99 per month for HBO from my cable provider. How much does HBO take and how much does my cable provider take. Thanks.

PSound
12-19-2011, 06:09 PM
What do those numbers mean Psound? Say it costs me $15.99 per month for HBO from my cable provider. How much does HBO take and how much does my cable provider take. Thanks.

There are variables, but on average HBO gets ~ $7.27 per sub with the MSO keeping the rest.


To wit, SNL Kagan found that HBO pocketed an average monthly affiliate revenue per sub of $7.27 while Starz got $2.11 and Showtime, $1.72.

HBO is projected to collect nearly $4 billion in revenues from subscrptions in 2011, according to Nomura, about three times as much as Starz or Showtime. In addition, Starz and Showtime don't have a presence internationally, whereas HBO has more subscribers abroad than in the U.S., not to mention a robust program licensing business.

http://www.variety.com/article/VR1118042241

Ray Von Geezer
12-19-2011, 09:10 PM
So does anyone have an opinion on how services like HBO, Showtime and Starz which all see lower ARPU per sub than Netflix streaming and who oftentimes have lower domestic sub numbers are not set to have the same fundamental issue with content acquisition costs?

For example: Starz LLC (which includes Starz and Encore with approximately 19 million and 33 million subscribers respectively) generated $389 million in revenue in Q3 2011. Keep in mind that not all of that revenue is even from subscriptions (although most of it is).

Meanwhile, Netflix is projected to drive ~ $462-$477 million in domestic streaming sub revenue in Q4 2011 with 20.0 - 21.5 million subs.

Now from taking a quick look at those basic numbers: Do people expect Starz to go out of business soon because they won't be able to secure or pay for content to keep their subscribers? How does Netflix having higher revenue with less subs make it compare negatively to Starz?Well looking at the example you quoted, there's one very obvious negative comparison, summed up by the old adage "Revenue is vanity, profit is sanity".

On $389 million revenue, Starz made $101 million operating profit (http://www.variety.com/article/VR1118045806?categoryid=14&cs=1&cmpid=RSS|News|LatestNews).

Netflix projects $30-40 million on that ~$462-$477 million, and that's contribution, not operating profit.

Of course, all Netflix has to do is add another 4 million streaming subs without spending another penny on content and they'd have that extra $100 million a quarter. The thing is though, this far on, with +20 million streaming subscribers, all the talk about economies of scale and saving on delivery costs, who can seriously say that they expected the streaming segment to still be only generating single digit profit percentages while OD runs at ~50% margin and 4-6 times the profit, and on half the subscribers?

Because ultimately HBO sees less ARPU for it's customer than Netflix does, and Starz and Showtime significantly less per customer.

....

There are variables, but on average HBO gets ~ $7.27 per sub with the MSO keeping the rest.Don't forget that (assuming Netflix split out revenue per subscriber for both parts of the business) in the future Netflix's streaming ARPU won't benefit from a boost from disk subscribers, so the most it can ever be is $8 per sub. That puts it far closer to HBO's $7.27. Indeed, just doing a rough sanity check on their Q4 projection's shows streaming ARPU of $7.7 using the conservative subscriber figure and lowest projected revenue, down to $7.39 using the highest of each.

I don't really think the ARPU is that relevent though, clearly when it comes to funding things like additional content acquisition and expansion it's how much you make, not how much you take.

What's become really obvious is, despite all the talk about being primarily a streaming company and the claims that disks weren't subsidising streaming, Netflix is incredibly fortunate to still have the hugely profitable disk segment funding its streaming content acquisition and expansion. The big question is - can it manage to control its love/hate attitude to disks and avoid shooting itself in yet another foot (Reed Hastings to star in Human Centipede 3? :D ) long enough to see them through until streaming can stand on its own?

Ray Von

PSound
12-19-2011, 10:22 PM
Well looking at the example you quoted, there's one very obvious negative comparison, summed up by the old adage "Revenue is vanity, profit is sanity".

You are ignoring the unique factors that will impact 2011 Q4 for NFLX, namely that net loss of subs were expected in the first 2 months, with gains making up for those net loss to be covered in December.

With the trial nature of new subs, the revenue impact will be unique vs the general trend of net sub growth.


Meanwhile, the booked streaming costs will remain relatively stable while increased subs has a positive impact on margin. But as with most growth companies, investments are made into growth to maximize long term profits.


And of course you gloss over the entire point of discussion revenue of Netflix vs revenue of Starz: That the idea that Netflix will not have enough money to get good content. It is ludicrous to push that idea when Starz already books less subscription revenue than Netflix, and Starz has contracts with Disney and Sony during the Pay TV window.

Ray Von Geezer
12-20-2011, 05:31 AM
You are ignoring the unique factors that will impact 2011 Q4 for NFLX, namely that net loss of subs were expected in the first 2 months, with gains making up for those net loss to be covered in December.The choice of comparison points (Starz Q3 revenue to Netflix projected Q4 revenue) was yours, and you used it to try to illustrate which was better placed to be able to purchase content. I'm sure you appreciate the importance of profit, not revenue, in funding further investment (without incuring debt) so your own comparison actually shows the opposite of what you wanted to illustrate.

Your expansion on why Netflix's profit on the revenue you picked for comparison is so much lower despite revenue being considerably higher, just reinforces that your comparison was flawed

With the trial nature of new subs, the revenue impact will be unique vs the general trend of net sub growth.That's your speculation.

Historically, free subscribers always rise through the year, peaking in Q4 as Netflix makes their Christmas push, and the Q4 percentage has increased considerably for the last two years (3.1% in Q4 2009, 8% in Q4 2010).

However, in Q2 and Q3 this year the percentage of free subscribers actually fell quarter over quarter (6.1% Q1, 5.4% Q2, 4% Q3), breaking the trend from 2009 and 2010. Fewer free subs means higher ARPU and higher profit, and I'm pretty sure this has already been accounted for by Netflix in their profit and revenue projections.

And of course you gloss over the entire point of discussion revenue of Netflix vs revenue of Starz: That the idea that Netflix will not have enough money to get good content. It is ludicrous to push that idea when Starz already books less subscription revenue than Netflix, and Starz has contracts with Disney and Sony during the Pay TV window.Again, the point that a direct revenue comparison between the two proves Netflix is better placed to secure content was yours. My pointing out that it's profit on revenue, not revenue itself, that funds growth/content acquisition, and on that basis Starz is better placed of the two, is not "gloss(ing) over the entire point of the discussion", it's merely showing that your point of comparison is flawed.

Basically, it doesn't matter how much revenue a business makes - "any fool can work for nothing" is another old adage. It's the profit on the revenue that funds expanision, or in this case, funds content acquisition, and on that basis your comparison fails.

Ray Von

PSound
12-20-2011, 09:13 AM
You are showing a distinct lack of understanding a subscription service.

The argument being put forth was that Netflix would not be able to afford content to attract subscribers. As I have demonstrated, Netflix actually has more subscriber revenue to spend on cost of subscription than Starz. The profit piece is important long term, but a bit of a red herring when discussion ability to secure content as subscription cost (in this case) is an indicator of spending for growth.


That is, profits are not required to secure content as the cost of subscription is directly tied to revenue for the reported period. This is particularly true during a growth period where a well-run company will take what could be captured as profits and continue to invest in growth.

Netflix streaming revenues are strong enough (and are projected to be strong enough) to continue to secure content. Indeed, their subscription revenue is only surpassed by HBO but that could change this year if Netflix growth continues in 2012.


Now, if subscriber numbers show negative trends in Q4, Q1 and Q2 then an argument could be made that Netflix will not be able to meet its commitments.

But right now, even while flat to negative, they are actually generating a profit from their domestic streaming service. And with their base of revenue, they have a stronger ability to secure content (and with it subscribers) than most any peer subscription service.

PSound
12-20-2011, 10:03 AM
Check out this page:

http://www.trefis.com/company?hm=NFLX.trefis&#


It has some pretty detailed analysis and ranges for both subscriber growth and content acquisition costs, including the known spike in 2012 related to boot-strapping the UK launch.

Cygnus
12-20-2011, 11:06 AM
What is the number of subscribers for hbo and starz? The ARPU of netflix and starz? I think it was mentioned earlier that hbo's ARPU is around $7..right?

PSound
12-20-2011, 11:23 AM
What is the number of subscribers for hbo and starz? The ARPU of netflix and starz? I think it was mentioned earlier that hbo's ARPU is around $7..right?

HBO's ARPU is about $7.27 with ~ 28.3 million subs.

Stars ARPU is about $2.11 with about 19 million subs.


Netflix is unique in that it's revenue per streaming sub is set by itself (vs deals with the MSOs). The ARPU is impacted by the number of subs in the free trial period. As previously noted, this is a unique quarter as it was projected that there would be significant net loss of subs in the first month of the quarter (something that has not happened in Q4 - I think ever and certainly not in many years). That net loss was to be made up in December. That shift of loss of paying subs made up by a surge in new subs in December will make the ARPU for Netflix lower in Q4 2011 than normal.


All that said, ARPU for Netflix streaming in Q4 2011 is projected to be $7.40 - $7.70, with the lower end of ARPU being based on projections for the highest sub growth.


For an average, figure about $7.55 ARPU with 20.75 million subs for Q4 (Netflix domestic streaming) with both ARPU and subs increasing in Q1 2012.

Cygnus
12-20-2011, 12:13 PM
Oh OK I see why hastings is saying that HBO will be netflix main competitor. I hope their original programing is as good as HBO..that remains to be seen. At least with their own content, netflix does not have to worry about the costs of international licenses. The content has to be good tho. We will see.

Ray Von Geezer
12-20-2011, 08:34 PM
You are showing a distinct lack of understanding a subscription service.

The argument being put forth was that Netflix would not be able to afford content to attract subscribers. As I have demonstrated, Netflix actually has more subscriber revenue to spend on cost of subscription than Starz.There's no magic inherent to a subscription service that allows for revenue to be spent twice.

For the Netflix quarter you raised for comparison, of the projected ~$462-$477 million raised in revenue, ~$432-$437 million has already been spent on purchasing content (and other related costs) to directly service that revenue, leaving $30-$42 million of CP (from which other business costs have to be deducted to get operating profit). For the Starz quarter you compared it to, revenue was only $389, but operating profit was $101 million.

If you want to argue that you can leverage revenue alone to purchase rights to additional content, or even to renew existing content deals at higher cost, you need to acknowledge that you'd have to reduce other costs, and in Netflix's case that would have to be by losing existing content (Netflix currently does it by using profits from other business segments, but that was outside your comparison). Getting out of existing content deals is difficult because they're agreed on year, or multi-year, contracts.

On the other hand, with profit you can purchase rights to additional content, or renew existing content deals at a higher cost, without having to reduce costs by sacrifice existing content. That means you also have more flexibility, you don't have to worry about "robbing Peter to pay Paul".

Looking purely at your comparison quarters, though Netflix gets more revenue, less than $30-42 million is left after the cost of generating that revenue. Starz on the other hand gets less revenue, but has $101 million (and that is operating profit not CP like the Netflix figure). If Netflix comes up against Starz in a bidding war for content, unless it happens to coincide with the expiry of some of Netflix's existing content obligations, Starz is in a far better position to "win".

Of course, if we look wider, Netflix has already said that they expect to be in the red for much of 2012 (or was it revised to all of 2012?) so there is no profit to spend on additional content, but in fairness they have said all content deals have been done for 2012 and no doubt accounted for in that projected loss.

That is, profits are not required to secure content as the cost of subscription is directly tied to revenue for the reported period.For existing content, I agree, by definition they're already included in the cost of generating revenue. But to secure additional content, or to fund cost increases when renewing existing deals, you need profit, it doesn't matter whether it comes from that segment or is bothered from another, profit is what's required.

Netflix needs additional content to attract additional subscribers, it's at the core of their "virtuous cycle" philosophy. Therefore they need profit, profit that they can use to pay for for additional content. That's why talking about revenue doesn't work, you can't use revenue to pay for existing content and additional content.

This is particularly true during a growth period where a well-run company will take what could be captured as profits and continue to invest in growth.I think that's really the main issue here - Netflix's recent mis-steps have set their growth back three steps, they need to re-invest in growth domestically as well as meet their commitments to international expansion, with the result that they'll be running at a loss. That would put them in a really precarious position because if anything else goes wrong at that stage they've very little in the way of a safety net. I think that's probably behind the share reissue/bond sale, it gives them a little bit of contingency.

Netflix streaming revenues are strong enough (and are projected to be strong enough) to continue to secure content.If everything goes as projected they may be in the future, but I can't agree that they are right now.

From the quarter you selected they've only got $30-42 million CP on $460-$470 million streaming revenue, and that is more than eaten up in other business costs (net income for the quarter is $19-$37 million, with $177-$192 million CP from OD). The money to pay for international streaming expansion, for running the business, and to provide that net income is all coming from the OD rental segment.

Now, if subscriber numbers show negative trends in Q4, Q1 and Q2 then an argument could be made that Netflix will not be able to meet its commitments.Personally, I don't think that'll happen either.

But right now, even while flat to negative, they are actually generating a profit from their domestic streaming service. And with their base of revenue, they have a stronger ability to secure content (and with it subscribers) than most any peer subscription service.The streaming service is generating contribution profit right now, and at levels that are insufficient to run the business at a profit overall without reliance on the OD segment. The current base of streaming revenue will only allow them to secure content at existing cost levels, and as we've seen the trend is for content costs to increase. To secure the same content at a higher price, they need to use OD's profit, or generate more profit from the streaming segment. So it's definately not enough right now to do anything more than cover existing content costs. Revenue will definately increase on subscriber growth, the question is whether it'll be by enough to cover future content costs and reduce the reliance on OD profit before that declines.

Ray Von

PSound
12-20-2011, 09:16 PM
Look Ray,

We are going to disagree. In my opinion, you do not understand the concepts behind a subscription service, and possibly even the basic financial concepts of COGS accounting. And you certainly are ignoring the sub trends and how that was impacted by the pricing change. Gross sub additions were doing fine even after the pricing change, it is just that churn impacted net gains (which has an immediate short term impact on margin). If net gains start going up in Q1, Q2 and beyond, the content commitments start to be covered and margin increases domestically.

We already know international is an investment primarily being financed by the declining (yet highly profitable) OD subscription business.


Let's just say that by this time next year we will have a better idea of who is correct. I see nothing in Netflix accounting that looks false, and I see their revenue being more than sufficient to cover cost of subscription services and sub growth to allow them to expand their offering.

Ray Von Geezer
12-21-2011, 07:08 AM
In my opinion, you do not understand the concepts behind a subscription service, and possibly even the basic financial concepts of COGS accounting.You're very welcome to your opinion :)

The BtoC model employed is really irrelevent to this discussion of whether revenue is an indicator of the ability of a company to grow. Whether you're selling plastic spoons, subscriptions or Ferrari's, the basic rule applies - revenue taken in isolation is an indicator of growth, it is not an indicator of the ability to grow further. The only time revenue alone can possibly be an indicator of further ability to grow is when costs (COGS if you prefer) are in decline, because then you can buy more "stock" for the same money. That's something we know is very unlikely to be a factor in the business under discussion.

In my opinion, you're ignoring this very basic concept to allow you to drive the point that Company A has more revenue than Company B, therefore company A is better equipped to grow. That point is flawed.

Look, there's various ways a company can fund growth, here are the main ones that are relevent to this discussion:-

1) They can reinvest profits directly generated to fund future growth. This is by far the "healthiest" of all options because it has the least risk, if growth revenue doesn't meet projections the only immediate impact is the "loss" of that profit. With $101 million operating profit vs $30-$42 million contribution profit, this is where Starz is better placed than Netflix in your direct comparison.
2) They can use profits from other business segments to fund growth in another. There's nothing inherently wrong in this, but it is riskier than 1) because there's unlikely to be a direct correlation between the costs required to grow segement A and the profits generated by segment B. The risk is that the profits generated by segment B become insufficient to fund growth for segment A. This is what Netflix currently does, with the additional risk factor that profits from segment B (OD) aren't only being relied upon to fund growth in other segments (see below).
3) They can take on debt, monetise assets or use capital. Again, perfectly normal, but considerably riskier than 1) since if growth fails to meet projections the debt remains or the asset/capital is gone.

And you certainly are ignoring the sub trends and how that was impacted by the pricing change. I'm not "ignoring" the trends, remember the catalyst for this discussion is your revenue vs revenue comparison made between two companies at a point in time.

Gross sub additions were doing fine even after the pricing change, it is just that churn impacted net gains (which has an immediate short term impact on margin). If net gains start going up in Q1, Q2 and beyond, the content commitments start to be covered and margin increases domestically.I think you're trying to dismiss this issue a little too easily. For a start, Netflix has said that churn isn't such an issue for them because hey, people leave, people come back. There were 5.5 million cancellations in Q3, and Netflix described them as having "left in anger", the large proportion who left due to the price increases are unlikely to come back, for a good while at least.

There's something else though. Back from 2008 to Q2 2011 (I didn't look back further, it may or may not hold true for previous years) gross sub additions haven fallen in Q2, increased every quarter until the next Q2 when they've fallen again. Obviously, this year that cycle has been broken with subs in Q3 also falling.

However, there is another trend that's been broken, and one which may perhaps indicate that replacing those lost subscribers won't be quite so easy as it might have been. Similarly to sub additions, free subscribers have historically fallen in Q1 and trended up until the next Q1 when they've fallen again. This year, free subs actually fell slightly in Q2, before the price rise kerfuffle, and again more heavily in Q3. As I'm sure you'll appreciate, those free subs are a very important method of snagging paying subscribers - every dealer knows to give the first hit free - but the number of free subs declined before Netflix threw spanners in the works.

We already know international is an investment primarily being financed by the declining (yet highly profitable) OD subscription business.We do, but what some don't seem to realise is that it's not just international growth that OD is funding:-

Q4 Domestic streaming CP= $30 to $42 million
Q4 Domestic OD CP= $177 to $192 million
Q4 International streaming CP (loss)= -$70 to -$60 million
Q4 Net income = $19 to $37 million

The three segments are projected to generate $137-$172 million of CP (after International losses are deducted), with $19-$37 million net income remaining after $118-135 million of operating costs and deductions. OD profits are not only being used to fund international expansion, they're being used to pay all of Netflix's operating costs.

Let's just say that by this time next year we will have a better idea of who is correct .... I see their revenue being more than sufficient to cover cost of subscription services and sub growth to allow them to expand their offering.If the question is "Is this revenue vs revenue comparison a reliable indicator of growth potential?", I don't need to wait a year to know the answer to that one mate ;) If Netflix proves to be better able to secure content than Starz, it won't be because their revenue>Starz revenue, it'll be because they had some money left from their revenue (or "profit" as it's usually called) to fund it. Or they just used money from another segment, one or the other :D

I see nothing in Netflix accounting that looks falseThis is why I think you got a bit hung up in bemoaning the fact that this topic was being discussed at all. You're talking about who is correct on this point, when all I (and most of the other contributors to this thread, including 3rd party article writers) have been doing is speculating about what could be behind the SEC's interest. Given that the speculation has included "It might just be nothing", then there's no "correct or incorrect" about it.

Ray Von

PSound
12-21-2011, 10:10 AM
Again, you are demonstrating a distinct lack of understanding of COGS especially around a subscription service.

For those who are interested in understanding and learning (and not in spreading FUD), I will put out this simple question: If the COGS (money paid for content either from other owners or Netflix produced) is set for any given quarter, where does the revenue from each and every sub above those costs go?

And what happens to that metric when churn related to the price increase goes back to more typical levels?

Ray Von Geezer
12-21-2011, 11:09 AM
Again, you are demonstrating a distinct lack of understanding of COGS especially around a subscription service.

For those who are interested in understanding and learning (and not in spreading FUD)Aw Psound, why so mean? I've taken time and effort to discourse with you since you issued the challenge for someone to show how Netflix wasn't better equipped than Starz to secure new content, using only a direct revenue comparison from two specific quarters and ignoring profit.

You've addressed virtually none of my points and now you've turned most discourteous. If you can see "FUD", please point it out. I'd be particularly interested to see you address the point I raised above about what Netflix actually uses OD revenue for, other than funding international expansion. Any "FUD" in there?

I will put out this simple question: If the COGS (money paid for content either from other owners or Netflix produced) is set for any given quarter, where does the revenue from each and every sub above those costs go?Why not just answer the question yourself? It's a simple enough one and that does make you sound a little bit on the patronising side, if I may make so bold?

It's actually part of a point I've been trying to drive home since I explained to you your mistake in making a direct comparison using only revenue whilst completely ignoring profit. Remember my pointing out "Revenue is vanity, profit is sanity"?

If the COGS (money paid for content either from other owners or Netflix produced) is set for any given quarter, where does the revenue from each and every sub above those costs go?The answer to your question, of course, is that it goes to profit, because, as any fule kno, revenue - cost = profit (specifically gross profit). And profit, old chap, is the best tool a company can use for growth (ref any of my last 4 or 5 posts for clarification).

And what happens to that metric when churn related to the price increase goes back to more typical levels?Profit increases, and with profit (note that's profit, not revenue) they can secure additional content.

And that's why comparisons of revenue are worthless without taking profit into consideration, and that in turn is why your original revenue-only comparison of Netflix vs Starz was flawed.

By George, I do believe he's got it. Jolly good show old boy :)

Ray Von

PSound
12-21-2011, 11:26 AM
Again, your distinct lack of understanding the basic premise of COGS is astounding.


The simple fact that you will continue to ignore (for whatever agenda) is that COG for revenue in a entertainment subscription business all goes to securing content.

Let me say that gain - THE COST OF SUBSCRIPTION FROM REVENUE GOES TO CONTENT. Hence, the higher revenue for Netflix means they have more money to spend on content than any other subscription service, except for HBO.

Netflix is opting to keep margin low while in their growth period, since (again) THE COST OF SUBSCRIPTION FROM REVENUE IS GOING TO CONTENT.


And that will likely change in the next 12-18 months at Netflix sub revenue outpaces HBOs.

Other businesses (like Starz) have very little upward growth opportunity and are actively taking and returning profit to the business (and shareholders). And that money will eventually be invested in areas where there is growth opportunity.

Ray Von Geezer
12-22-2011, 08:19 PM
Again, your distinct lack of understanding the basic premise of COGS is astounding.See, statements like these are why I love you being able to read my replies. Take a deep breath, stay calm, we'll both come through this unscathed, I promise.

The simple fact that you will continue to ignore (for whatever agenda) is that COG for revenue in a entertainment subscription business all goes to securing content.

Let me say that gain - THE COST OF SUBSCRIPTION FROM REVENUE GOES TO CONTENT. Hence, the higher revenue for Netflix means they have more money to spend on content than any other subscription service, except for HBO.

Netflix is opting to keep margin low while in their growth period, since (again) THE COST OF SUBSCRIPTION FROM REVENUE IS GOING TO CONTENT.Ah, since you keep repeating it, it all makes perfect sense.

Wait, sorry, no it doesn't :D

Firstly, you're using cost of goods interchangeably with cost of subscription there, they're not the same thing (cost of subscription cannot all go towards content, since it includes other costs outside of just purchasing content).

That revenue allocated to COGS pays for goods (content in Netflix's case) is a self evident truth, and I'd challenge you to show where I've said anything to the contrary.

Where you're going wrong is saying that revenue for COGS can go to "securing content" rather than "paying for content", and (except perhaps at one specific point in time) it can't - "you can't use the same money twice" as I said earlier. What you're missing is that content Netflix is currently paying for is already secured - they're committed to taking that content for a period of time, usually a year, perhaps longer in some cases.

For streaming content, we buy like our industry and pay television and network TV buys and cable networks, which is you have to commit upfront, and you have to pay a fixed amount per time period, typically per year, for access to that content on your network. So that's the industry in which we compete and we buy in that way.

To "secure content", that is be able to commit to taking extra content, they need money which is not already committed elsewhere, and during the term of a content deal revenue for COGS is money committed. The one specific point in time when they would use COGS to secure content is at the point when one commitment ends, but all that really does is free up money they would have paid to the content provider they're ceasing dealing with, allowing them to spend it with another, or renew with the same content provider (assuming the price stays the same, otherwise they'd need additional money on top of the COGS revenue).

Reading back the your original post of yours I replied to, it's weird, because at that point it's pretty clear you appreciated the difference between paying for content and securing content:-

Do people expect Starz to go out of business soon because they won't be able to secure or pay for content to keep their subscribers?

Looking forward to your reply, as always :)

Ray Von

PSound
12-22-2011, 11:28 PM
Where you're going wrong is saying that revenue for COGS can go to "securing content" rather than "paying for content", and (except perhaps at one specific point in time) it can't - "you can't use the same money twice" as I said earlier. What you're missing is that content Netflix is currently paying for is already secured - they're committed to taking that content for a period of time, usually a year, perhaps longer in some cases.

And again, you simply do not understand accounting in a subscription video service.


At any given point in time the cost of revenues: subscription (COGS) is for content that is within a very specific reporting window. That does not prevent Netflix from acquiring content for future windows. Indeed, that has already occurred and will continue to occur as most of the content is not pre-paid (hence the importance of the recognition windows).

As of their last 10-Q filing, Netflix had contractual streaming obligations off the balance sheet (for less than 1 year - payments due within that period) of $160 million. The payments due within the year (Accounts Payable) is $750 million. Assuming the low end of domestic streaming revenue (and zero growth), those costs are paid for just in the first half of the year.


Netflix has streaming content obligations between 1-3 years (again with payments due in that period) of $2.3 billion. That is content spread across 2 years.

Other non-current liabilities, which are payments for fixed cost content (paid greater than a year out is $373 million).

Netflix is expected to drive $462-$477 million in domestic streaming sub revenue in Q4 2011. Assuming absolute zero gross and not taking into account any international revenue, Netflix will have $3.76 billion in revenue during that reporting time.


That equates to Netflix having more that a billion in revenue during those reporting periods to use for content acquisition or profit taking. And again, that is assuming ZERO QoQ revenue growth and does not factor in a dime of international revenue.

Ray Von Geezer
12-23-2011, 05:29 AM
At any given point in time the cost of revenues: subscription (COGS) is for content that is within a very specific reporting window.First, can you please clarify that by saying "cost of revenues: subscription (COGS)" you're identifying COGS as a subset of cost of subscription, not that COGS equals cost of subscription? It's just that you repeated three times in your post prior to this one that all of cost of subscription goes to paying for content, and I want to be clear you're now aware of the difference.

I'm really not sure what you're saying here, obviously COGS for a reported period/window is only for that period, it's a defined term. You couldn't pre-pay for goods (content) to sell in a subsequent quarter and record it as COGS in that quarter, because you haven't sold the goods.

That does not prevent Netflix from acquiring content for future windows. Indeed, that has already occurred and will continue to occur as most of the content is not pre-paid (hence the importance of the recognition windows).Agreed, I've said this several times. The issue is your contention that you can use COGS to "secure content", because by definition COGS has already been used to pay for content already sold.

As of their last 10-Q filing, Netflix had contractual streaming obligations off the balance sheet (for less than 1 year - payments due within that period) of $160 million. The payments due within the year (Accounts Payable) is $750 million. Assuming the low end of domestic streaming revenue (and zero growth), those costs are paid for just in the first half of the year.You're only looking at one type of content there, only content with a known specific cost per title gets recorded as accounts payable.


This is explained in their Investor FAQ (http://ir.netflix.com/faqTopQ.cfm#)

Specific title(s) and known fee per title(s)

Balance sheet impact:

....

If the fee for that title has not yet been paid, we also record a liability within accounts payable for the amounts due within one year.

For other content

•Any future known payment obligation for this content is included in our contractual obligations table which is reported in the MD&A section of our 10Ks and 10Qs and is disclosed in the footnotes to our financial statements.

From the contractual obligations section

We have entered into certain license agreements that include an unspecified or a maximum number of titles that we may or may not receive in the future and/or that include pricing contingent upon certain variables, such as theatrical exhibition receipts for the title. As of the reporting date, it is unknown whether we will receive access to these titles or what the ultimate price per title will be. Accordingly such amounts are not reflected in the above contractual obligations table. However, such amounts are expected to be significant and the expected timing of payments for these commitments could range from less than one year to more than five years.

Regardless of which type of content it is, you cannot say it will be paid for in just the first half of the year, because the cost of the content is spread across the entire time they have access to that content. Again, from the Investor FAQ:-

Specific title(s) and known fee per title(s)

Income statement impact

•When a specific title is recorded as an asset on the balance sheet within the content library, we generally amortize it on a straight-line basis over the life of that title. The amortization is reported within the "cost of revenues: subscription" line item on the income statement.


....

Set of content with total fee unable to allocate to specific title

Income statement impact

•The license fee for the set of content is expensed on a straight-line basis over the life of the agreement and reported within the "cost of revenues: subscription" line item on the income statement.

It's pretty simple really, by definition the COGS included in any period's cost of subscription indicates the cost paid for content used in that period, and the entire cost of the content is "expensed/amortized on a straight-line basis over the life of the agreement". So as I've said over and over again, the fact that they pay $x million in one quarter for content indicates that they'll pay the same amount next quarter, and every quarter during the period for which they've committed to taking that content (usually a year minimum). COGS for one quarter is no indication of being able to secure additional content, it's an indication of how much they're going to have to pay for content they've already secured.

Netflix has streaming content obligations between 1-3 years (again with payments due in that period) of $2.3 billion. That is content spread across 2 years.Per Reed Hastings comment in the Q3 conf call, that's up to $3.5 billion.

Netflix is expected to drive $462-$477 million in domestic streaming sub revenue in Q4 2011. Assuming absolute zero gross and not taking into account any international revenue, Netflix will have $3.76 billion in revenue during that reporting time.

That equates to Netflix having more that a billion in revenue during those reporting periods to use for content acquisition or profit taking. And again, that is assuming ZERO QoQ revenue growth and does not factor in a dime of international revenue. When you say "reporting time" are you talking about 2012 there?

If so, assuming "ZERO QoQ revenue growth", $462-$477 million in domestic streaming sub revenue over 4 quarters is $1.84-$1.90 billion in revenue. For that quarter contribution profit on that revenue is expected to be $30-$42 million, over 4 quarters that would be $120-$168 million of CP for content acquisition or profit (putting aside for a second that CP doesn't include deductions for other costs, such as operating expenses).

And if they had $1 billion for content acquisition or profit taking, why would they be projecting they'll spend the entire year operating at a loss?

I just want to summarise the knowns here, to make sure it's clear:-

Content is paid for evenly across the entire period that content is available.
Therefore COGS in any one quarter is an indication of what COGS will be in every quarter that content is available.

Example: Netflix signs a deal for 12 months access to content at $300 million for the period. Because content is "expensed/amortized on a straight-line basis over the life of the agreement", that's $75 million per quarter in COGS for every quarter the content is available.

If, as you suggest, they paid for the entire year's content in two quarters, the COGS shown for those two quarters would only include 6 months of cost, not the whole 12 months. It's a very, very basic rule - COGS can only ever relate to costs within that reporting period (quarter in this case).

Whatever Netflix shows in COGS for one quarter is what they'll be paying in COGS the next quarter, unless they lose access to content, the cost of content reduces, or they pay for additional content using other money.

I hope that's finally clear, but if not please point out specifics that you disagree with, most of them can be backed up with information from Netflix itself (or definitions of common terms).

Oh, and in case I don't get chance to reply until after, you (and everyone else) have a great Christmas.

Ray Von

TowerGrove
12-23-2011, 07:33 AM
First, can you please clarify that by saying "cost of revenues: subscription (COGS)" you're identifying COGS as a subset of cost of subscription, not that COGS equals cost of subscription? It's just that you repeated three times in your post prior to this one that all of cost of subscription goes to paying for content, and I want to be clear you're now aware of the difference.

I'm really not sure what you're saying here, obviously COGS for a reported period/window is only for that period, it's a defined term. You couldn't pre-pay for goods (content) to sell in a subsequent quarter and record it as COGS in that quarter, because you haven't sold the goods.

Agreed, I've said this several times. The issue is your contention that you can use COGS to "secure content", because by definition COGS has already been used to pay for content already sold.

You're only looking at one type of content there, only content with a known specific cost per title gets recorded as accounts payable.


This is explained in their Investor FAQ (http://ir.netflix.com/faqTopQ.cfm#)



For other content



From the contractual obligations section



Regardless of which type of content it is, you cannot say it will be paid for in just the first half of the year, because the cost of the content is spread across the entire time they have access to that content. Again, from the Investor FAQ:-



It's pretty simple really, by definition the COGS included in any period's cost of subscription indicates the cost paid for content used in that period, and the entire cost of the content is "expensed/amortized on a straight-line basis over the life of the agreement". So as I've said over and over again, the fact that they pay $x million in one quarter for content indicates that they'll pay the same amount next quarter, and every quarter during the period for which they've committed to taking that content (usually a year minimum). COGS for one quarter is no indication of being able to secure additional content, it's an indication of how much they're going to have to pay for content they've already secured.

Per Reed Hastings comment in the Q3 conf call, that's up to $3.5 billion.

When you say "reporting time" are you talking about 2012 there?

If so, assuming "ZERO QoQ revenue growth", $462-$477 million in domestic streaming sub revenue over 4 quarters is $1.84-$1.90 billion in revenue. For that quarter contribution profit on that revenue is expected to be $30-$42 million, over 4 quarters that would be $120-$168 million of CP for content acquisition or profit (putting aside for a second that CP doesn't include deductions for other costs, such as operating expenses).

And if they had $1 billion for content acquisition or profit taking, why would they be projecting they'll spend the entire year operating at a loss?

I just want to summarise the knowns here, to make sure it's clear:-

Content is paid for evenly across the entire period that content is available.
Therefore COGS in any one quarter is an indication of what COGS will be in every quarter that content is available.

Example: Netflix signs a deal for 12 months access to content at $300 million for the period. Because content is "expensed/amortized on a straight-line basis over the life of the agreement", that's $75 million per quarter in COGS for every quarter the content is available.

If, as you suggest, they paid for the entire year's content in two quarters, the COGS shown for those two quarters would only include 6 months of cost, not the whole 12 months. It's a very, very basic rule - COGS can only ever relate to costs within that reporting period (quarter in this case).

Whatever Netflix shows in COGS for one quarter is what they'll be paying in COGS the next quarter, unless they lose access to content, the cost of content reduces, or they pay for additional content using other money.

I hope that's finally clear, but if not please point out specifics that you disagree with, most of them can be backed up with information from Netflix itself (or definitions of common terms).

Oh, and in case I don't get chance to reply until after, you (and everyone else) have a great Christmas.

Ray Von

Have a blessed Christmas Ray! Best Wishes!!!:)

PSound
12-23-2011, 09:24 AM
Let me just state that we are talking different accounting fundamentals.

You look at their cost of revenues: subscription and see it lining up with revenue for the one reported quarter and only see signs of it impacting their content acquisition in future quarters.

I look at Netflix financial data and see that a few things: First that their accounting method means that those COGS have likely already had significant payments in past quarters and this is simply accounting for what was delivered in the projected quarter.

I also look at their long term content obligations vs revenue projections (even assuming flat growth) and see that revenue will be fine to cover all content within the year (including all announced contracts and deals) and that they have room to sign new contracts or extend them quite significantly beyond Year 1 (we will know more as H1 closes just what sort of revenue growth they have domestic and internationally).


And I fully expect for Netflix to try and match their subscription costs closely to overall revenue for the immediate future. They have growth opportunity both domestic and abroad and it would be wise to invest in that by taking consumer revenues and putting towards costs of subscription (to continue making the service more valuable).

Ray Von Geezer
01-11-2012, 08:42 AM
Sorry this seems so long ago, just got back fully "on line" yesterday from our Christmas hols.... Here's to a great 2012 now we're back to the grind....

Let me just state that we are talking different accounting fundamentals.The "accounting fundementals" we're discussing are defined terms and set practices, they're not open to interpretation.

You look at their cost of revenues: subscription and see it lining up with revenue for the one reported quarter and only see signs of it impacting their content acquisition in future quarters.From the start I've argued that they need to either increase profit or reduce costs to acquire more content, you were the one arguing that the fact they spent x million in that quarter meant they could afford more content in subsequent quarters, which doesn't make any sense. As I've said many times, costs in this quarter will reflect costs in future quarters, because we know Netflix spreads the majority of its content costs evenly across the period it has access to that content.

And let's not forget the reason for using that one reported quarter (or predicted quarter) is that you picked it to make a direct comparison with results from another company, and claimed on that basis that Netflix was as well (if not better placed) to acquire content.

I look at Netflix financial data and see that a few things: First that their accounting method means that those COGS have likely already had significant payments in past quarters and this is simply accounting for what was delivered in the projected quarter.That's not "their" accounting method, that's standard accounting, one of the most basic fundementals - costs (and income for that matter) shown on an income statement must only relate to that reporting period, I've lost count of how many times I've said this. It really doesn't matter if those costs were prepaid or deferred, that's what sections like "prepayments", "liabilities" and "accounts payable" are for on the balance sheet. They only appear on the "income statement" during the matching period - income vs cost.

If they didn't do it that way, they'd almost certainly draw attention from a regulartory body ;)

Mate, before making accusations about other's lack of knowledge please make sure you're up to speed on the basics. It's a good job I'm such a laid back guy, that's all I can say :D

I also look at their long term content obligations vs revenue projections (even assuming flat growth) and see that revenue will be fine to cover all content within the year (including all announced contracts and deals) and that they have room to sign new contracts or extend them quite significantly beyond Year 1 (we will know more as H1 closes just what sort of revenue growth they have domestic and internationally).I agree revenue will likely be fine to cover existing obligations, I believe they've already said they've done all their US deals for 2012 and aren't looking to do any more.

The bolded bit though? That's hard for me to agree with, they've already forecast a loss for an entire year and they don't have that much cash on hand.

And I fully expect for Netflix to try and match their subscription costs closely to overall revenue for the immediate future. They have growth opportunity both domestic and abroad and it would be wise to invest in that by taking consumer revenues and putting towards costs of subscription (to continue making the service more valuable).When a company forecasts 12 months of losses, I think it's hard to argue with a straight face that they're going to try and match their costs to revenue ;)

I think perhaps you're taking my repudiation of your initial quarter-vs-quarter comparison with another company and pointing out your misuse of common accounting terms and practices, and imagining that I have a wider opinion that they're definately set to fail. This debate is largely a reflection on your overblown opinion of Netflix, not necessarily Netflix itself.

I certainly think they face challenges - they're heavily dependent on OD revenue to operate for one, and they've picked a very difficult market for their next international expansion for another, but overall I think they'll be fine. Not as "disruptive" as they hoped, but a company that doesn't make anything itself can't be a frontrunner forever.

Ray Von

PSound
01-29-2012, 08:48 AM
It looks like even just a couple of months later we are already seeing improvements to streaming profitability, to the tune of 290 bps in Q4 (at 10.9%), with projections to improve it by 100 bps each quarter starting in Q2.

And that increased margin is WITH plans to increase spending on streaming content QoQ in 2012.

Imagine that.... exactly what I stated. Money to spend on new content while increasing domestic streaming profitability.

Ray Von Geezer
01-29-2012, 07:10 PM
It looks like even just a couple of months later we are already seeing improvements to streaming profitability, to the tune of 290 bps in Q4 (at 10.9%), with projections to improve it by 100 bps each quarter starting in Q2.

And that increased margin is WITH plans to increase spending on streaming content QoQ in 2012.

Imagine that.... exactly what I stated. Money to spend on new content while increasing domestic streaming profitability.Kudos if that's what you predicted, I don't think I was involved in that part of the discussion.

I don't think you're entirely right though, let's have a deeper look and get past that spin.


Domestic Streaming (Q4 Outlook)
Subscriptions: 20.0m to 21.5m
Revenue: $462m to $477m
CP: $30m to $42m

Domestic Streaming (Q4 Actual)
Subscriptions: 21.671m
Revenue: $476m
CP: $52m

As can be seen, they actually beat their subscriber projection, but missed their revenue projection slightly. Can't blame them too much for that - the increase was entirely from free subscriptions and paying subscribers actually fell by another 350,000. However, what we can see is where the increase in profit came from - not from revenue from additional new subscribers, but actually by reducing costs from $435 million down to $424 million.

We can't really be sure where that cost saving came from, but it's probably worth noting that Q4 once again bucked the trend of YoY increases in free subscribers, with subscribers willing to trial Netflix falling to just below 2010 levels. It'll be interesting to see if that trend continues through 2012, that'd be further evidence of a the stall in subscriber numbers continuing.

The actual bottom line increase for the quarter was ~$4m ($40.732m vs $37m projected).

As to whether that equals "more money to spend on content", if I had to hazard a guess at how much content $4m buys it would be "not a lot", even if they hadn't already said that they're through doing any more domestic deals for 2012. Plus, to my knowledge, they're still forecasting that they'll spend the whole of 2012 operating at a loss.

Perhaps it'd be more fitting to say that the extra $4 million is money they can use to reduce their reliance on DVD, and to reduce their losses?

Ray Von

bruceames
01-29-2012, 08:22 PM
I may be nitpicking, but how did Netflix miss the revenue projection? $476 million was within the projected range of $462 to $476 million, and almost exceeded it.

If I am reading the above info correctly, the revenue projection was indeed met, but not exceeded.

PSound
01-29-2012, 09:00 PM
I may be nitpicking, but how did Netflix miss the revenue projection? $476 million was within the projected range of $462 to $476 million, and almost exceeded it.

If I am reading the above info correctly, the revenue projection was indeed met, but not exceeded.

Correct.

And the projections for contribution were exceeded and expected to increase 100 bps each quarter from Q2 until the end of the year. That is including expected increase in content spending QoQ through the year (increased spending on content with higher overall margin).

Ray Von Geezer
01-30-2012, 07:39 AM
I may be nitpicking, but how did Netflix miss the revenue projection? $476 million was within the projected range of $462 to $476 million, and almost exceeded it.

If I am reading the above info correctly, the revenue projection was indeed met, but not exceeded.I should have been clearer - what I meant to say was that although they exceeded their top-end subscriber projection they didn't hit the corresponding top-end revenue prediction. Sorry for any confusion caused.

As I say, it's really not a big issue of itself, it's "only" $1 million out, but in the context of any discussion about Netflix having raised streaming contribution profit, it helps clear up any possible confusion that Q4's rise in CP was attributable to subscriber growth when it was actually due to lower than projected costs. Thats how I've seen Psound try to spin this but TBH I couldn't be arsed to point it out until he started patting himself on the back :)

And to illustrate my point of how lucrative each streaming sub above the fixed cost level is:

The addition of 220,000 streaming subs shifted the contribution margin for the entire 21.67 million streaming sub base from from ~8% (projected) to 10.9% (actual). Contrary to how that reads, that 220,000 addition still left them $1 million down on projections, and (unless they were way out in their Q4 cost projections) the increase in CP came entirely from cost reduction. Personally, given Netflix's business I don't think cost reductions can be relied upon to boost CP every quarter.

Ray Von