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Netflix Q3 2012 Results - Loss Of 650,000 Disc Subs Predicted

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Old 10-17-2012, 10:39 AM   #1  
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Arrow Netflix Q3 2012 Results - Loss Of 650,000 Disc Subs Predicted

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Indeed, Netflix, which reports third quarter results Oct. 23, is expected to downsize initial year-end domestic subscriber additions of 7 million, in addition to posting a loss of about 650,000 disc subs.
http://www.homemediamagazine.com/net...-netflix-28601
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Old 10-17-2012, 10:42 AM   #2  
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Netflix lost 850,000 disc subs in Q2 2012:

http://www.highdefforum.com/high-def...-2012-a-2.html

Netflix also lost 1 million disc subs in Q1 2012.
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Old 10-19-2012, 06:51 AM   #3  
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More of the same. Finally the management consultants and/or business school professors admit the obvious.


http://www.forbes.com/sites/petercoh...h-transitions/

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Of course, the king of all failed tech transitions is Netflix (NFLX). As I wrote in September 2011 when it introduced its controversial pricing policy — an up-to 60% price increase, Netflix could not replicate in online streaming the dominance it enjoyed in DVD-by-Mail. That pricing policy led two-thirds of my students to cancel their accounts.

Netflix’s problem was that in DVD-by-Mail, it could buy DVDs at a low price and rent them out. But when it came to online streaming, it had to license the content from studios and as the popularity of online streaming grew, its licensing costs spiked 53%.

Moreover, the bandwidth required for consumers to stream movies was soaring and some Internet service providers started charging consumers for that extra consumption. Without the ability to control those costs, Netflix was doomed to profitless prosperity.

I can’t fault Google, Microsoft, or Netflix for trying to go where their consumers are heading. But that is also the precise problem they face — when these three were first getting off the ground, they were setting the direction for consumers.

Now they are struggling to follow the lead that other competitors are taking. And in this regard, they are at a huge competitive disadvantage — precisely because of their greatest strengths. That is, their market lead in the previous generations of technology has given them capital they could invest in developing a lead in the new technology.

But it has also given them a mindset that makes them frame their new business strategy through the blinders created by their previous success. Google tries to make mobile search ads that are too much like its successful desktop ones; Microsoft can’t overcome its PC-centric mindset; and Netflix can’t tap the competitive advantages it enjoyed in DVD-by-Mail to win in online streaming.
These guys/profs figuring things out years after the fact.
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Old 10-19-2012, 03:27 PM   #4  
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Lol, this guy is trying to say that Google and Microsoft are failures?
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Old 10-19-2012, 07:04 PM   #5  
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Lol, this guy is trying to say that Google and Microsoft are failures?
Appears so.

Another out of touch business school professor.
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Old 10-23-2012, 05:05 PM   #6  
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Netflix Q3 Profit Drops 82%, Adds 1.2M Subs

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Netflix Oct. 23 said it posted a third-quarter (ended Sept. 30) profit of $7.6 million — down nearly 82% from a profit of $62.5 million during the previous-year period. Global revenue increased 10% to $905 million, compared with $822 million last year.

Los Gatos, Calif.-based Netflix said it added 1.16 million domestic streaming subscribers in the quarter, in addition to 690,000 international subs. The service added 510,000 international subs during the same period last year before it started rental streaming in the United Kingdom and Ireland.

The domestic subscriber additions were well below projections and leave Netflix less than half-way to its year-end net addition goal of 7 million subs.

Netflix ended the quarter with 23.8 million domestic and 4.31 million international streaming subs. It lost 630,000 disc subs to end the period with 8.61 million.

Regardless, disc rentals continue to drive margins, generating $131 million in contribution profit and 48.2% margins — the highest since the fourth quarter last year.

Domestic streaming generated $91 million contribution profit and 16.4% margin, while international operations posted a contribution loss of $92 million, up 75% from a contribution loss of $23 million last year.

Indeed, Netflix expects the contribution loss for international operations to increase to $113 million in the fourth quarter and then declining in 2013.

“While we are not growing membership as fast as in 2010, we think that over time nearly all U.S. households will be broadband households, nearly all video will be Internet video, and that as our content and member experience continue to improve faster than competitors,” CEO Reed Hastings and CFO David Wells wrote in a shareholder letter.

The executives said Netflix’s long-term domestic market opportunity remains two-three times that of linear HBO. They said Netflix would resume international expansion after "significantly" reducing foreign losses and establishing the SVOD service's profitability on a global basis.

Eric Wold, analyst with B. Riley & Co. in Los Angeles, said he has predicted 5.6 million additional paid subs by the end of the year — a tally Netflix has now lowered to a range from 4.75 million to 5.25 million. Netflix ended the quarter with 3.43 net new subs since the beginning of the year.

"I continue to believe that increasing competition and ubiquitous content will drive consumers to look at other options," Wold wrote in an email. "And with a minimum of $5 billion in content commitments and a greater amount of spend on original programming, this poses a risk to the entire business model."

Wold said management's desire to maintain international expansion will continue to undermine the bottom line indefinitely.

"I continue to believe earnings expectations for the next few years remain too aggressive," Wold said, adding that the disc margin improvement was likely due more to a beneficial mix of discs shipped or possibly less usage of the subscriptions ahead of possible cancellations.

Investors concurred, sending Netflix shares down more than 16% in after-hours trading.
http://www.homemediamagazine.com/net...12m-subs-28646
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Old 10-23-2012, 05:14 PM   #7  
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Yikes, not so good. Streaming sub growth / profits worse than expected, but disc sub loss and profits probably a little better than expected.
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Old 10-23-2012, 07:03 PM   #8  
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Regardless, disc rentals continue to drive margins, generating $131 million in contribution profit and 48.2% margins — the highest since the fourth quarter last year.
Netflix lost 850,000 disc subscribers in Q2, to end the period with 9.24 million physical media subscribers. The decline in disc subs is noteworthy, considering Netflix reported $146 million in contribution profit from physical rentals, including 46% margins.

HMM thinks that the margin % is more important than the actual contribution profit dollars
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Old 10-24-2012, 09:18 AM   #9  
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Their stock got hammered yesterday, so obviously investors weren't too pleased with the report.

Just a huge gap between DVD and streaming profits for the company. Now with Amazon and Verizon/Redbox getting entering the market with others surely to follow, the future doesn't look too bright for Netflix streaming growth / profits. I think they should reinvigorate their highly profitable DVD business.
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Old 10-24-2012, 09:31 AM   #10  
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Their stock got hammered yesterday, so obviously investors weren't too pleased with the report.

Just a huge gap between DVD and streaming profits for the company. Now with Amazon and Verizon/Redbox getting entering the market with others surely to follow, the future doesn't look too bright for Netflix streaming growth / profits. I think they should reinvigorate their highly profitable DVD business.
Easier said than done. Disc is no longer the "must have" product while SVOD is grabbing all the headlines and consumers.

IMO, consumers are looking at their high CBL and SAT bills and thinking is there an alternative? SVOD may be that alternative. It sure won't be disc.
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Old 10-24-2012, 10:59 AM   #11  
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Easier said than done. Disc is no longer the "must have" product while SVOD is grabbing all the headlines and consumers.

IMO, consumers are looking at their high CBL and SAT bills and thinking is there an alternative? SVOD may be that alternative. It sure won't be disc.
A little marketing would certainly help, as well as promotions and having a prominent mention on their website.

As it is, it's corporate "indifference", so any effort would be better than the status quo.

After all, disc-by-mail is still more convenient than Redbox (aside from waiting a day or two for the discs to arrive) and the selection is second to none. That's a lot of upside, upside that would be the focus of their marketing campaign. Also to help promote both streaming and discs and make them a "team", they should offer disc + streaming packages at a discount (say, 20% off purchasing them separately). That's why Verizon/Redbox will be doing, I think.

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Old 10-24-2012, 11:08 AM   #12  
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Originally Posted by bruceames View Post
A little marketing would certainly help, as well as promotions and having a prominent mention on their website.

As it is, it's corporate "indifference", so any effort would be better than the status quo.

After all, disc-by-mail is still more convenient than Redbox (aside from waiting a day or two for the discs to arrive) and the selection is second to none. That's a lot of upside, upside that would be the focus of their marketing campaign. Also to help promote both streaming and discs and make them a "team", they should offer disc + streaming packages at a discount (say, 20% off purchasing them separately). That's why Verizon/Redbox will be doing, I think.
They had a promotion . . .

http://www.highdefforum.com/high-def...ming-subs.html

And still lost 650,000 disc subs in Q3 2012
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Old 10-24-2012, 11:14 AM   #13  
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They had a promotion . . .

http://www.highdefforum.com/high-def...ming-subs.html

And still lost 650,000 disc subs in Q3 2012
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Netflix is quietly offering its 24 million streaming subscribers in the United States a free month of disc rentals, the by-mail packaged media rental pioneer disclosed in a company blog.
"Quietly offering"? Not my idea of a promotion. Plus, it went effective at the end of August, nearly 2/3 into the Q3 reporting period.

I had something more in mind of promoting disc-by-mail on the same level as they are doing with streaming, as well as offering a permanent 20% discount for bundling them together.

But since that would be the smart thing to do, I'm sure they won't do it.
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Old 10-24-2012, 11:24 AM   #14  
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"Quietly offering"? Not my idea of a promotion. Plus, it went effective at the end of August, nearly 2/3 into the Q3 reporting period.

I had something more in mind of promoting disc-by-mail on the same level as they are doing with streaming, as well as offering a permanent 20% discount for bundling them together.

But since that would be the smart thing to do, I'm sure they won't do it.
When NF looks at it's D-b-M program, all they see are huge handling costs and postage costs. Sure it's a myopic view but it's also reality.

So Bruce . . . how well did disc rentals do according to the DEG for Q2 2012?
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Old 10-24-2012, 11:28 AM   #15  
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When NF looks at it's D-b-M program, all they see are huge handling costs and postage costs. Sure it's a myopic view but it's also reality.

So Bruce . . . how well did disc rentals do according to the DEG for Q2 2012?
Not so good. And how well did disc rentals profits do for Netflix lately?

Disc may be dying, but it's certainly not going away anytime soon, and Netflix is making a relative killing off of it. That's the bottom line. They could and should be milking OD for every last penny of profit but Netflix is being stupid, as reflected in their falling stock price.
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