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1699 posts

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  # 2287056 1-Aug-2019 11:51
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tdgeek:

 

tehgerbil:

 

a ~20% increase with no increase in value is a cheeky move regardless. 


 

 

For years they made losses, then when they turned a profit it was a very small fraction of sales. Today's new pricing is probably about right for them, and the market.

 

 

Still burning through billions of cash per annum.  Most recent quarter had higher cash losses than the previous corresponding period.  Netflix needs to keep raising prices to earn an appropriate return on invested capital.   Its not even close to what the proper pricing probably needs to be to justify ongoing investment in content.  I'd expect to see more increases in the future - will it be a little bit annually or a big slug every so often?


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  # 2287064 1-Aug-2019 11:59
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ockel:

 

tdgeek:

 

tehgerbil:

 

a ~20% increase with no increase in value is a cheeky move regardless. 


 

 

For years they made losses, then when they turned a profit it was a very small fraction of sales. Today's new pricing is probably about right for them, and the market.

 

 

Still burning through billions of cash per annum.  Most recent quarter had higher cash losses than the previous corresponding period.  Netflix needs to keep raising prices to earn an appropriate return on invested capital.   Its not even close to what the proper pricing probably needs to be to justify ongoing investment in content.  I'd expect to see more increases in the future - will it be a little bit annually or a big slug every so often?

 

 

Last time I looked they made 103M from memory, that was maybe a couple of years ago. I do recall reading recently that their subscribers go up and down like a yoyo


 
 
 
 


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  # 2287068 1-Aug-2019 12:03
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Quote

 

logged profit of $134 million on revenue of $4.2 billion in the final three months of last year.

 

That compared with a profit of $186 million on revenue of $3.3 billion in the same period the prior year.

 

Netflix ended the year with 139 million paying members worldwide, up 29 million from the start of the year. end of Quote

 

https://phys.org/news/2019-01-netflix-profits.html

 

 

 

I dont see where burning through billions of cash per annum comes from. Margins are slipping as the article mentions, but they are making money


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  # 2287072 1-Aug-2019 12:08
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They raised $2 billion dollars in debt earlier this year

https://www.google.com/amp/s/techcrunch.com/2019/04/23/netflix-offers-2-billion-more-in-debt-to-fund-its-content-spending/amp/



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  # 2287079 1-Aug-2019 12:18
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ockel:

 

tdgeek:

 

tehgerbil:

 

a ~20% increase with no increase in value is a cheeky move regardless. 


 

 

For years they made losses, then when they turned a profit it was a very small fraction of sales. Today's new pricing is probably about right for them, and the market.

 

 

Still burning through billions of cash per annum.  Most recent quarter had higher cash losses than the previous corresponding period.  Netflix needs to keep raising prices to earn an appropriate return on invested capital.   Its not even close to what the proper pricing probably needs to be to justify ongoing investment in content.  I'd expect to see more increases in the future - will it be a little bit annually or a big slug every so often?

 

 

My understanding is they are aiming for $30 USD for the top tier plan. 


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  # 2287080 1-Aug-2019 12:20
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tdgeek:

 

Quote

 

logged profit of $134 million on revenue of $4.2 billion in the final three months of last year.

 

That compared with a profit of $186 million on revenue of $3.3 billion in the same period the prior year.

 

Netflix ended the year with 139 million paying members worldwide, up 29 million from the start of the year. end of Quote

 

https://phys.org/news/2019-01-netflix-profits.html

 

 

 

I dont see where burning through billions of cash per annum comes from. Margins are slipping as the article mentions, but they are making money

 

 

they might be making money but the signs are there that they are not in great shape for the future. Profits are falling, 384 million first quarter last year to 271 million first quarter this year. This year for the first time they are not getting close to the forcasts of new subscribers added, in fact they are losing them quicker than ever which is a worry because they spend nearly $13 billion on new content last year and it's rising, 17 billion this year, and they need new subscribers to fund it and Disney is just around the corner at half the price Netflix will be . 





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  # 2287082 1-Aug-2019 12:22
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I agree, future is looking uncertain with those margins and considering significant number of players in the market relatively. 

 

Even $30 a month USD isn't going to be enough if they aren't careful.


 
 
 
 


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  # 2287094 1-Aug-2019 12:36
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tdgeek:

 

Quote

 

logged profit of $134 million on revenue of $4.2 billion in the final three months of last year.

 

That compared with a profit of $186 million on revenue of $3.3 billion in the same period the prior year.

 

Netflix ended the year with 139 million paying members worldwide, up 29 million from the start of the year. end of Quote

 

https://phys.org/news/2019-01-netflix-profits.html

 

 

 

I dont see where burning through billions of cash per annum comes from. Margins are slipping as the article mentions, but they are making money

 

 

 

 

The Netflix net income for fiscal 2018 was $US1.2 billion from  $US15.74 billion revenue.





Mike
Retired IT Manager. 
The views stated in my posts are my personal views and not that of any other organisation.

 

There is no planet B

 

 


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  # 2287100 1-Aug-2019 12:55
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https://www.theverge.com/2019/7/18/20699037/netflix-earnings-report-q2-streaming-wars-disney-apple-warnermedia-international

 

 

 

Seems like a bigger difference to 4k and HD, I may consider HD only. 4k plays well for me. I'll get 4k movies off Apple.

 

Haven't had Netflix for 3 months, when put it on would've been up to a six month stint, as price goes up I'll get fussier on what watch and do more binge viewing and only keep it for a month or two at a time.

 

In the poll on Stuff around 19% said price increase would put them off Subscribing. If Spark still covers full cost of standard plan, it means more savings there.

 

 


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  # 2287104 1-Aug-2019 13:05
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MikeB4:

 

tdgeek:

 

Quote

 

logged profit of $134 million on revenue of $4.2 billion in the final three months of last year.

 

That compared with a profit of $186 million on revenue of $3.3 billion in the same period the prior year.

 

Netflix ended the year with 139 million paying members worldwide, up 29 million from the start of the year. end of Quote

 

https://phys.org/news/2019-01-netflix-profits.html

 

 

 

I dont see where burning through billions of cash per annum comes from. Margins are slipping as the article mentions, but they are making money

 

 

 

 

The Netflix net income for fiscal 2018 was $US1.2 billion from  $US15.74 billion revenue.

 

 

And the key statement to look at is the Cashflow Statement.  Like most entertainment companies Netflix pay cash for content but then can smortise this cost over a period to time to reflect the value that the content is watched.  The assumptions that it makes about the amortisation period can greatly effect the reported accounting profit.  So the P&L needs to be taken with a grain of salt - the key to understanding most corporate profits is actually in the financial footnotes in quarterly and annual filings.  

 

Importantly the operating cashflows remain in deficit.  In each quarter.  And then deduct the investing cashflows and you start to get an idea of how much cash Netflix needs to continue to raise (either through debt or equity) to continue trading.  


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  # 2287105 1-Aug-2019 13:05
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vexxxboy:

 

tdgeek:

 

Quote

 

logged profit of $134 million on revenue of $4.2 billion in the final three months of last year.

 

That compared with a profit of $186 million on revenue of $3.3 billion in the same period the prior year.

 

Netflix ended the year with 139 million paying members worldwide, up 29 million from the start of the year. end of Quote

 

https://phys.org/news/2019-01-netflix-profits.html

 

 

 

I dont see where burning through billions of cash per annum comes from. Margins are slipping as the article mentions, but they are making money

 

 

they might be making money but the signs are there that they are not in great shape for the future. Profits are falling, 384 million first quarter last year to 271 million first quarter this year. This year for the first time they are not getting close to the forcasts of new subscribers added, in fact they are losing them quicker than ever which is a worry because they spend nearly $13 billion on new content last year and it's rising, 17 billion this year, and they need new subscribers to fund it and Disney is just around the corner at half the price Netflix will be . 

 

 

The article was less bleak. Subscribers rose and was ahead of external forecast. With all this they are making money, and yes its tough. The other players wont be increasing subscribers and also buying low quality content. Consolidation will happen in due course. If the public decide to consciously give up content, and stick with just a couple of providers, then they all lose

 

As with Sky Sports debates, it all comes to do one set of people. The owners of the content. The distribution channels such as SVOD, and the public are feeding them, as they are not playing their part to establish fair costs and prices. They dont care if any of them fail. They are no doubt loving it


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  # 2287123 1-Aug-2019 13:17
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ockel:

 

 

 

And the key statement to look at is the Cashflow Statement.  Like most entertainment companies Netflix pay cash for content but then can smortise this cost over a period to time to reflect the value that the content is watched.  The assumptions that it makes about the amortisation period can greatly effect the reported accounting profit.  So the P&L needs to be taken with a grain of salt - the key to understanding most corporate profits is actually in the financial footnotes in quarterly and annual filings.  

 

Importantly the operating cashflows remain in deficit.  In each quarter.  And then deduct the investing cashflows and you start to get an idea of how much cash Netflix needs to continue to raise (either through debt or equity) to continue trading.  

 

 

You already said that when you said they pay cash and spread the cost out. If they are spreading the cost out over an appropriate number of years, the the bottom line is fair. I doubt the US will allow them to do whatever they want so they they can fudge cashflow with profits. And I assume that content has a high value early then a low value in a year or two or three, and amortisation would allow for that. If your assumptions are correct, NF will make their 1B profit every year, then in a few years time a loss of 10B. I dont see the US accounting practices allowing that

 

If they make money, the cashflow deficit/surplus will even out over time

 

Ironically, cashflow is more important than profit.


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  # 2287131 1-Aug-2019 13:32
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tdgeek:

 

ockel:

 

 

 

And the key statement to look at is the Cashflow Statement.  Like most entertainment companies Netflix pay cash for content but then can smortise this cost over a period to time to reflect the value that the content is watched.  The assumptions that it makes about the amortisation period can greatly effect the reported accounting profit.  So the P&L needs to be taken with a grain of salt - the key to understanding most corporate profits is actually in the financial footnotes in quarterly and annual filings.  

 

Importantly the operating cashflows remain in deficit.  In each quarter.  And then deduct the investing cashflows and you start to get an idea of how much cash Netflix needs to continue to raise (either through debt or equity) to continue trading.  

 

 

You already said that when you said they pay cash and spread the cost out. If they are spreading the cost out over an appropriate number of years, the the bottom line is fair. I doubt the US will allow them to do whatever they want so they they can fudge cashflow with profits. And I assume that content has a high value early then a low value in a year or two or three, and amortisation would allow for that. If your assumptions are correct, NF will make their 1B profit every year, then in a few years time a loss of 10B. I dont see the US accounting practices allowing that

 

If they make money, the cashflow deficit/surplus will even out over time

 

Ironically, cashflow is more important than profit.

 

 

Amortisation assumptions can be very broad based on US GAAP.  And as long as Netflix complies with these "generally agreed" principles then there are no issues with how it bases its assumptions.  And the auditors (paid by the company) will review them for reasonableness.  If the timing of the assumption is incorrect then at some point in the future the remaining value of the asset will occur as an adjustment to the companies bottom line (recall TVNZ did a whopping writeoff of its Disney contract in the last few years as the assumed value of the asset (future viewing) changed).

 

All I suggest is that you be wary of reported profits and spend more time focusing on the cashflow statements.  You cant fudge cashflow.  You can fudge reported profit.


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  # 2287133 1-Aug-2019 13:34
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So instead of being 50 times cheaper than Sky, after the increase Netflix will only be 49.97586 times cheaper than Sky.

 

 

(Ok, I didn't really do the calc. My point being that even after the increase, Netflix remains outstanding value for money when compared against our local dinosaur).

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  # 2287139 1-Aug-2019 13:48
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ockel:

 

 

 

Amortisation assumptions can be very broad based on US GAAP.  And as long as Netflix complies with these "generally agreed" principles then there are no issues with how it bases its assumptions.  And the auditors (paid by the company) will review them for reasonableness.  If the timing of the assumption is incorrect then at some point in the future the remaining value of the asset will occur as an adjustment to the companies bottom line (recall TVNZ did a whopping writeoff of its Disney contract in the last few years as the assumed value of the asset (future viewing) changed).

 

All I suggest is that you be wary of reported profits and spend more time focusing on the cashflow statements.  You cant fudge cashflow.  You can fudge reported profit.

 

 

If the US freely allows companies to decide what profit to report then I guess you are correct, but that not my understanding. TVNZ's writeoff is not the same as intentionally understating profits by playing with digital content amortisation. In any case it would not be that hard to look at cashflow, "reported" profits, content assets, and find the date where this will tank. Notwithstanding those that fund the cashflow having an interest in that. Maybe I should send my degree back to Sanitarium!

 

IMHO, danger signs will be seen well before it bites, thats what will cause consolidation to occur, this is all natural.


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