Are the fundamentals for NFLX changing?

[GarrettKimmel]

Let me preface this post by saying that I have not done a full read of NFLX's 10k, so forgive any ignorance or poor understanding on my part.

For a long time I think a lot of people's problem with NFLX has been that while their customer acquisition and subscription model has been relatively successful, their implied valuation has not been justifiable due to poor content acquisition economics. This meaning that NFLX has had to pay enormous licensing and rights fees to provide their streaming content which they don't own. As a result, FCF has not been there (TTM is -$543mm).

What got me thinking about a shift in their overall business model was over the week as I finished up their new Original series Narcos. It always struck me as impressive that every Netflix Original series has seemed to do very well - House of Cards, Orange is the New Black, and Narcos to name a few. However, when I looked into it I saw that Netflix is the publisher of well over a dozen originals that range from documentaries to children's shows.

So this leads me to ask the following questions about NFLX's business that I thought we could brainstorm on:

* What is the ROIC on publishing original content?
* Is the mix of original content greater than, or could it eventually exceed, the amount of licensed content NFLX streams?
* What potential effect could a greater mix of original content have on customer acquisition economics vs. competing streaming services such as Hulu?

Or maybe this has already been noticed by investors, priced in, and I'm just late to the party haha.

What are everyone's thoughts?

 

[rmorse]

The value of a stock on any given day is based on perception and market conditions. Perception and market conditions change everyday. Some things will never make sense including the daily fluctuation of stock prices.

 

[volpunter]

bollocks. So according to your point it is worthless to ever trade stocks because it is a pure gamble. By extension the same then should be applied to commodities, index futures, currencies.

There is something called "fair value" and some hedge fund managers make billions betting that current market values are mispriced.

But you at least make it perfectly clear that you believe the only ones benefitting in this game are brokers such as the one you represent.

The value of a stock on any given day is based on perception and market conditions. Perception and market conditions change everyday. Some things will never make sense including the daily fluctuation of stock prices.

 

[newwurldmn]

Let me preface this post by saying that I have not done a full read of NFLX's 10k, so forgive any ignorance or poor understanding on my part.

For a long time I think a lot of people's problem with NFLX has been that while their customer acquisition and subscription model has been relatively successful, their implied valuation has not been justifiable due to poor content acquisition economics. This meaning that NFLX has had to pay enormous licensing and rights fees to provide their streaming content which they don't own. As a result, FCF has not been there (TTM is -$543mm).

What got me thinking about a shift in their overall business model was over the week as I finished up their new Original series Narcos. It always struck me as impressive that every Netflix Original series has seemed to do very well - House of Cards, Orange is the New Black, and Narcos to name a few. However, when I looked into it I saw that Netflix is the publisher of well over a dozen originals that range from documentaries to children's shows.

So this leads me to ask the following questions about NFLX's business that I thought we could brainstorm on:

* What is the ROIC on publishing original content?
* Is the mix of original content greater than, or could it eventually exceed, the amount of licensed content NFLX streams?
* What potential effect could a greater mix of original content have on customer acquisition economics vs. competing streaming services such as Hulu?

Or maybe this has already been noticed by investors, priced in, and I'm just late to the party haha.

What are everyone's thoughts?

In 2011, there was talk that NFLX wouldn't be able to support the growing cost of licensing content. It was about that time they started House of Cards (which they bought supposively because their data mining teams realized that people like Kevin Spacey and political thrillers). Before 2011, NFLX was considered a Blockbuster competitor. Now they are considered an HBO competitor.

In my opinion getting original content saved the business. They were dependent on ABC, NBC, etc for content when these guys were trying to start their own streaming services. Now NFLX has been able to earn it's own userbase which allows them greater negotiating power with the larger content owners.

I don't think anyone can accurately value NFLX. I built a financial model in 2011 when the market cap was 4bn, it came down to (the number of users they can get * monthly fee)-(cost of content). Two of those numbers are highly volatile into the future. At the time I figured the company can be worth zero or 10bn but it was a crapshoot. I should have bought the stock.

 

[emg]

So this leads me to ask the following questions about NFLX's business that I thought we could brainstorm on:

* What is the ROIC on publishing original content?
* Is the mix of original content greater than, or could it eventually exceed, the amount of licensed content NFLX streams?
* What potential effect could a greater mix of original content have on customer acquisition economics vs. competing streaming services such as Hulu?

u didnt mention stock split.

 

[jonny1lot]

Netflix is a pig. I hate that stock. Short it until your hands bleed.

 

[destriero]

No, the content isnt enough with NFLX at 50 let alone 100. I watched HoC and Narcos, but they are making a mistake to air the entire season at once. Everyone that I know has a NFLX sub and nobody watches anything other than HoC and Narcos. Their catalog (outside of original) is pathetic.

 

[sellindexvol66]

No, the content isnt enough with NFLX at 50 let alone 100. I watched HoC and Narcos, but they are making a mistake to air the entire season at once. Everyone that I know has a NFLX sub and nobody watches anything other than HoC and Narcos. Their catalog (outside of original) is pathetic.

whats wrong with you.

how could you not spend 2 hours nightly watching an unlimited supply of B movies?