Nothing you quoted contradicts the viewership numbers. You're just unhinged at this point.

I don't think you know what "factual" means. I'm giving you hard data from two different periods and two different impartial companies, tracking the actual views of 102 million customers - which shows that 42% of customers only view licensed content and that none of the top 10 most watched are the heavily promoted expensive originals - and you're giving me non-data vague company statements ("Sarandos said the amount of money Netflix is investing in originals is "pretty consistent" with the amount of hours people spend watching them") that doesn't even refute what I'm saying?

Stick in a fork in you bro, you're done.

It said that 42% of viewers watched at least 95% licensed content. Not "42% of viewers only view licensed content." A person likely to have a subscription to netflix to watch one or two originals that spends the time between batches/seasons of those being released vegging out to old shows would be part of that number.

Even so, that number is static and thus meaningless as to what the trend is.

The number of streams that were netflix originals jumped from 12% to 20% during the year before the study. That is more in line with what netflix is trying to do.

netflix actually spent 9.8 billion on content last year. They spent 5.7 billion in 2015. so basically they've shown no ability to scale their content costs.

obviously that scale kicks in at some point but you're grossly underestimating how much content spend will be in 5 years. I bet they spend 21 billion in calendar year 2021

also in terms of margins, I love how people say its a disruptive new technology so old models dont apply. This isnt software, they cant just create content out of thin air. People want to be paid to create content. difference with disney is yeah, they sort of can create content out of thin air because they have phenomenal IP. So I see it being very hard for netflix to ever beat 25% ebit margins

What is disruptive is the subscription model versus the old school network advertising model. The advertising model is dead and every media company is now scrambling to get into some sort of subscription model.

Used to be a content creator would pitch ideas to the networks and if they were lucky enough to get picked up they were at the mercy of the nonsensical Nielson ratings. Now its a whole new ballgame. I suspect the newcomers to the streaming industry will have even greater costs and hurdles than Netflix does. Also I am guessing that Netflix internal viewer data gives them a much better idea of what streaming consumers want and can use this data to much more efficiently manage their content spend.

Does that mean NFLX is correctly valued as a stock? Probably not

Yeah, the 9.8 billion is for pure crap too, that half of their own subscribers don't even want compared to first and second rate licensed content.

Neflix simple doesn't own any talent. Old media does, and I don't see that changing.

It's always the same story. Slap a software layer and some hype over what is pure old world business with old world fundamentals, and people who don't know anything about either technology or business talk up the "paradigm shift", until it eventually crashes to old world fundamentals, which it always does. The 2000s tech bubble and (non-new technology) .coms selling stuff online, Tesla disrupting car manufacturing because software layer, Enron disrupting energy markets because derivatives, Valeant, Shrekeli disprupting pharmaceuticals with "new models".

Netflix is an old world media business with no way to escape being an old world media business. And it's a pretty terrible one at that. They have to pay vast sums to create content and only receive $10/month incoming, and have no side revenue streams. That model is a mess.
What the actual **** are you talking about? Pay TV isn't a subscription model? It's been around a lot longer than Netflix.



Let's stick to facts rather than dopey hype, ok? As for the "old advertising models" being dead, here's how Disney is doing:



Their advertising revenue went up through that whole period. It's dipped a little - and I mean a little - recently, but there's no strong evidence of a trend yet, let alone the model being "dead'.

HULU is another example of you just making **** up that has no connection to reality. They have 20 million subscribers and pulled in a full billion dollars last year in advertising revenue from the portion that use the advertising version.

They're growing way faster than Netflix 40%/year. Their advertising model is paying as much revenue per user as Netflix gets from their subscription model
Please please please may I have a sane and factual bull who's not just wholesale making **** up?
You would guess this but you would be wrong. With $8 billion dollars Netflix is producing content that doesn't hit the top 10 - even new heavily promoted content vs both new and old licensed content - and where 42% of their viewers don't even watch any of it.

Netflix is producing pure worthless trash with their data - formulaic public access/TV movie quality stuff that appeals to the losers who binge watch, but not the rest. And the rest are what matter when competing with Disney and when continuing to grow once the low hanging fruit are picked, which they already are in many key markets.

At this point, international expansion requires insane levels of international content spend. Setting up in the US and then expanding to wealthy English speaking countries that are happy to view the same content because of shared culture/language was really the low hanging fruit.

I guess I should have said advertising model. Or perhaps the network model that ABC, Fox, CBS and NBC are. Cable TV is a subscription model that people are fleeing from because people prefer closed system streaming models like Netflix which is what media companies are scrambling for (see all of the buyout fervor).

As consumers have gotten a taste of watching what they want when they want commercial free they aren't ever going back to the old ways. Even those that have cable still will use the DVR to skip the commercials.

You did say advertising model. Your position seems perfectly reasonable and first glance and is pretty much the "fake news" consensus, but it is fake news. It's what the news and analysts do. They print the edgy view (old energy- killed by Enron!) and then copy each other's articles and created a pure bull**** consensus of some changing paradigm that morons can get clickbaited on.

Reality is very different.

Is there any strong evidence that the advertising model is "dead"? Revenues declined a little fora couple of years but have roared back, but the decline is largely because there's so much content now that competes for eyeballs and time, including YouTube and other ad supported services as well as stuff like computer games. Netflix isn't so much an ad free streaming competitor as it is a pure time competitor - even if it was ad supported, like Hulu is with 20 million subscribers/50 million eyeballs, it would still take network TV time away. It's not the subscription model killing the ad model, it's simply more options making a tiny dent (which has now rebounded).

I just don't see how Netflix is destroying anything or how any model is dead at this point. Your view is the hip/fake news consensus way of viewing it, but it doesn't seem to reflect reality. CBS for example, has these numbers from a month ago:

CBS tops estimates on healthy ad sales

I just don't see any evidence whatsoever - not even a trend! - that advertising is "dead" and that they're "scrambling" to get into streaming or that subscription/non-advertising models are giving them headaches. It seems to be an extremely slow change which all the media companies are keeping up with and carefully transitioning to, with their core businesses still going strong.

And I would add that this growth is despite them also competing with the rapid exponential rise of Google and Facebook competing for advertising dollars. In fact it's a testament to the remarkable strength of the advertising model that revenue is increasing despite supply increasing 100+%.
I think you have upper middle class bias or something. You have a view of what people are doing that is not in any way reflected in the numbers of actual network TV ad sales, which are growing, or actual lost pay tv subscriptions, which are steady at 98 million.

You've been spewing BS for about 2 years now about how overpriced Netflix is, yet it's up 300% since then... I'm sure evidently one day you'll be right, don't give up kiddo

Netflix long? Keep holding at $390, kiddo, I'm sure that'll end well for you.

And are you allergic to facts? I'm not sure what your response has to do with what was quoted. I guess the fish get salty when you point out they're holding T7s at this point, and that that isn't a good play. Congratulations on your success if you were long from much earlier. Please post when you sell!

Couple things: think about the content created in western countries internationally, significance long term; the time and resourses needed for new player to enter new market and adjust to the specific conditions there; scale = buy ****load of content, targeting X partitions of the population (X larger with scale) - use data + MI - recommend right **** to right person for it (TS, think how irrelevant are your statistics in such an environment. Think it carefully) that said, I'm short nflx, short term only. But pretty sure eventually they will grow into their valuation

Couple things: think about the content created in western countries internationally, significance long term; the time and resourses needed for new player to enter new market and adjust to the specific conditions there; scale = buy ****load of content, targeting X partitions of the population (X larger with scale) - use data + MI - recommend right **** to right person for it (TS, think how irrelevant are your statistics in such an environment. Think it carefully) that said, I'm short nflx, short term only. But pretty sure eventually they will grow into their valuation

I agree with all that (including short NFLX ) but what you wrote is actually bearish. You seem to be forgetting that the major studios already have this. Disney for example has Netflix crushed on content in most international markets, with deep local knowhow, local movies, channels, merchandising, a vast international library already translated.

Disney's back catalog alone >>>>>>>>> Everything Neflix has or will produce in the next five years, in terms of quality, volume, desirability, etc, both in US and international markets.

For example, in India just to pick a random country, multiple Disney channels are already running there, with lots of local content (adult and kid):

Simple Samosa!



Disney India blockbuster movies:



Netflix are the guys many years behind here.

And even looking at the available data what you say seems to be untrue. HULU is growing at 40%/year and has 20 million subscribers. They seemed to have no trouble entering the space that Netflix dominated. Indeed, parts of Netflix's rapid subscriber growth slowing in the US is from competitors like this. Disney already has all kinds of local content, knowhow, partnerships, billing, etc all over the world.

All of this big data stuff that you're getting excited about is straight up bull****. Think it through - if Netflix's data had value, they would be producing much better content. As it is they produce formulaic B grade trash that even their own customer base has a low opinion on as shown by how they vote with their clicks.

Making movies and TV shows that people want to watch is about talent and money. Silicon Valley big data is great for advertising and politics, and that's about it. It's not a formula for making content. That's made by talented writers and producers and staff with lots of money and decades of trial and error. The idea that you can squeeze out some more demographic juice here is laughable; the entertainment market already saturates every demographic there is 10x over with content.

Besides, EVEN IF this stupid meme was true, most of the major studios have their fingers in the pie of HULU (50 million eyeballs, data as rich as Netflix), pay tv, etc etc. The idea that Netflix have some data advantage is pure fake news, spoon fed to you by daddy, the breathless tech media and their clickbait, as well as worthless analysts. Think it through for yourself. Look at the data for yourself. Every bull here believes ridiculous things about both the industry and Netflix.

you just described HBO. Which isnt surprising because Reed Hastings has said he hopes to become HBO faster than HBO becomes netflix.

HBO has no commericals, leases a bunch of 3rd party content, and has a great collection of originals. So, netflix. only difference is HBO came up before streaming but still got scale through the old distribution model. Now they have streaming.

The whole bull case about netflix really should just be a scale argument since they are truly global. Thats much more believable than a paradigm shift which isnt true.

Of course US growth is slowing, u got only so much households there. Key to valuation is international.
"if Netflix's data had value, they would be producing much better content"
Here is your misunderstanding - they really dont want to produce top top content, they want to produce effective content - targeting different small groups of their total customers. Sure they still want to have some critically aclaimed stuff but thats very small part of the game and expensive one. A bigger part is exactly formulaic B grade ****, but thats what works with most ppl and what works with NFLX strategy. And the data and proper analysis gives u the ability to predict exactly what combination of actors-director-writer-story type etc. etc. will fit the taste of targeted group with high probability.
Another thing - think about actors directors writers, the talant so to speak - a part of their decision of who to work for is how many eyeballs they get, also how much freedom they get. Also content library being created is pretty huge moat too, and netflix are too conservative with amortization metrics (contrary to what most people think, only my opinion ) It doesnt matter so much how old exactly is the content if they can succesfully predict what to recommend to people that's tailored to their taste - they wont care its 10 years old, they will care that netflix gives them something they like. Lastly just gonna mention their many international projects and ramp there is another future advantange that will create a lot of staying power

It is beyond comical that you think Netflix have an edge here. This is the "Tesla is leading in autonomous driving" bull thesis for Netflix. It's a narrative that's saleable to retail tech fish but has no basis in reality.

The reality is that Netflix have no special insight, and are creating B and C grade TV and movies because they can't afford quality content costs and have no choice but to pad their offerings out with something. The radio silence on details on how their content is playing, combined with a number of "shrug" type comments from the Netflix CEO on how their original content is faring, says it all really.
Netflix creating B & C grade content library that half of their early adopters customers have no interest in = "a pretty huge moat".

Massive Disney A-grade content collection covering decades with far more content, far larger scope, proven appeal = "will have no effect on Netflix".

These aren't sane positions. You have to let go of one or the other.

Come on now, they cant afford costs, really? Moat in the library is in its wide range. Also once u got a person its a lot easier to get him to pay the next 10$ every month, the trickier part is the aqusition in the first place which is what their good content is for (and their foreign language projects).
About Disney, havent said they wont have effect on Netflix, but wont be such a big deal probably. They are couple years late to the party, while netflix got their massive customer base already

I've been long since late '15, yes I agree with you, they're overvalued, but so is the whole US stock market, I don't have enough facts / stats to call a peak let alone short them, shorting any growth stock during a bull run is a dangerous game.

Throw some numbers out there in what you believe the stock price should be now and in the future rather than pointing out that it's overvalued, the market is always irrational and even though you're probably right, you haven't convinced me to sell

exited short, not the best timing in retrospect and not the best hedge given that trade war doesnt affect netflix much..

ps. a bit more indepth look at the business model, thought it would be useful to some people here : http://www.vulture.com/2018/06/how-n...-industry.html

Using data + new age analytics, they micro target on a global scale which is interesting. Their streaming content still sucks though (at least to me it does). They seem to be mass producing second rate products hoping to luckbox a few hits here and there?

Is this the new age of valuing a company? Like TSLA, amass debt, bum rush a market with revolutionary vision, grow into valuation, ???, profit?

Just like I didn't buy that Tesla had some car manufacturing robot genius that the majors don't have, I don't buy that Netflix have some super data advantage that allow them to make better targeted content. It's nonsense. Their content wouldn't suck ass and be barely watched if they had an advantage. The notion that their watch data - which everyone else has by the way if you read my reasoning above - is an advantage doesn't pass a basic bull**** test.

If anything, their data has been a negative, as their shows are formulaic and look like Frankensteins, put together to look a person but not quite right and a little offputting, rather than being quality original content as part of a proper creative process rather than making something to fill a box.

Excellent article! I particularly liked this passage:

Which sort of refutes the Netflix shows suck and nobody wants to watch them mindset. Plus NOBODY but Netflix knows what the viewership numbers of any given show are not even the creators.

They have changed the game and have a vast leadership position. All that said though doesn't mean they are properly valued by the stock market. But the notion that old school thinking like Disney will hurt them is ludicrous. They may very well be overvalued but Disney will never be the reason why.

They have a lot of obsessive compulsive fans. That's all that says. We know that 18% are Netflix diehards who watch a lot of original content. On the other end, 42% of their actual customers donotwantdog.jpg. The hardcores are irrelevant for a bull or bear case and especially irrelevant for "Disney can easy steal their least satisfied 20% and put Netflix in growth reversal, which will tank the stock" bear thesis.

Where do you get this from? We have the exact viewing from 10s of million of computers which program they watched, for how long, how often they clicked off, what clustering of programs they like - the survey organizations I posted above have data as rich as Netflix for a huge sample of their population.

This whole old school thinking/new school thinking just isn't real. Hulu, owned by "old school", is making a profit and has nearly half the subscribers of Netflix, starting far later and growing at a much faster rate. HBO has more subscribers worldwide than Netflix. Disney has vastly superior content, and there's no complex software layer in streaming beyond the basic technical requirements - it's all content.

The idea that a vastly superior content library underpricing Netflix and aggressively marketing in a bid to get as many subscribers as possible as fast as possible can't hurt them (on subscriber growth rate, on the ability to raise prices) is a little hokey imo.

A quick google search tells me Netflix has 117 million subscribers to HBOs 36 million (Starz/Encore has 40 million). Disney has some important movie franchise content but that won't translate so well to streaming. Once you have seen them you have seen them and they have already announced they will stress childrens and family friendly content rather than the gritty shows that are the talk around the water cooler. To succeed at streaming you need series after series after series. Netflix has a huge head start here not to mention a HUGE subscriber base which is really the most important aspect.

I am willing to agree to disagree. 6 months after Disney launches Netflix will have more subscribers than it has today. This doesn't mean the stock is worth $400+ but they won't be losing market share to competition. The entire pie is getting bigger and room for many players.

I have no idea what you're talking about. HBO has 142 million subscribers as of now. This is last year:



I agree completely with this, it's nearly a mortal lock. Irrelevant to the "Disney will turn NFLX growth numbers negative for the first time in years and compress the inflated P/E rapidly" bear case though.