Tag Archive for media

Netflix – Debt and a Risky Business Model

Last week one of the internet’s darling companies Netflix suffered a huge drop in value. The precursor was a hugely disappointing earnings report by the media giant, much worse than expected with the companies attempt to focus on other key economic indicators being largely ignored.

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The success story of Netflix has been really driven by the growth of it’s subscriber growth now approximately 1.7 million a year across the world whereas the market had expected upwards of 2.5 million. It’s not known why these estimates where so wrong however it’s unlikely that subscriber churn is completely to blame.

The fundamental problem though wasn’t the number of subscribers which are still impressive, but more the huge levels of spending and debt being incurred by the company. As many internet darlings have discovered it’s not enough to just have users, a company needs to be profitable or at least have the expectation of profit. After all if you look at the total number of subscribers which is now not far off 80 million, the potential is massive. The problem is that although marketing expenses are relatively low for a media company – the costs for content are very large indeed.

All those films and movies don’t come cheap and remember since Netflix has expanded to a more global company covering around 190 countries, those costs will have spiraled upwards. Broadcasting rights and licenses are mostly agreed on a per country basis which is why Netflix’s content varies so much from region to region and why they have to artificially block access from different areas which users often do – see Netflix Blocked VPN and Proxies.  These deals have also to be over a long period which means that the content liability stretches out over years to come.

So how much is this liability and how much debt will be involved?  Well it’s estimated that Netflix’s streaming content obligations now total something like 13 billion dollars up over $3 billion from 12 months ago.  This means that it’s content liability has grown by over 31% compared whereas it’s subscriber base has grown around 27%.

This means that there is currently a pretty large difference between growth in earnings (via subscriber increase) and that of spending on content liability (remembering that these are not strictly capital assets although the value does depreciate over time).

The debt is going to keep rising for the near future and possibly beyond.

Further Reading:

The use of VPNs and proxies to watch Netflix is growing, in tis article – Residential VPN services, demonstrates how these Netflix VPN blocks are being fought.

 

iPad and the Economics of the World

It was a huge deal when these were attempting to sell 1 million a month during those times. Now we understand that was a poor start.

Since its launch, Apple has offered nearly 200 million I pads. Apple continues to be losing market-share, really, but nevertheless has the majority of the tablet PC sector’s earnings. A superb summary of the landmarks of iPad history is found at the the app store website. The writer describes how a iPad clarifies how it motivated his mom to use both the web and a computer, and enlarged the audience for accessibility and on-line media.

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Another post is from 2010, the CBS Information report of the launch. An analyzer from Wired is quoted as stating “it will make the computer vanish.” Fundamentally, the report expresses the thought the iPad becomes a television set, a mag, a paper, a-game, a publication, and virtually other things that can be achieved with a data-stream.  If you combine with an VPN client, which are available from a wide variety of services like this

There was incredulity in 2010, that this is simply another gadget. The theory was adopted by some print companies. They launched the notion of reactive design for electronic content as an important tool because of their customer’s media installation strategy. Now all produced content has to take care of the extensive variety of communications and imaging all through media formats, from movie to packaging to signage.

Tablet PC aren’t going away, they are becoming better. The tendencies of cloud-computing, more affordable and quicker broadband, and expanding reliance on movie, future tablet PC, and smart mobile, increase is supported by all. Have you been participating? Is the company an important partner for making communications operate in as many formats as there is potential?

Further reading

http://thenewproxies.com/quick-ip-address-changer/