Analyst-Netflix 2.6-3.6 M subscriber loss = $160 M Redbox gain, 4.7 M loss = $445 M - High-Def Digest Forums
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Old 11-19-2011, 01:06 AM
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Default Analyst-Netflix 2.6-3.6 M subscriber loss = $160 M Redbox gain, 4.7 M loss = $445 M

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Analyst: Netflix’s Sub Drain Equals $160M Redbox Gain


18 Nov, 2011
By: Erik Gruenwedel



With Netflix expected to lose 2.6 million to 3.6 million subscribers in the current fourth quarter, Redbox could realize incremental revenue of about $160 million as a result, an analyst said.

When Netflix implemented a 60% rate hike in September to its combined disc and streaming rental program, subscribers reacted negatively — with 300,000 more abandoning the service than Netflix’s projected third-quarter (ended Sept. 30) loss of 800,000 subs.

Eric Wold, analyst with B. Riley & Co. in Santa Monica, Calif., believes Netflix’s defections could reach 4.7 million, which he said represent upwards of $445 million in disc rental revenue up for grabs.

In a Nov. 16 note, Wold surmised that the majority of the aforementioned defectors would downsize their monthly rental activity since a-la-carte rentals carry a higher perceived cost than a monthly subscription.

Indeed, the Netflix exodus occurred in large part due to the perception among subscribers that the value of its $9.99 combined disc and unlimited streaming rental program could not be replicated by Netflix’s separate $7.99 monthly disc and streaming program.

“Once that subscription plan was eliminated (or essentially priced up 60% to $15.98), we believe the attractiveness of a $7.99/month DVD-only plan for the casual renter was dramatically diminished given the growing availability of Redbox rentals for $1 a day,” Wold wrote.

With Redbox parent Coinstar acknowledging that 20% of Netflix subscribers also use Redbox, Wold said a large percentage of the remaining disenchanted Netflix subscribers would likely downsize their rental activity to about one to two discs per month at Redbox kiosks generating $50 million to $80 million in incremental annual pre-tax earnings.

“In our opinion, this potential upside is not fully reflected in either our or consensus 2012 expectations at this point,” Wold wrote.
http://www.homemediamagazine.com/net...box-gain-25679
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Old 11-19-2011, 01:53 AM
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If Hastings isn't gone by the end of the year, they deserve to fall...
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Old 11-19-2011, 03:16 AM
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If Hastings isn't gone by the end of the year, they deserve to fall...
They should make this forum the new CEO.. since we all saw it a mile away.

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Originally Posted by PSound View Post
Netflix customers can get discs for the same amount as before. It really is simple.
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Originally Posted by Elee s View Post
Simple enough if competition didnt exist. Redbox and others might be better deals for alot of DVD customers now.
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Old 11-19-2011, 08:16 AM
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Is Netflix making any profit right now? I keep hearing these big numbers thrown around whenever a licencing deal hits the news, and now hearing they are losing millions of subs...how are they still afloat?

Also, if Amazon were to quickly launch an app for their streaming service across all major devices (Boxee, Roku, PS3, 360, Wii, etc.) by the end of the year, how much more do you think that would hurt Netflix?
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Old 11-19-2011, 09:12 AM
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Originally Posted by A_Gorilla View Post
If Hastings isn't gone by the end of the year, they deserve to fall...
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Originally Posted by Elee s View Post
They should make this forum the new CEO.. since we all saw it a mile away.
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Originally Posted by rm082e View Post
Is Netflix making any profit right now? ...how are they still afloat?
Netflix made $190 million in net profit for the first nine months on 2011 on revenue of $2.3 billion.

In 2010 Netflix made $113 million in net profit over the first nine months, on revenue of $1.6 billion.

In other words Netflix is doing very well, but the haters have to have somewhere to vent their hatred.
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Old 11-19-2011, 09:13 AM
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Originally Posted by rm082e View Post
Is Netflix making any profit right now? I keep hearing these big numbers thrown around whenever a licencing deal hits the news, and now hearing they are losing millions of subs...how are they still afloat?

Also, if Amazon were to quickly launch an app for their streaming service across all major devices (Boxee, Roku, PS3, 360, Wii, etc.) by the end of the year, how much more do you think that would hurt Netflix?
Yes every few days we hear they are spending even more money, yesterday they purchased rights to an old TV show that left the airwaves because few were watching and the ratings showed that. I notice many of these deals are up in 2013. Will they even have enough money to pay these costs many of which will be re occurring fees when the rights expire and are up for renewal again. Netflix will have a hard time raising rates again soon as the press will be all over that if it happens and they the media will spin this as a negative for sure.

Last edited by towergrove; 11-19-2011 at 11:18 AM.
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Old 11-19-2011, 09:56 AM
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Originally Posted by mikemorel View Post
Netflix made $190 million in net profit for the first nine months on 2011 on revenue of $2.3 billion.

In 2010 Netflix made $113 million in net profit over the first nine months, on revenue of $1.6 billion.

In other words Netflix is doing very well, but the haters have to have somewhere to vent their hatred.
Maybe I'm missing it since I don't spend much time on this board, but I don't see any real "hate" for Netflix. I don't think it is unreasonable to feel displeased with a 60% rate hike...
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Old 11-19-2011, 10:06 AM
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Originally Posted by mikemorel View Post
Netflix made $190 million in net profit for the first nine months on 2011 on revenue of $2.3 billion.

In 2010 Netflix made $113 million in net profit over the first nine months, on revenue of $1.6 billion.

In other words Netflix is doing very well, but the haters have to have somewhere to vent their hatred.
The key. Number is that it has P/E that is priced at significantly higher future earnings several multiples of their peak. Now that it is clear subscriber base is not going, and earnings are not going on that trajectory, the stock will settle at a more solid level that can be justified.

This was a growth story that was built by the analysts out of fundamental misunderstandings of their potential customer base. NFLX is not going away, but absent the growth and technology, any P/Eabove 12 has limited upside.
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Old 11-19-2011, 10:29 AM
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Originally Posted by Kosty View Post
http://www.homemediamagazine.com/net...box-gain-25679

With Netflix expected to lose 2.6 million to 3.6 million subscribers in the current fourth quarter, Redbox could realize incremental revenue of about $160 million as a result, an analyst said.
NETFLIX LETTER TO SHAREHOLDERS - October 24, 2011

Quote:
In Q4, we are providing guidance for both our domestic DVD and streaming segments, and will be reporting on that basis going forward so investors have greater transparency on the respective businesses. In the past, we have guided to a total domestic operating margin target. Going forward, we will be guiding to separate contribution profit ranges for each segment, as well as providing guidance on global net income and EPS. Similarly, we will be focused on, and therefore guiding to, streaming and DVD subscriptions, as they drive revenue for each of our domestic segments (rather than total unique domestic subscribers.) Nevertheless, we do anticipate that total unique U.S. subscribers will be slightly up in Q4.

We think DVD subscriptions will decline sharply this quarter, as reflected in our guidance, due to our price changes. Our weekly rate of DVD cancellation is steadily shrinking, as the price effect washes through, and in future quarters we expect DVD subscriptions to shrink more modestly. We don’t anticipate any additional material investment in equipment or other PP&E and a majority of our DVD library is fully depreciated; so at $7.99, the segment is profitable. We have yet to decide whether or not to offer video game discs. The decision will have little financial impact either way. We still expect DVDs to last a long time, as they serve some unique needs for completeness, for simplicity, and for those households without access to high speed broadband. Our $7.99 pricing is a full 20% lower than our nearest unlimited DVD-by-mail competitor, and our service is better because we have more distribution centers and, as such, faster delivery.
Total subsciptions are not dropping.

OPTICAL DISC subscriptions are dropping.

Some publications and internet posters blood boils when that occurs.
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Old 11-19-2011, 10:50 AM
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Originally Posted by rm082e View Post
Maybe I'm missing it since I don't spend much time on this board, but I don't see any real "hate" for Netflix. I don't think it is unreasonable to feel displeased with a 60% rate hike...
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Originally Posted by mikemorel View Post
NETFLIX LETTER TO SHAREHOLDERS - October 24, 2011

Total subsciptions are not dropping.

OPTICAL DISC subscriptions are dropping.

Some publications and internet posters blood boils when that occurs.
There is indeed hate here. It's made to look like they are just reporting the news. Bit the spam you see of every reported story regardless if it's the exact same story is proof enough. Why the hate? Because Netflix is proof of the real future which is not what these guys want. I see them as a bunch of D&GRs complaining because things will not turn out the way they expected. They are just a bunch of pessimists. Netflix stumbled. But these guys are quick to write them off for obvious reasons.
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