Qwikster: Netflix's NGE

[Chimpy]

What is redbox doing right that blockbuster did wrong?  Or is it just not having a full store they are paying rent for?

A) Redbox not having stores means they do not have to have as much in the way of staff (a couple of guys can cover all the machines in a good sized city by themselves, a single Blockbuster store probably had 12 people on payroll at a minimum). The other operating overhead of rent/utilities/etc. not being there helps a lot too.
B) Redbox does not carry a very large selection.

[Yegolev]

At the moment, robots are less assholey than teenage humans.  Also, robots are much cheaper than humans.  For one thing, they don't require expensive health insurance.

[Numtini]

Netflix started out targeting this new technology, DVDs, and a big part of that was being a place where you can get everything that was out at the time on DVD instead of the Top 10 that Blockbuster had in DVD, forcing you to watch everything else on VHS. For me at least, a big part of netflix appeal was that it had everything. Same appeal that Amazon had. No more going to Blockbuster/Borders and finding out they didn't have what you wanted.

Redbox did the opposite. They came in once the tech was common and have grabbed the least common denominator top 10 crowd. Netflix probably wasn't even competition, the average redbox customers probably weren't going to spring for a monthy fee anyway.

BTW DS9 is on streaming. I remember some people asking where it was. I had the same reaction to it as I had 20 years ago, it made me want to watch B5 which has been removed from streaming. That's a big issue on the streaming thing. Stuff comes which is great, but it also goes and it is very very annoying to sit down to watch something you could the previous day and have it be gone.

[KallDrexx]

Whatever they paid it is still a drop in the bucket compared to the $5 billion in market cap lost from that announcement and it doesn't appear like the stock is going recover any significant portion of that even with today's announcement.

When it was announced, Netflix' stock started trading up 3%.  It's now ending the day at -4.77%.  As a comparison, the market as a whole is up 3%.

[Xanthippe]

My local grocery store has Blockbuster boxes - so Block-b (as my kid used to call it, or simply "the buster") is now competing with Redbox.  Our local Blockbuster closed a few years ago, but I think there's one across town still.

[Trippy]

Whatever they paid it is still a drop in the bucket compared to the $5 billion in market cap lost from that announcement and it doesn't appear like the stock is going recover any significant portion of that even with today's announcement.

When it was announced, Netflix' stock started trading up 3%.  It's now ending the day at -4.77%.  As a comparison, the market as a whole is up 3%.

I meant the original Qwikster announcement.

Edit: I

[tazelbain]

Current P/E Ratio            29.7
P/E Ratio 1 Month Ago    54.8
P/E Ratio 26 Weeks Ago  79.3

Seems like the stock has just gone back to normal.

[KallDrexx]

More clownshoes from Netflix from their earnings call last night.

They lost 800k subscribers from their stupidity, and predict they will be running in the red for a few quarters due to their expansion into Ireland and the UK.  When the CEO was asked why they chose UK and Ireland, he responded with:

Well, Sky Movies does have the fixed major studios, but there is a wide range of other movie content available from the non-fixed majors, and then there's a tremendous amount of television that's available also. And Sky Movies is expensive at GBP 16, or about $25 a month and it's only taken now by less than 5 million citizens or households. So there's a big opportunity for those who don't have Sky Movies. And then for those who do have Sky Movies for using our TV content selection to attract those subscribers.

So the answer to the question of why the U.K. and Ireland, it's because we see a very attractive market, with great, over-the-top penetration. Many consumers are very comfortable with online video, and use it frequently from 4 on Demand, from BBC iPlayer, Sky Go, all the different providers. So it's a very fertile market in that way. And our big advantage is really knowing streaming technology well, streaming marketing, and we feel great about entering with all of our CE partners.

So, essentially Netflix thinks that even though Sky Movies has long and good relations with content providers, they think they can get a better deal and be cheaper than Sky can possibly go.  And this is where they are putting a huge investment in.

Oh yeah, and they predict that subscriptions in the US will go up next quarter despite price increases.

Meanwhile, in reality land, their stock price is down 37% to 74 since yesterday, the first time it's been down below 100.

[Sky]

Wall Street is not reality land.

[HaemishM]

Yeah, the funny part about their stock price tanking (besides the "fuck with your customers, they will fuck back" lesson) is that Netflix still MADE A PROFIT. But profits aren't what Wall Street wants, they want expectation of stock price rises in the future, which is so decoupled from actual business that it might as well be making bets on sleestack races on Jupiter.

[rattran]

We don't have investors anymore, just stock jobbers.

Hell, even my boss who had been evangelizing for how great netflix is for a couple years has dropped Netflix. When he had to chose between dvds and streaming or twice the price, he just dumped it all. Everyone I've spoken to about netflix has either dropped their sub, or reduced it.

[KallDrexx]

Yeah, the funny part about their stock price tanking (besides the "fuck with your customers, they will fuck back" lesson) is that Netflix still MADE A PROFIT. But profits aren't what Wall Street wants, they want expectation of stock price rises in the future, which is so decoupled from actual business that it might as well be making bets on sleestack races on Jupiter.

Normally I would agree with you (especially when you look at Microsoft's stock price) but it's justified this time.  Just because Netflix made a profit still doesn't mean they are headed in a direction to keep making profits.  The subscriber losses were near the end of the quarter, so the full effects of it won't be fully felt until next quarter.  They are spending massive investments on expanding streaming internationally when they have proven to not be able to gain or retain streaming content deals domestically.  Not much points to "Netflix will continue operating successfully in the future" much, and thus I think this is one of the few times that a stock drop is warranted.

[naum]

800K is a lot of customers, but that's only ~3% of the ~25M customers they still have.

They're still the market leaders in streaming video -- yeah, I know there are other alternatives, but none IMV rival the 8$ a month and device ubiquity (on just about every device and OS -- PS3, XBox, Wii, Roku, AppleTV, OS X, PC, iOS, Android, etc.…).

But if they stagnate and do not grow library while others jump into the market, it might be doom for them. And they might be hopelessly constrained by the movie studio houses and other forces (like Apple and others reliant upon streaming rentals and online purchases).

[NowhereMan]

I liked how one of their reasons for going into the UK was, "There's already a number of popular and free streaming services so it's clear people like streaming. We're just going to the same thing but not free."

[Sky]

We dropped it, but not due to the fiasco. We just re-upped cable for the winter. I intend on picking up netflix again next summer unless they fuck something else up. Since we weren't using DVDs (lol DVD resolutions), the decoupling didn't affect me at all.

[slog]

At some point, the content creators are going to pull their heads out of their asses and realize they can do this themselves.  It seems to me that the only reason Netflix exists today is that the same content creators can't bring it upon themselves to cut their prices on their own.

[Mrbloodworth]

They already are. But see my point a few pages back. I refuse to have accounts with 5 streaming services. I can't be alone in that.

[KallDrexx]

They already are. But see my point a few pages back. I refuse to have accounts with 5 streaming services. I can't be alone in that.

I don't need an account to watch ABC programming on abc.com, or CBS on their website, etc...

[Mrbloodworth]

I'm talking about HBO, Starz and Showtime like services.

[Furiously]

Or the cable companies and dish companies are going to say, "You give us the rights to digitally distribute this as well as show it on your channel, or we can drop you."

[Xanthippe]

I don't know where else to ask this so I'll ask here.

I want to be able to stream old HBO shows to my tv.  I have a TiVo with Comcast digital cable (HD) connected to my television.  I don't have an iPhone (although everyone else in my household does) or an iPad, but HBO Go sounds sort of like what I want except for the streaming to TV thing.  HBO On Demand seems lacking in old content - they seem to only have a very limited amount of things available.  Regular HBO allows for current series plus whatever movies and so on that HBO decides to put on their channels.

Netflix doesn't stream old HBO shows.

[Samwise]

Torrent + media server.   

[Trippy]

I don't know where else to ask this so I'll ask here.

I want to be able to stream old HBO shows to my tv.  I have a TiVo with Comcast digital cable (HD) connected to my television.  I don't have an iPhone (although everyone else in my household does) or an iPad, but HBO Go sounds sort of like what I want except for the streaming to TV thing.  HBO On Demand seems lacking in old content - they seem to only have a very limited amount of things available.  Regular HBO allows for current series plus whatever movies and so on that HBO decides to put on their channels.

Netflix doesn't stream old HBO shows.

If you have Comcast you'll want Xfinity TV. HBO Go doesn't work if you have Comcast or another cable provider that has its own HBO on demand system. There's Xfinity TV apps for iOS and you can use them to stream to your TV using something like AirPlay or an special HDMI cable for the iPad 2. Or you could hook your computer up to your TV.

[Xanthippe]

If you have Comcast you'll want Xfinity TV. HBO Go doesn't work if you have Comcast or another cable provider that has its own HBO on demand system. There's Xfinity TV apps for iOS and you can use them to stream to your TV using something like AirPlay or an special HDMI cable for the iPad 2. Or you could hook your computer up to your TV.

I think I have Xfinity.  I think I need to hook up a computer to my TV in order to get all that I want on my TV.

[Sky]

I think I need to hook up a computer to my TV in order to get all that I want on my TV.

Like minecraft amirite?

[Khaldun]

Netflix is on the march again. This time Reed Hastings has declared that their main ambition is to get out of streaming other companies content altogether and just become another cable content provider like HBO. More or less.

This is seriously marching to the head of the line of the most spectacular self-inflicted wounds in the history of business.

[taolurker]

The fake Reed Hastings in Conan's sketch last night was eerily close to how Netflix must feel about customers.

http://www.youtube.com/watch?v=eWYA753fBOY&feature=plcp&context=C3bd4201UDOEgsToPDskKrKcg1CjrXjHm6PTIIiivi

[caladein]

Not sure where they're going with this actually, as they did something quite similar to that I thought with the Red Envelope stuff and that just sort of stopped.  And now they have that new show.

And where the hell is my game rentals package...

[Trippy]

And where the hell is my game rentals package...

They canceled it after they killed Qwikster.

[caladein]

YOU MONSTERS

[Cyrrex]

I have trouble thinking of any company in recent history that has so thoroughly stomped on its own dick like this.  They were on top of the fucking world.  How did they go from such an intelligent model to all this pants-on-head stuff?

[Merusk]

The content companies started demanding a lot higher share of the revenues and Netflix had no idea how to leverage their position to push back, so instead they said "Fuck it, let's try something else."

Someone said before Netflix's success was more luck and being ignored for too long than actual guile and their stumbling just shows that's correct.

[tazelbain]

Netflix is doing quite well.  Expectations for Netflix were completely out of touch with reality for while.  The bungling from this summer caused everyone to return to their senses.  Just remember the  people who lobbied to censor the internet are same people Netflix has to negotiate content deals with.

>Netflix had no idea how to leverage their position to push back
Basically Apple could do this because it had a monopoly on a dominate platform.

[Johny Cee]

Was reading some more analysis this morning. Netflix is fucked. They loaded up on streaming content at a time when no one was paying attention to what they were doing, and they got a gigantic fucking inrush of stuff for a song and a dance from Starz. Netflix subscribers slowly awoke to how much shit they could watch via streaming, and really liked the ease and convenience of doing so. But the users got an expectation that more and more would be added and started to get annoyed as the good stuff increasingly disappeared and the streaming library became increasingly crap-infested.

Now all the content owners are aware of the value of what they're sitting on, at least potentially, and they are going to charge premium prices to Netflix to get access to it. Plus some of them want streaming media of any kind to just go away, they want to live with their old business models, or they're protecting an older form of subscriber-based service (like Starz). Netflix has less cash in the bank than any of the other possible content buyers who have streaming infrastructure who are ALSO now aware of how much consumers like streaming media and they're aware that DVD rental is almost dead because Netflix killed it.

Netflix just did a great job doing proof-of-concept for whatever company it is that ends up being the real streaming-media giant. Netflix is basically the MP3 player that didn't work all that well but convinced Steve Jobs to make an iPod and create iTunes. Probably most of the possible successors to Netflix are just pissed that the company unnecessarily shot its own dick off in such a spectacular way earlier than any of them wanted to make a move.

Yes, exactly.

Netflix never had a product...  their whole business model was based around being a better middleman than video stores and getting in early on streaming content.  Just like video stores, the market is now moving past them as new practices take hold and bargain prices on streaming content go away.  The writing is on the wall, and they need to do something big while they still have some kind of first mover advantage.

Some vestige of Netflix is going to survive at least as a source for old, niche and other content.  But that would be a major contraction for them.


The eventual winner is either going to be your local cable company (who already have the infrastructure, client lists/agreements, and operating agreements with content makers) or the companies that own the rights to the libraries.  Businesses using an agency model (iTunes, what Amazon Prime seems to be) will likely survive as well because they're just acting as the front end for the content providers/owners.

I honestly use the free portion of my cable OnDemand all the time.  It gives you anywhere from a month to an entire season of current TV (though some networks are being stupid), as well as a bunch of free content/movies.  Combined with the package I'm in that gives me a few of the Premium channels, you also get a good roster of recent movies.

 

[HaemishM]

Netflix is on the march again. This time Reed Hastings has declared that their main ambition is to get out of streaming other companies content altogether and just become another cable content provider like HBO. More or less.

This is seriously marching to the head of the line of the most spectacular self-inflicted wounds in the history of business.

So wait... he's going to have Netflix only stream a certain set of content, and stop streaming movies and TV shows that he doesn't own the rights to? Or.. what?

Did he take crazy pills? And if not, shouldn't he?

Netflix succeeded because it saw a need and filled that need better than anyone. If they couldn't leverage the very pervasive ubiquity of their service into a better deal with the content providers, they are run by fucking idiots.