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The Almighty Buck Businesses The Media Entertainment

Netflix Expects To Be Unprofitable In 2012 323

Posted by Unknown Lamer from the running-red-branding-exercise dept.
PolygamousRanchKid writes with an article in CNN Money about Netflix's prospects in 2012. From the article: "Netflix warned in its last earnings report that it expects to be unprofitable 'for a few quarters' starting at the beginning of 2012. The primary culprit is Netflix's pricey plan to expand its streaming video service into the United Kingdom and Ireland, but a wave of subscribers jumping ship hasn't helped. The filing also revealed that Netflix is in the process of raising $400 million from investors to help bulk up its cash stash. While that will give Netflix more money to invest in content, secondary offerings are sometimes considered ominous signs."
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Netflix Expects To Be Unprofitable In 2012 More

Netflix Expects To Be Unprofitable In 2012

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  • More content (Score:4, Informative)

    by Anonymous Coward on Wednesday November 23, 2011 @11:23AM (#38148592)

    They need more content...I watched nearly all the good movies over one winter off work.

    • They need more content...I watched nearly all the good movies over one winter off work.

      The "watch it now" content started at about 10% of the catalog, and it was a fair cross section (of the 500 movies in our queue, 50 showed up in "watch it now")

      The difference between disc by mail and watch it now is that you can only get maybe a half-dozen discs by mail per week (3 at a time, assuming you're not "watching" them the minute they arrive and running across town to get them back in the mail before the 6pm last pickup). With watch it now, you can binge on 6 movies a day, or more if you want.

      Most

      • Theoretically you can watch more with streaming, but in practice I don't think that's a common enough problem. What it means is that I could watch a couple episodes out of several different series during the week. The main limiting factors for most people are time and the speed of mail. People probably do watch more streaming than discs, but then again they might not, I know before I canceled that I watched several times as many discs as streams. And since leaving I haven't missed streaming at all.

        I have no

    • Re: (Score:3)

      by tom17 ( 659054 )

      In their Canadian implementation, everything I have tried looking for(pretty much anything you would see on Rogers/Bell) has not been on there. I have not enabled my free trial yet because of this.

      If they put actual content on, I would gladly give them my money.

      • It is actually better than it seems. I subscribed a while back and it appears that there is more content than they show on their sign up screens. Which of course makes no sense at all.
        That said, I did run out of content I wanted to watch after about 2 months. So I suspended my account. It comes back on as of Dec 1, I hope they have added enough content to make it worthwhile, or I will be suspending again before very long. After that if they still can't get content, I will be ending my account.

    • I put my NF sub on hold since I did run out of things to watch. my queue is entirely on the 'no idea when we will pay to have this back again' list. so I suspended my account. didn't really want to, but they are being very 'slow' to restock various videos and series.

      I'm more and more picky about what I waste time on, for tv; and I've about watched all there is that is worth watching. NF is slacking. I think they'll buckle and fall apart in a few years since they make so many bad business decisions.

  • At least... (Score:2, Funny)

    by Anonymous Coward

    Qwikster will be profitable. Oh, wait...

    • Qwikster will be profitable. Oh, wait...

      Qwikster could have been profitable. But it's saturated, which would have made it an income stock, not a growth stock. And nobody wants to be an income stock, because it's not sexy. In the long term the Disc by mail will be doomed by changes in 1st class mail. A stamp is going to 45 cents next year. Saturday delivery is doomed. And eventually the USPS will go to alternate day delivery to nearly half the number of carriers and trucks it needs. Redbox will be the way of the future, for the media of the

  • Overvalued for 10 years (Score:5, Insightful)

    by JoeMerchant ( 803320 ) on Wednesday November 23, 2011 @11:26AM (#38148624)

    Anytime I ran any kind of "rational valuation" calculation on NFLX based on subscribers, income, potential for growth, etc. the market seemed to be out-pricing my ideas by a factor of 3 to 7... NFLX has been a very expensive stock for a very long time, I'm surprised it took this long for the bubble to deflate.

    Still a good business model, when they aren't spouting off idiotic ideas about breaking it.

    • Market imbalances is how money is made in stocks. An overpriced stock that pays no dividend has "short me" written all over it. I am never surprised when a stock falls in line with performance metrics, but I am often surprised at how long it takes before that happens.

      NFLX has been a screaming short for a long time. The service split and price increase was so incredibly harebrained, it's almost as if management wanted to fail.

      • Re: (Score:2)

        by vought ( 160908 )

        If anyone has ever seen the asinine PowerPoint on the "Netflix culture" (follow their careers link), you'd understand why this company has been screwed for a while.

        A more self-entitled group of assholes is hard to find south of Menlo Park.

  • Netflix pissed off all the whiny brats (Score:3, Insightful)

    by Anonymous Coward on Wednesday November 23, 2011 @11:26AM (#38148630)

    Who got upset over their subscriptions going up a tiny amount. If those people wanted to protest something really gouging, it'd be the gas prices. Or the costs of medicine. Or fuck, go out and yell at the government or the banks.

    • Or fuck, go out and yell at the government or the banks.

      Actually, they're doing that. With sit ins, and tents, and pepper spray, and all the fixins...

    • On what plane of existence is 60% a tiny amount? I was actually a faithful customer since its inception, but raising prices that much out of nowhere when neither service is THAT worth it is probably why most subscribers left.

      • Re: (Score:3)

        by JWW ( 79176 )

        On the plane of existence where if the studios get their way Netflix dies and they implement their own streaming services for $50 / month, or for $3 per movie streamed.

        The studios are incorrect by nearly an order of magnitude with respect to what streaming services should cost. Netflix has set the price level, the studios better start offering them content at rates that let them keep their prices lower than twice the amount they are charging now (yes I will pay twice as much for Netflix, but not 10x).

        Appl

      • If you pay a mere pittance for a service, and it goes from that to a paltry sum... it's still cheap. Sure my netflix went from 8 to still under 20, the only basic cable package in my area went from 20 per month in 2001 to it's current 140 per month.
        Netflix may not work for some, but it cant match the greed exhibited by your average local-monopoly cable providers.

  • Netflix still in a good position (Score:5, Insightful)

    by SuperKendall ( 25149 ) on Wednesday November 23, 2011 @11:27AM (#38148638)

    They lost a lot of subscribers due to their split-service gap, and they look to be having content issues...

    However, they still seem in a good position to me. The service is fundamentally good, they still have a lot of ratings from users to help determine what content makes sense for them to buy, and (most importantly) they have a LOT of paths into the home - just about any device you can name supports Netflix.

    They are in a rocky spot now but I just can't see who can replace them easily, or even reach the position they currently hold within a year or two.

    • Re:Netflix still in a good position (Score:5, Insightful)

      by girlintraining ( 1395911 ) on Wednesday November 23, 2011 @11:41AM (#38148854)

      They are in a rocky spot now but I just can't see who can replace them easily, or even reach the position they currently hold within a year or two.

      You seem to forget Netflix' existance is allowed solely at the discretion of the MPAA. They're becoming unprofitable right now because the MPAA decided to charge more. They're like the OPEC of the content world. They don't care who lives and who dies, as long as they can keep writing their own paychecks.

      • You seem to forget Netflix' existance is allowed solely at the discretion of the MPAA. They're becoming unprofitable right now because the MPAA decided to charge more.

        That is just a pricing issue though. Netflix have taken those lumps already. As stated, the fundamentals of what they offer (device reach, still lots of content) mean they will survive, and probably thrive since there is no other company in the position they are in, nor will there be for some time due to the very difficulties you mention.

      • Re: (Score:2)

        by jedidiah ( 1196 )

        This is why people should not be so quick to get rid of physical media. Physical media is personal property and comes with first sale rights and a large group of diverse sellers. You can buy just what you need, pay the market price for it, and find a 3rd party willing to sell it to you.

        You don't have to put up with any of this "it's their content, they should be able to exclude you" kind of nonsense.

        • Re: (Score:2)

          by 0123456 ( 636235 )

          You don't have to put up with any of this "it's their content, they should be able to exclude you" kind of nonsense.

          Except it's probably infested with DRM. This is one reason why I still buy more DVDs than Blu-Rays, since DVD DRM is pretty much dead.

      • There's a trade off for a lot of people though - the convenience of getting content at a price you're happy with versus the hassle of getting the torrent for free. Mess around with the price of the former and the hassle of the latter suddenly starts to look like less of a barrier. If the MPAA succeed in killing off Netflix they'll just foster a whole new bunch of downloaders (conversely they could try dropping prices still further and see if their uptake soars as people feel it's less risky to take a punt o
      • Is the mail portion of Netflix no longer profitable? The MPAA can do nothing to stop Netflix. The only thing they can do is make a deal, they sell DVDs to Netflix for cheaper prices and Netflix doesn't make them available for 30 day or whatever.

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      > just about any device you can name supports Netflix

      Linux PC!

      • Linux is not a device. The computer itself is the device. The computer will run Netflix just fine as long as you load the right software on it. You complaining that it won't run on a Linux PC, is the same as me complaining that it won't work on my Nokia Symbian phone. Sure it would be nice, but I realize that it will probably never happen because the market for people with Symbian phones is just too small.

  • Obligatory Oatmeal reference (Score:4, Funny)

    by Compaqt ( 1758360 ) on Wednesday November 23, 2011 @11:27AM (#38148644) Homepage

    They had it coming. Oatmeal Netflix parody:

    http://theoatmeal.com/comics/netflix [theoatmeal.com]

    • To be more fair, and what a lot of people seem to forget is this. Their original price was for mail only, then they added streaming for free. Later they decided that wasn't viable and split the two, charging two different rates for the two separate products. To use the hamburger analogy from the comic you linked to. It's like the hamburger restaurant selling hamburgers for $X. They they start giving away free milkshakes with the hamburgers for $X. Then, they find out the price of milkshakes skyrockets
      • A lot of people were upset that they were now expected to pay for something that they previously got for free, but what really turned that disappointment into anger was the condescending way that they played the PR game. "Sure, our prices have gone up, but only by the cost of a couple of coffees", suggesting that people's complaints were warrantless. What they should have done was played it straight, pointed out what people had been getting for free, pointed out all the costs involved on their side, the non

  • I'm sympathetic, but stop with the bonehead moves (Score:5, Interesting)

    by elrous0 ( 869638 ) * on Wednesday November 23, 2011 @11:30AM (#38148674)

    I understood when they had to raise prices. The studios have gotten crazy greedy on the whole streaming thing and their costs have gone through the roof. Netflix streaming is still BY FAR the best deal around. You can watch the entire runs of shows like Battlestar Galactica (original AND new, even 1980), The X-Files, Twin Peaks, Firefly, Family Guy, etc (many of them in HD, no less). Nothing else even comes close to the selection or quality of Netflix's streaming library.

    But I'm a lot LESS sympathetic with some of their bonehead moves--like trying to separate their by-mail/streaming divisions with annoying separate websites and queues (a move destined to serve little purpose other than pissing off loyal customers like me) and paying $40 million for a bunch of shitty Dreamworks streaming rights (a move that's only going to encourage the greed of the other studios in the future).

    • If I could sort Netflix streamers by ratings (or by anything other than Netflix's lame categories), it wouldn't bother me that 99% of the streamers are crap. And if I could weight other people's ratings by raters who rate similarly to how I rate, then I might better find crap that I'd like anyway.

      • Re: (Score:2)

        by Daetrin ( 576516 )

        And if I could weight other people's ratings by raters who rate similarly to how I rate, then I might better find crap that I'd like anyway.

        Doesn't it theoretically do that already? I know it gives star rating estimations for stuff that we haven't watched yet based on past ratings. I thought that was done via the ratings of people similar to us, but i admit that i haven't really looked into it much.

    • Re: (Score:2)

      by 0123456 ( 636235 )

      You can watch the entire runs of shows like Battlestar Galactica (original AND new, even 1980)

      If Netflix are relying on Battlestar Galactica 1980 as a way to draw in customers, that explains why they're doing so badly :).

    • Don't talk about greedy this or greedy that. Netflix is not a not-for-profit, they are greedy too. A lot of social scientists agree that men are mostly egotistical and driven by greed.

    • This was done, because the studios were trying to devour the DVD business income in their negotiations for streaming content.

      Hey you made $400 million, We want $200 million. But streaming only accounted for $40 million. So how do you keep the studios from digging into the pockets of the DVD side to gouge for streaming.

      You split the company. Then the profits are held separately.

      They just botched the explanation of why.

  • Good luck Netflix (Score:5, Insightful)

    by Dan East ( 318230 ) on Wednesday November 23, 2011 @11:30AM (#38148684) Journal

    They face very stiff competition from other companies with much deeper pockets, so they are going to have it tough for a while. I like Netflix (their latest snafu with splitting the DVD rental / streaming plans didn't affect me - I'm streaming only), and as a technophile, I'm pleased that they have gone to great lengths to support such a diverse range of hardware. A lot of companies wouldn't have bothered with Wii, XBox, Android, etc. Netflix's decision to split off their DVD rental was simply waaaaay too early. That is an inevitability of course - anyone with the least bit of foresight can see that demand for physical media is going to drop off a great deal in the near future. However, Netflix must provide a mechanism to bolster the streaming support since the movies offered online are so hit and miss, and the only choice is DVD for now.

    Take Lord of the Rings for example. Did you know that you can watch The Two Towers online, but not the first or third movies? Now what in the world is that about??? As long as that sort of garbage is going on, customers need a single unified interface and billing to get movies in whichever format is available.

    • Damn this computer. I accidentally modded this redundant instead of insightful. Posting to undo.

      While I'm at it, I really have to agree here. I feel bad for Netflix because I know it isn't entirely their fault. The studios are really screwing them over and quite frankly it's almost criminal what they're doing at this point. God forbid they give reasonable pricing and just let us have what we want. No, they need to make 10x as much money while the number of people willing to pay for these ridiculous

    • Take Lord of the Rings for example. Did you know that you can watch The Two Towers online, but not the first or third movies? Now what in the world is that about???

      The Two Towers was released in that tiny window when New Line Cinema was under AOL-Time Warner's corporate umbrella instead of Time Warner proper, which controlled New Line when the first and third movie were released. During the time AOLTW ran the distribution for Warner Bros and New Line, they were much more aggressive about getting the produ

  • Tivo Redux (Score:4, Interesting)

    by localman57 ( 1340533 ) on Wednesday November 23, 2011 @11:30AM (#38148688)
    Here we go again. Netflix (streaming) is going to follow the same path as Tivo. Innovate at the beginning, then get to a point where you have trouble growing your audience. Then bigger companies, such as the cable companies, come in with a comparable product, and eat your lunch, because they already have a relationship with the customer, and deeper pockets than you which will help them bid up content license prices. This makes the streaming side of NFLX negative growth in the middle term, as they have the same problem in other countries, despite their efforts to expand.

    The disk mailing side of the company is already saturated from a customer base side. Increasing postal rates and the eventual end to saturday delivery will make the service less viable. Eventually the postal service will go to every-other-day delivery of first-class mail, in order to reduce the number of carriers and mail trucks by 30 to 40 percent. The disk mailing side of NFLX is therefore a revenue stock now (with that revenue being eatten by the streaming side), and negative growth in the future. Sell...

    • Then bigger companies, such as the cable companies, come in with a comparable product, and eat your lunch, because they already have a relationship with the customer

      But what kind of relationship is that? It's not a good one.

      TiVo was wiped out because all they could fundamentally do is offer a slight improvement to the cable box, once the cable companies started also including a DVR that was it. They couldn't offer additional content, just extra convenience.

      Netflix is more than that, they offer a vast arra

      • Re: (Score:2)

        by tibit ( 1762298 )

        I tried TiVo once, and had to return the equipment for a refund. The firmware was crappy, and the user experience was abysmal. This was their 2nd generation system, no less.

        As much as I'd like to see competition out there, I think the only company with the understanding of how to satisfy a customer is Apple and their iTunes service. I seriously think that they are the only ones who understand how to offer smooth experience for users of their technology, in spite of whatever snafus they have committed in the

      • Re: (Score:2)

        by geekoid ( 135745 )

        Since my Cable Companies DVR IS a TiVo, I wouldn't call them 'wiped out' TIVO is fine, the consumers are screwed. I mean, seriously needing a specific type of recorder to record channels? WTF. I SHOULD be able to by any DVR, plug it in and it work.

        But no, I need to have a special DVR for direct TV the costs 200 dollars. That's why I don't ahve one

      • Well, the cable companies are not the only possibility.

        There's competing streaming video from Amazon, which can stream both rentals and streaming versions of DVDs you buy from them, and audio. It's also not hard to imagine a significant expansion of video for iTunes. Amazon and Apple seem to have good relationships with their customers, so this is a serious issue.

        There's also Hulu+, and it's pretty clear that Google is trying to integrate YouTube movie streaming into G+.

  • I want to ride the wave of Netflix serving content at a loss for my own profit. Is there an example (preferably Eclipse) Google TV project demonstrating an app that accesses the Netflix catalog and streaming content?

  • That turned to crap by pursuing both at once.

    Netflix had ALWAYS planned to ditch their DVD service in favor of streaming; the original idea was to be done by 2007.
    But the general infrastructure did not progress as fast as had been forecasted.
    So divesting themselves of their DVD side was the logical progression. Except that their entire plan was ill-formulated and just altogether sloppy. Poorly timed, too, considering their loss of Starz and such.

    Raising fees to accomodate the general paradigm shift - where

  • I think they have a couple problems. First their library isn't great. It's $8 a month for all the b movies you can watch. They'd be better off raising the prices and consistently having new movies in stock. Indeed, I hope they are going unprofitable to get more content.

    I think their second problem is that if you have cable, your On Demand is probably as good as Netflix and if you get a premium channel, it comes with an On Demand that blows Netflix out of the water.

    I wish Netflix was going to give th

  • Netflix Did It Wrong (Score:4, Insightful)

    by Doc Ruby ( 173196 ) on Wednesday November 23, 2011 @11:38AM (#38148808) Homepage Journal

    Netflix clearly wants to get out of the DVD business and into the more profitable streaming-only business. Netflix could have just raised its streaming+DVD prices a little for a little while, say +$2 for 6 months. Then started charging a little more for DVD deliveries, while offering a rebate to streaming-only customers. After a few months of that structure, they'd have a distinct streaming-only customer group. Then they could have raised prices on streaming or DVD independently. Voila! Two distinct, differently priced products, each profitable, with DVD delivery able to be wound down while making the streaming-only product look better.

    Instead they did it in a way that told their customers that they had to take whatever Netflix shoved at them. "Where ya gonna go?" Well, many went, and the brand is damaged even for those who stayed.

    It's not too late for Netflix to do the underlying biz transformation right. But the marketing and corporate execs who backed the debacle should take a big hit. The marketing people should probably go, unless the corp execs want to give them a second chance on something like what I described. But probably they should go. There's never any reason to keep a marketer unless they're really a star (which is extremely rare) - there are plenty of non-stars who can take a crack at the next marketing bungle.

    • My guess is that they signed some deal with the content providers that they'd pay them for streaming their movies based on the number of Netflix customers ...

      So, you unload the DVD customers to a separate company, and suddenly, they don't have to pay for the people who never would've been able to stream in the first place.

      Of course, if this were the case, they should've said something ... telling the customers that it was a move to screw over the distributors might've given them some goodwill rather than ju

  • A large part (Score:5, Interesting)

    by AdamJS ( 2466928 ) on Wednesday November 23, 2011 @11:44AM (#38148888)

    A large part of their problems, ironically, can be blamed on iTunes. Or rather, what iTunes did.

    Apple came into the market and swept a massive position of power and influence right out from under the music (or rather, content) industry's feet. Apple gained a novel and unrivaled position to dictate the terms of negotiation.
    They're still stinging from that.

    As a byproduct, they were far more 'prepared' for Netflix. Well, not prepared, as the industry is ancient, slow, bloated and generally can't see "the next big thing" until it's already slapped them across the face and taken their daughter out to dinner.
    They were more Apprehensive, really.
    They may not have known if Netflix would be a success (by-mail services could never be a threat, and when the streaming came about, similar "on demand" services were rather mediocre) but they knew well enough to keep the reigns on a potentially unwieldy beast.

    So Netflix' (possibly unexpected to the Industry) fast growth and explosion in the public mindshare did not end up giving them anywhere near the same control and leverage for negotiations with content owners and producers. Netflix did not secure a completely dominant position, and were unable to supplant the general DVD purchase/rental and theater-going parts of the industry, or at least nowhere near as successfully as iTunes snowballed over CDs.

    As such, they're entirely at the whim of industry conglomerates that view them now as something of an enemy, or an annoyance that is profitable enough not to deserve a swat yet.

    If the industry wasn't so generally inept, there would have been an MPA-aligned style service already out and Netflix would be deprived of most of its content almost immediately.

    • Re: (Score:2)

      by tibit ( 1762298 )

      The problem with the content industry is that they have always sucked with their digital delivery. This is, unfortunately, a generalization that has no exceptions, and has equally applied from the time the first network set up a website till now. Jobs had repeatedly bashed them about it, and they still haven't learned their lesson.

  • The Netflix streaming library is poor. There is not much there worth watching, unless you are in the mood for an old movie, and then it is still a coin toss if you can find what you want. Expansion to the UK and Ireland will not bring profitability. Expanding content will.

    I pay for the Nexflix streaming, but only because I have a 4 year old and the selection of content for that age range is decent and worth the price.

    If you want profitability, look at tiered streaming pricing. Add a couple of bucks

  • They have a lot of options to become profitable. (Score:5, Insightful)

    by Viewsonic ( 584922 ) on Wednesday November 23, 2011 @12:16PM (#38149288)

    Netflix has yet to offer video games or adult movies. Both those avenues will bring in tons of cash.

  • I wish I could say I am going to lose money the next several years, please give me 400 million to tie me over!

  • Maybe Netflix should worry about offering content people actually want to watch instead of expanding in to new markets. I know Netflix Canada sucks... Dated movies, B-Grade movies and kids movies do not appeal to people who have video on demand subscriptions with their cable company. For $12 a month I get unlimited access to my cable companies video on demand library, which includes newly released videos.

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