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Netflix Business Model “Not Remotely Sustainable;” Content Owners Can Make or Break Streaming

Phillip Dampier February 2, 2012 Consumer News, Online Video, Video 2 Comments

Porter Bibb, managing partner at Mediatech Capital Partners LLC, and Kevin Landis, chief investment officer at First Hand Capital Management, discuss Netflix Inc.’s fourth-quarter results and outlook. Although results improved, a large amount of Netflix streamed content licensed from Starz will disappear this month.  More importantly, their long term business model is “not remotely sustainable” as programming acquisition costs continue to skyrocket, says Bibb.  Bibb and Landis speak with Emily Chang on Bloomberg Television’s “Bloomberg West.”  (6 minutes)

Currently there are 2 comments on this Article:

  1. Alex Perrier says:

    It would be nice if they let you pay per view, such as $1 for SD or $2 for HD, for those customers who don’t want to commit to a unlimited $8/month plan.

    • me says:

      There are services out there like that. For example Amazon is usually about 3 bucks per. With some stuff free if you use their prime stuff.

      Interesting view on the dynamic of what Netflix is up against. One dude is saying they have a nice customer base. The other is saying they do not have the cash going forward to buy more content. The more content is exactly what I hear from most people who have netflix. Lots of crap 80/90s b movies. Missing lots of blockbusters from years past. Hit or miss on latest blockbusters.

      Their mail business is fairly easy to understand number of discs shipped is a cost plus packaging (they do a lot by hand). Then subtract that from money in per customer. Limit the number of discs in and out and you are in the black.

      Their streaming business is a bit more difficult as there fixed cost is just bw per show (and how much they have colocated). The variable cost is what the studios are charging. Is it flat rate? Per view? Sounds like the are amortizing it across all viewers. So it becomes *way* more important the number of viewers you have. As you can then lower the per user cost and bully a little bit with I have x number of viewers who will no longer watch your show.

      If they went to a per pay per view model you would see some sort of point system or straight up limit of number of movies per month you can watch.

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