Oh Look, Tickerguy Was Right... (NFLX)
The Market Ticker ® - Commentary on The Capital Markets
Posted 2012-03-28 13:23
by Karl Denninger
in Company Specific
Ignore this thread
Oh Look, Tickerguy Was Right... (NFLX)
 

Who predicted this? smiley

Comcast internet subscribers  can rejoice. Comcast has recently announced that they will not be counting  content streamed via their Comcast  Xfinity App on the Xbox 360 against their bandwidth caps.  Comcast  claims that since the data is only traversing their internal Comcast network  that it will not count towards your 250 GB limit a month.

Bye-bye Netflix.  That was a very pretty bounce your stock has had but the cat was, in fact, dead. 

From 10-22-2010:

So Netflix has a $9 monthly service plan that in effect, counts on you being able to push a $50 monthly service toward a traffic profile that the cable company would charge you $200 for, without paying the $200.

.....

The cable company and other last-mile providers have an advantage here that Netflix never will - a near-zero cost of last-mile transport on an incremental basis.  Disks these days are basically free, and in addition most of the last-mile providers have existing deals with the content owners for distribution.  As such I expect a collateral attack to show up soon with cable providers installing disk farms and using their digital delivery systems to provide what amounts to Netflix's service at the same or lower price, undercutting their business.  At the same time the company will be forced to either duplicate infrastructure that their competitors already own or pay for long-haul transport (either directly or via a "Hot Potato" charge to them), which will wind up impacting their margins as well.  They can tattoo Netflix on COGS (Cost of Goods Sold) and once that realization sinks into the heads of the CableCo executives they will, I predict, do exactly that.

It was just a matter of time.

The erosion will continue and IMHO this firm is eventually either a zero or will be taken out at pennies on the dollar for their content agreements -- assuming they don't expire first.

Disclosure: No position at present but stalking for a nice fat short.

Discussion below (registration required to post)
 

Main Navigation
Full-Text Search & Archives
Archive Access
Get Adobe Flash player





Blogtalk 3:30 CT Mondays
Items To Look At


Discuss The Capital Markets along with daily technical analysis with our Gold Donor program.

Where We Are, Where We're Heading (2013) - The annual 2013 Ticker

Links and Blogroll
Our policy on reciprocal links: Send us an email with your information and why you think your blog or news site would make a good addition - in most cases reciprocal link requests will be granted.
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Looking for "The Best of Market Ticker"? Check out
Ticker Classics.

Visit the forum to discuss this and other investing-related topics; see the FAQ on the forum for information about Gold Donor status including access to our technical analysis video server.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.

Submissions may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.

Leads on stories of current economic and political interest are always welcome. Our fax tip line is 850-897-9364; please include contact information with your transmission.

 
Comments.......
User: Not logged on
Login Register Top Blog Top Blog Topics FAQ
User Info Oh Look, Tickerguy Was Right... (NFLX) in forum [Market-Ticker]
Gable
Posts: 413
Incept: 2009-07-04
Green
Report This As A Bad Post Add To Your Ignored User List
I know the realities are against them, but for folks like me out in the boonies with no cable service (and will never get for lack of customer density) they provide a much needed service.

Hopefully they or someone like them can redo their business model to be profitable for folks like us.

----------
In all of history, no government became more honest, less corrupt, or granted its citizens more rights as it grew in size. E.L. 2011

Ellie's Law-As an online discussion about the failures of the Obama Administration continues, the probability someone shouting "It's Bush's Fault" approaches 1
Latviski
Posts: 89
Incept: 2008-02-22

Baltimore, MD
Report This As A Bad Post Add To Your Ignored User List
As much as I believe you're right (NFLX has entered a downward spiral), Comcast (at least in my area) is a nightmare. Customer service is atrocious, they're overpriced, and they operate with a monopoly-like business model. None of this is surprising, however, as Comcast essentially has a monopoly of my service area. After they drown Netflix, they'll hike their own rates even further.

Genesis
Posts: 130779
Incept: 2007-06-26
Admin A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Oh Comcast sucks, but that's not the problem -- the problem is that Netflix's ability to force other companies to eat their network costs has evaporated.

----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
Plymster
Posts: 912
Incept: 2007-09-19
Green
Report This As A Bad Post Add To Your Ignored User List
I can watch 8 hours/day every day of the month of Netflix at "Best Quality" (as long as it's not HD, then I only get 3.5 hours/day) before I hit Comcast's 250 GB cap.

If I'm watching that much TV, I think my need for a new couch and bigger waistband would hit me before my need for a bigger bandwidth cap.
Krzelune
Posts: 5513
Incept: 2007-10-08
Green
Report This As A Bad Post Add To Your Ignored User List
Comcast will lower their limit.

----------
The desire of millions, the inconvenience of millions, the suffering of millions, the death of millions, does not concern them because of the evolutionary humanist lens they peer through.
Novid
Posts: 92
Incept: 2010-06-25

Philadelphia
Report This As A Bad Post Add To Your Ignored User List
Game the **** OVER for Netflix. Even a little scrub like me saw the writing on the wall. They are done.

Still waiting for the rest of the entertainment business to stop using the bundles and stick to the one disk model (blu-ray) period. Netflix is a joke, crunchyroll is the greatest joke in the history of entertaiment and im wating for Hulu to get short changed which they will.

How many times do people have to get it through there damn heads why we STILL have disk media and that will never go away REGARDLESS how fast the connection is?

Bertdilbert
Posts: 2662
Incept: 2008-12-22
Gold
CA
Online
Report This As A Bad Post Add To Your Ignored User List
I note that you can watch movies from Amazon so I don't see why Amazon could not put together a package at some future point and crush Netflix anyway.

----------
Dear Euroland: Relax, Germany has a plan for your money!

Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
Atmartin
Posts: 93
Incept: 2011-12-24

PNW
Report This As A Bad Post Add To Your Ignored User List
They can't drop that cap too much more. It was amusing last year when Comcast sent me an email telling me they thought my computer had been hacked for sucking down about 60GB of data in a couple of weeks. That was just due several days with high use of netflix streaming, I installed Steam for a game and a couple of other large game downloads/patch updates. When one video game download via Steam is 10+ GB, 250GB isn't that high.

I do enjoy their reading their pleas to swap to email only eco-billing while they try to entice me to buy the latest xfinity service with 2-3 letters/ads in the snail mail each month. I'll stick with my $12 per month for basic tv since they want to charge you $10 extra if you're not a tv and internet customer.
Jmanng
Posts: 537
Incept: 2009-01-03

Boston, Massachusetts, USA
Report This As A Bad Post Add To Your Ignored User List
Doesn't Amazon's Prime movie streaming service have the same fundemental problem as netflix? They are also freeloading off the cable companies infrastructur

Reason: clarification
Hescominsoon
Posts: 66
Incept: 2010-01-04
Green

Banned
Report This As A Bad Post Add To Your Ignored User List
nopers. This is not the end of netflix. Look at comraps so claled offering. you ahve to be subbed to a bundle and then pay extra for this "service". I'm going the other way. I'm dumping comcast residential everything and going business class inet only. going from capped 250 gig 200/month to unca00ed business for $65/month. 90% of our tv is netflix anyway..so we jsut bought a new tv that has netflix built in. bye Bye comcast tv between netflix, rooku, xmbc and amazon video we have everything we got form comcast residential.
Rbarreira
Posts: 2826
Incept: 2009-05-27

Portugal -> Sweden
Report This As A Bad Post Add To Your Ignored User List
Doesn't Netflix use Akamai and/or other similar content distribution networks?

Companies like Akamai put in servers inside big ISPs networks in order to minimize the data transferred between ISPs. Instead the movies can be streamed from inside Comcast (or whoever's network), just as Comcast is doing.

If you look at how much data hard-drives can store in a small area, it should be piece of cake for Netflix to provide thousands of movies locally inside ISPs. If this is not possible it must be because ISPs like Comcast want to prevent Netflix from doing it...

In short, Netflix's problems should be a nothingburger, unless Netflix is completely stupid or someone is actively preventing Netflix from making its service work efficiently... The latter seems much more likely, especially when Comcast is trying to compete with Netflix on movie streaming.

----------
In Soviet Russia, the government regulates the banks.

Novid
Posts: 92
Incept: 2010-06-25

Philadelphia
Report This As A Bad Post Add To Your Ignored User List
@Rbarreira
@Hescominsoon

It doesnt matter if they use Akamai. Or any sort of distribution server. It only matters who ownes the copper/fiber line at the end of the line. It doesnt matter if they want to put it on locally made ISP's - who control the line at the final point of sale. Nobody is preventing Netflix from making money. They were making money hand over fist before they went into the streaming business (so was Amazon) but they have the bright idea to undercut a distribution model that wasnt broken in the first place. We had a economic problem that exasrabated the issue.

When they wake up, and do only Blu-Ray releaces, no combos, no digital bs call me. Until then all this streaming nonsense is just that - nonsense. If they want to to make a deal with the cable companies/ISP's which they almost did some weeks ago they are free to do so, but Netflix never took it. They can make all the deals with Hollywood they wish. Hell even redbox gets it but there pricing is wonky.

Inkt2002
Posts: 99
Incept: 2009-07-15

Report This As A Bad Post Add To Your Ignored User List
Great call on NFLX. Spot on.
Much better than this one

http://market-ticker.org/akcs-www?single....
Bsfootprint
Posts: 965
Incept: 2011-02-27
Green

Online
Report This As A Bad Post Add To Your Ignored User List
I often wondered if that net neutrality ploy was intended to protect Netflix.

Netflix' CEO is politically 'active' and I wonder if Netflix or Hastings and his network of college pals made any interesting campaign donations...

I live and work in a semi-rural area; a neighbor's broadband connection would go down the crapper every Friday afternoon through the entire weekend, as the kids came home from school and people came home from work and fired up the video downloads. The local network segment was totally overloaded. (This was a direct line-of-site wireless system, not cable or DSL.) The network provider has worked hard to improve things, and it's much better, but still spotty.

Karl's absolutely correct: Netflix (and other) live video streaming providers who don't own the last mile distribution are pushing their product costs off on someone else, and that game of musical chairs was bound to end at some point. It appears that it's happening now.

Care to bet on legal action by Netflix to force ISPs out of competition, claiming 'unfair advantage' and monopoly/anti-competitive behavior?

----------
When I hear central bankers are blowing bubbles, I like to picture a large, happy and well-endowed male chimp named 'Bubbles'...

Ckaminski
Posts: 1583
Incept: 2011-04-08
Green
Report This As A Bad Post Add To Your Ignored User List
Arguably, they're pushing it off to consumers. If Comcast wasn't also a TV provider with all this bundling nonsense, they'd make people pay for the extra bandwidth they consume to use Netflix.

What next, you'll be arguing Amazon should pay Comcast for all the traffic Comcast customers consume? I don't believe net neutrality is a ploy. *I* should not be charged more for content YOUR customers want.

Though I agree with Karl, due to Comcast's ability to bundle, Netflix has some serious hurdles to overcome in the years ahead.

If Netflix were to peer with Comcast, and Comcast continued to subject them to the bandwidth cap, I would argue that they might have a case, if Comcast continued to sell their own service with no cap.

I'm proud to say I would feel no sadness if the ISPs got out of the TV business.
Genesis
Posts: 130779
Incept: 2007-06-26
Admin A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Netflix cannot "peer" as peering is a statement of intent (that must then be realized) of reasonably-equal data flows in both directions and thus something approaching equivalent values for both parties.

----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
Johnny_crab
Posts: 1938
Incept: 2008-10-09
Gold
Boonieland south Texas
Report This As A Bad Post Add To Your Ignored User List
Netflix > DTV for us in Boonieland. When NFLX goes, there will be a marketable hole for something.

Pic is today's robot-ad FAIL.

----------
If you want to know truth, start by turning off your television.

"They didn't just***** in the coffee, they took a **** on the hood of a '73 Eldo, let it bake in the DC sun, ground it up and sold it to us as coffee."--Duc888
Login Register Top Blog Top Blog Topics FAQ