Whistling Past the Dead Netflix, You Be...
The Market Ticker - Commentary on The Capital Markets
2017-08-12 10:27 by Karl Denninger
in Company Specific , 319 references Ignore this thread
Whistling Past the Dead Netflix, You Be...
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Oh what have I often said....

"That we would be sitting around watching holograms and Netflix would be an "old" invention. When it first came out it had decent movies on it. Now it has movies that I didn’t know existed and movies that just aren’t that interesting to me. They really lowered the quality so of course that meant Hulu was my backup. 

smiley

Psst.... don't look at their free cash flow; into deteriorating user perception that could be real trouble...

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Eli
Posts: 8564
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What are talking about Karl Netflix is a great company!

Solid as a rock.

"Netflix is already $2.37 billion in debt, but the company announced today in a press release that it was raising another $800 million through a new debt offering in order for the streaming service to create more original content. "

This was from 2016 so Netflix is now in even more solid shape.

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If you want a vision of the future, imagine a boot stamping on a human face - forever.
George Orwell

Tickerguy
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Yes, it's dropping a solid all right...

smiley

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Winding it down.
Exppi
Posts: 63
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PDX
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Lots of folks ignoring the cash flow problems with various companies. You called it. Just like your call on Tesla.
Ckaminski
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Can't wait til Netflix and Hulu pop and Comcast buys them for pennies on the dollar...

Oh will i be laughing then.
Nonsensical
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Hulu won't survive either. It's really an impossible situation with content pirating.

Content producers are losing money and it simply isn't becoming profitable or even feasible to go into film, music or books. For example, in film there's been a massive drop in original screen plays, and now the vast majority is previously branded content or remakes. It's all become data driven. But the thing about data driven content is it can only tell you what you already like.

This has forced the content providers to try to squeeze the content distributors, but who's gonna pay for content when they can get it for free. This devaluation of content has already wrecked havoc. You have an older set of artists like Roger Waters and the late David Bowie saying it might be foolish to go into music today because they don't see how you're going to make money. This is the case in about every category: you have older artists advising younger artist to not do it. In music, books, film, etc.

So we complain about the lack of content, but who can afford to produce it and distribute it anymore? So of course there's going to be a lack of content. This has and is going to cause further damage that's very difficult to reverse as it's not easy to just create professional artists and right now there's going to be a generation of artists lost because they've literally starved.
Supertruckertom
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Thanks Nonsensical, I was thinking about going into improv and stand up at a club here in ATL on Sunday evenings.

They have an improv class that is cheap fun.
Movie industry here is booming.
Pinewood Studios is 6 miles from my son's house.

Character acting would be my thing.
I would love to be like Jack Elam.
People say I look like him already with my beard full.
Ah, something to do in retirement.

Either that or be the next Archie Bunker if it is resurrected.

Class link: http://villagecomedy.com/classes/

I also suspect that would be good training for any politician or Lawyer.


Elam, Dern, and Garner in this scene.
Too bad this bluff will not work with the Nork lunatic.

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Preparing to go Hunting.
Quik49
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and then there are those TSLA bonds that appear to be making some headlines of "WTF".....

itching to short the **** out that bastard with some putties

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Long Vaseline....

Tickerguy
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Tesla is a literal zero. Upcoming Ticker on why -- in short they're going to get pasted within the next year and change, and when it happens they won't know what hit them.

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Winding it down.
Quik49
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couldn't happen to a better group of *******s....

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Long Vaseline....

Nadavegan
Posts: 23
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Nonsensical, it has already happened to music. But it isn't just about piracy. The studios figured out it is easier to convince everyone that they like Katy Perry "music", than it is to find the next Prince or David Bowie. It started out as a cost-saving measure, but now that there is no REAL talent in the pipeline, coupled with the masses being largely stripped of taste or appreciation, piracy will merely be the final nail for the music industry.
Mangymutt
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"Yes, it's dropping a solid all right..."

Is that a **** sammich in your post - YUMMY!!!!

Seems like that is what's going to be for breakfast, lunch and dinner for a lot of things.
Nonsensical
Posts: 111
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This post isn't directed at supertruckertom (maybe to people who think we are really booming), it was more inspired by his post. I really want to try to express to people what's at stake.

I got good news and bad news. Bad news: you have cancer. Good news, though: it's booming!

When we talk of growth and booms we have to qualify what we're talking about. There's this idea that blanket growth is good, because we're taught growth, growth, growth. When growth went unqualified and beyond reasoned measure the Ancients called this "overreaching", and it had disastrous results.

Many people think that the majority of players in the NFL are millionaires. This is far from the case, where only a handful of players on a given team even net a million dollars (and yes, the average player does earn well above the median income, but they have a much, much, much shorter window of earning potential). On a 53 man roster, at least, 45 of those players are role players.

Now here's the thing. If you're a star player and you get cut or traded, typically you won't find out about it until ESPN broadcasts it. The General Manager or his office won't contact you. Partly because a star player negotiates his contract as an individual because he has leverage. However, role players are fired or traded rather nicely. They sit you down, say nice things about you, wish you luck, and so on. Why is this? Because the vast majority of the team consists of role players. So if I treat you badly because you are a role player, you're likely going to get a bad reaction from the team. See, an owner can still field a team without a star player, they can't field a team at all without the role players.

The content business use to run on the Pareto Principle, commonly called the 80/20 rule, that is, 80% of the effects comes from 20% for the causes. Basically, 80% of the revenue was generated by 20% of the content. So let's go back a few years, 2013, the top 1% of music artists accounted for 77% of all artist-recorded music. http://www.promus.dk/files/MIDiA_Consult....

I use 2013 because the research consultant firms that conducted the research have released those reports to the public (obviously for current numbers they'd want to get paid). Are we to suppose that the situation has gotten better? So yes, there's movies, music, and books that are making money, but they're fewer and fewer and they're all previously branded stuff typically. That's the thing about creating content solely though data: it can only create content you already like or know about. Just look how awful Google's ad sense and ad words is.

This is what they mean by the 1% economy, it's the consolidation of wealth and power. There's many reasons for how and why this has happened, but one thing that's easy for people to grasp is data mining. So, perhaps Google and others can get better at their data being predictive, sure, if you're willing to let them into your house.

But even top selling artists have to product place into their acts. Lady Gaga's infamous Doritos performance. Even a high grossing performer like Jay-Z has to product place in concerts. This of course ends the notion of the independent artist. But it's booming, right? Try putting your content on Youtube and they demand 45% of the ad revenue without sharing any of the production costs. Or wait until Youtube goes to negotiate with Merlin Agency and see what kind of deal they'll get. Who's Merlin Agency? And agency that represents a collective of indie labels in digital media.

Web 1.0 promised the democratization of distribution. Except it's ended up in fewer hands.

Web 2.0 the sharing economy. Except it's ended up in fewer hands.

And now Web 3.0, the DIY economy (do it yourself), or the maker economy. That's 3d printers where people can make their own items like clothing--intellectual rights on clothing designs, yeah that worked out great for music, film and books....it'll end up in fewer and fewer hands.

When Andrew Keen interviewed Dale Daugherty, the guy championing the maker-economy, he asked him what's going to happen with everyone in the textile industry in unemployed? Keen said Daugherty didn't respond. Even he's not sure what kind of world that will be.

Technology advancing is one thing, the total disregard for the law and common decency is a totally different thing, but it's on the internet so it's okay. Hey, I like that band, I think I'll bankrupt them by pirating their content.

And the thing is, this was not at all what the early implementors of the internet and the web in the 1980s and early 1990s envisioned--because they're very much alive and say so. But by turning YOU into a product through data mining, they've been able to devalue everything else.

Even Silicon Valley for the most part hasn't benefited. In Santa Clara County, the geographical heart of Silicon Valley, in 2001 after the dot-com bust the poverty rate was 8%, but in 2013 it was 14%, food stamps in 2001 was 25k, jumped to 125k by 2013. Silicon Valley doesn't even create jobs in their own area. Because they form start up to get funding, and then the top people pay themselves, try for another round of funding, and so on. That's their business, not production but getting funding. Silicon Valley has one of the shortest employment lengths than any other industry, just about competing with the NFL. Start ups tend to fire 25% of their staff in the first year. Then the "founders" jump to another start up, get funding, then dump it, and so on. The business model is about funding, not production. That's all Tesla has proven to be.

With Netflix, because the content gets poached by pirating, they then poach the networks, and then the networks poach the consumer and so on. It creates an entirely perverse system as everyone is trying to survive. But it didn't have to be this way, nor does it need to remain this way. It's literally become lawless.

Of course star players are needed, but without the role players you can't even field a team. Every General Manager and coach who doesn't understand this is out of a job quick.
Nonsensical
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@nadavegan

There's always been a Katty Perry. There was Michael Jackson and Madonna long before her. It's what they call the superstar economy, that is, the only way you are viable is having a blockbuster.

Before, under the 80/20 rule, there was enough left over to fund experimental stuff. Or, although musicians weren't big hits, they could make a living.

A four member band to each make the US minimum wage of $15,080, they would need to get a quarter of a trillion plays for their music on Spotify.

There are executives that are not always about making money, this is a caricature. Of course if they don't make money, then they'll have to close the doors.

American author Cormac McCarthy is considered one of the great contemporary writers in American Literature. He hadn't made a dime in writing until he published All the Pretty Horses, in 1993. He was about 60 years old by that time. He had published I think five or six previous novels. Suttree in '79 earned him a MacArthur Fellowship, and in '84, Blood Meridian, was released which is now considered a great American novel. All of those books did absolutely nothing commercially, they didn't even earn him enough to live on. But Random House did continue to publish him because they thought he was a great author and they could afford to. That's becoming less and less plausible now.

Yes, there are executives who are nothing but bottom line, but not all executives. And yes, there are a lot of artists that got ripped off and had to fight back, the big Tom Petty case and judgment. Not everyone is a nice person, but they weren't all shills either.

But as any small to mid size artist should know, it was because of the big acts that companies could finance you. Now even the big acts can't remain independent.

When you offer something for free, it devalues the product. This happens with currencies, just start giving it away and it creates a devaluation through inflation. The same thing with content. In this case though, it was offered from free not with the wishes of the owners and it was someone other than the owners that made money off of it.

Just follow th money. Simply look at revenue from 1996-2017 then. Especially with the appearance of Napster and Kimdotcom.
Eli
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Karl you missed the boat on Netflix, but Telsa is a solid lock that guy is making money hands over fist.


Buy buy buy!

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If you want a vision of the future, imagine a boot stamping on a human face - forever.
George Orwell

Idiom
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In content Supply outstrips demand. by a lot. There are *millions* of songs with zero downloads.

This is a golden age of tv, there is more good content than anyone can possibly watch.

Very few properties have enough leverage to demand payment.
Nonsensical
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And I can't say that Netflix didn't bring its demise upon itself by fighting for net neutrality. Net Neutrality now leaves the networks no form of retaliation against pirating on peer-to-peer networks. So not only was a "free" market solution prevented but now the networks have to be complicit in theft, and in some cases, theft of their own content.
Supertruckertom
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Thanks Nonsensical. More thoughtful comments.
Karl's use of the BH over the years has really distilled and concentrated the amazing knowledge base of the people that post here.

Free Shipping !!!! No such thing.
No Free music , or movies unless you are a thief.
I still buy Compact Disks. Hard drives crash.
The lack of talent is obvious.
When you can walk into Guitar Center with $1500 and get a DAW, a decent mike, USB ADC mixer, Fuity Loops software and some VST effects plug ins, everyone is a "Producer".
Then some local station will play it on Saturday morning around 2 AM in the upcoming artists showcase.
My ears bleed when tuning across the band and I hit some stations.
The staccato dissonant notes and irregular beat is a window into the thought process of the creators.
People that cannot write complete sentences have disjointed thoughts that are difficult to follow.
It makes sense to them but requires ESP for others to comprehend.
Full cultural immersion is probably necessary to get it.

Haiku is much easier for me.
Set to music, could it be a new genre?

ATL movie production is growing at the expense of LA.
Overall movie production is probably lower in total.

My brother was a role player in NYC.
He danced from 1996 when he started at Julliard, Graduated in 2000, and retired and moved on to being an Agent at CAMI in 2015.
He was always ensemble.
When he was working on tour or in a steady show, he made higher weekly earnings than me.
Averaged out though, trucking has been the better paying career in my case compared to his.
Even a Tony Award winner doesn't live a posh lifestyle in NYC.
They are comfortable yes, penthouse, no.

You would have to be certifiable to leave a decent job and try acting.
Starting out with nothing, you have nothing to lose.
Being retired and already set, you could dabble in bit parts or at least go read for them.
Voice over is another avenue.

$100 a day is the rate for extras around here or a little more.
That is just Pocket money for someone that doesn't really need it.
You can't pay your rent off of that income stream.

In other news, Tesla is supposed to introduce the Tesla Truck later this year.
Even if Tesla doesn't survive, the self driving technology will.
http://www.reuters.com/article/us-tesla-....
I obviously need to start saving like mad, getting debt free, retraining myself, and getting into shape, starting yesterday.
Exploring all options while I still have some breathing room is the current course of action.

I have been doing improv on the CB radio for decades.
That is as unfiltered as it gets but it is dead now.
Cell phones killed CB.

Tom

Self criticism:
My formatting and writing style is chunky and lacks flow.
Is that a window into my thought process?
It looks like code blocks in a way.






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Preparing to go Hunting.
Nonsensical
Posts: 111
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And speaking of Elon Musk...word is Margrethe Vestager is building a case to ultimately tear Google and Facebook apart. The $2.7 billion fine is just the start.

For those of you who don't know, Margrethe Vestager became the European commissioner for competition at the end of 2014. She has essentially vowed to bring Silicon Valley to heel.

inline
Reluctantdebtor
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It's impossible not to notice that any entertainment or software product can be found in convenient illicit form in less time than it takes to read this sentence. Even the most technically modest sub-broadband DSL allows pirated albums of music and even entire large discographies to arrive on a PC before a user's finger can be removed from the mouse button after the DOWNLOAD button is clicked. This killed the 80/20 rule.
Only a complete lock-down of the Internet could partially prevent further development of easy free delivery of stolen content. However, lately local kids have taken to trading 1- or 2-terabyte portable hard drives or 128-gig and larger thumb drives stuffed full of content, which cuts out the Internet after the initial download. The activity becomes no more personally significant than kids trading ALF bubble gum cards. This has diminished the value of specific bands. One's favorite song might be by a performer whose name can't be easily recalled, because it's on a huge drive with thousands of songs created by dozens of performers. This extends to movies and TV, although the larger files sizes of Blu-ray rips prevent the quick piracy allowed by music's small bandwidth requirements.
The trend over the last few decades has been to rob every last thing of any value to the common person. Experiences, possessions, a sense of self-worth, all relentlessly diminished by forces pressing in ceaselessly from every angle.
I think I forgot what point I was going to make, but this is good coffee..
Tickerguy
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Yeah, BluRay rips are ~50Gbytes EACH.

You can compress that of course (at cost of resolution loss) but if you have an interest in the "real deal" the data storage and transport to do it is pretty daunting.

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Winding it down.
Supertruckertom
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I will pay for good 4k content for my new TV.
Up scaled Blue Ray is nice, especially The Good, The Bad, and The Ugly.
Spaghetti Westerns are a favorite of mine.
The scenery is amazing and I want to see it in remastered 4k minus the dust and graininess.

CGI cannot compete with the reality of Nature.


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Preparing to go Hunting.
Smacktle
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We share my BILs Netfritz and for the life of me I can't find much to watch on there. Every now and again there might be a movie or something.

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The faults of the burglar are the qualities of the financier.
- George Bernard Shaw
Ckaminski
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Everything I know about Baltimore I learned from 'The Wire' when it was on Netflix... :-)

I haven't bought a CD in nearly 15 years, since the industry showed what little foresight they had when they sued to bring MP3.com to heel. MP3.com was basically the first Spotify (if you owned the CD, you could stream it from their service).

I'm not saying the industry wasn't correct, but they won the battle at the expense of a lot of good will and set back the industry internet efforts at least half a decade.

I usually only get CDs at concerts.
Tickerguy
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The music industry has become polluted to such a degree by the scams and schemes of the labels and others (cf. Spotify engaging in payola!) that there hasn't been a CD produced that I have wanted to own in over a decade.

The music industry doesn't have to worry about my stealing their "product" as they no longer produce anything worth stealing, say much less paying for.

The movie industry, by the way, is right behind them. From a dozen or more films I considered worth owning on an annual basis 10-15 years ago to an effective zero today (sorry, but 1 or 2 over the space of a year is for all intents and purposes ZERO.) So no, they don't have to worry about me stealing anything either.

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Winding it down.

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