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Netflix Rises On EPS And Intl Sub Beat, In-Line Revenues, And Domestic Subs Miss; Price Increase

Tyler Durden's picture




 

With revenues meeting estimates to the dot, and with largely meaningless non-GAAP EPS (because after all NFLX is valued on a 2024 foward basis), Netflix is choppy after hours as algos try to determine what is more important for them:the miss in domestic subs, which rose 2.25 million on expectations of a 2.31 million increase, of the beat in international (and very much money-losing although now expected to be profitable in 2014) subs, which rose 1.75MM vs estimates of 1.64MM.

Perhaps more important was the company's announcement that it is slowly but surely proceeding with price increases:

As expected, we saw limited impact from our January price increase for new members in Ireland (from €6.99 to €7.99), which included grandfathering all existing members at €6.99 for two years. In the U.S. we have greatly improved our content selection since we introduced our streaming plan in 2010 at $7.99 per month. Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only. Existing members would stay at current pricing (e.g. $7.99 in the U.S.) for a generous time period. These changes will enable us to acquire more content and deliver an even better streaming experience.

What "generous" means for a period of time, only Janet Yellen knows.

Netflix also commented on the incursion of competitors:

We continue to see more capable Internet television devices launched. Chromecast, Roku Streaming Stick, and Amazon Fire TV (on which we expect to support voice search later this year) push the quality of experience and price points for adapter products. Smart TVs from manufacturers like Sony, Samsung, LG and Vizio are starting to evolve from Internet TV as a “bolt-on” to Internet TV as a critical and integrated part of the overall device interface. Roku TV will likely be available in the Fall as one of the first Internet-centric TVs. We expect this trend to continually decrease the friction required for our members to access Netflix and enjoy great content.

 

In Q1, Amazon changed strategies in the UK and Germany, closing LoveFilm as a streaming brand to compete with Netflix. They have repurposed their content deals to serve Amazon Prime Instant Video in the UK and Germany, and are investing in creating awareness of this new model. Amazon is not currently offering subscription video within Prime in Canada, France, Italy, Spain or Japan. They may choose to expand Prime Instant Video or to focus on tuning their three existing Prime Instant Video markets: U.S., UK and Germany. Since much of the content on Netflix and Amazon Prime (as well as Hulu in the U.S.) is mutually exclusive, many consumers see value in subscribing to all three networks. In general, we continue to believe that our biggest long-term competitor for entertainment time remains the MVPDs improving through TV Everywhere, as they are doing with HBO Go.

As for the topic of Net Neutrality, NFLX is "surprisingly" against the Comcast - TimeWarner merger. Why? It's called leverage:

If the Comcast and Time Warner Cable merger is approved, the combined company’s footprint will pass over 60 percent1 of U.S. broadband households, after the proposed divestiture, with most of those homes having Comcast as the only option for truly high-speed broadband (>10Mbps). As DSL fades in favor of cable Internet, Comcast could control high-speed broadband to the  majority of American homes. Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix. The combined company would possess even more anticompetitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger

Finally, on the topic of NFLX's cash flow, well - there is always next quarter... and next year.

 

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Mon, 04/21/2014 - 16:25 | 4680640 slotmouth
slotmouth's picture

How is netflix inflation figured into fed models?

Mon, 04/21/2014 - 16:41 | 4680682 pods
pods's picture

Can't wait till Netflix dies and the internet will be usable during peak time again.

Is everyone but me plugging into the matrix at night?  Is the steak tasty?

pods

Mon, 04/21/2014 - 17:10 | 4680773 Jumbotron
Jumbotron's picture

Just about pods.  I bought a Roku back late last year.  It's the first "television channel" device I have had since 2002.  Up til then no cable, satellite or even OTA.  Just DVD's.  My families not glued to the set and we get to police what the kids see.  And lo and behold.....everywhere I go people remark on how well all five kids behave.  Imagine that.

But....there has been a spike in their TV viewing with the Roku....but it's still primarily policed Netflix, documentaries and old time Westerns.....all the kids love those.....funny that.

But after 7:00pm.....I have to go into the secret setting of Roku to dial back the max data rate to only 600k or else it just stalls all the time.  Even the entire net is slower.

And on Sunday evenings.....fugghedaboutit !!

Oh.....BTW.....for all you Roku owners.....or those looking at getting one......the secret setting to get to the stream rate and lock it into place so that it decreases the number of stalls is this....

Hit the Home button 5 times

Hit the Rewind button 3 times

Hit the Fast Forward button 2 times

This will bring up the Bit Rate Override Menu.  There you can disengage the auto-bit rate and force it down to as low as 300k.  But of course....the lower you go the worse the quality of your picture.  But if it's low quality vs. nothing at all.....hey....it's better than nothing.

Enjoy.....and in my best grumpy old man accent.....

"And you kids.....GET OFF OF MY INTERNET !!!   Grrr.."

Mon, 04/21/2014 - 17:14 | 4680791 James_Cole
James_Cole's picture

http://ir.netflix.com/financials.cfm?CategoryID=282

 

^your economy on hallucinogens

buy buy buy

 

Mon, 04/21/2014 - 18:58 | 4681068 TerminalDebt
TerminalDebt's picture

Netflix can double their prices in Canada. Those Canadians are broken in by Rogers and Bell, getting screwed is expected.

Mon, 04/21/2014 - 17:26 | 4680830 Jumbotron
Jumbotron's picture

Addendum to the above.....The TED channel on Roku is worth the price of a Roku alone.

Mon, 04/21/2014 - 17:27 | 4680832 ejmoosa
ejmoosa's picture

I'm ready to drop Netflix.   There's no content of value being added any longer.  It's mainly crap that bombed at the box office.

Mon, 04/21/2014 - 16:25 | 4680642 Oh regional Indian
Oh regional Indian's picture

Geometric growth required to stay afloat in a linear world.

There's a formula for stress-less success...

ori

Mon, 04/21/2014 - 16:29 | 4680643 Say What Again
Say What Again's picture

I was trying to watch a few shows on Netflix over the weekend, and the entire system was so broken that my local device could not even make a connection.  Everything else in my house worked fine, but Netflix was DOWN.  I went online to look at various chats about the problem, and there were plenty of pissed off people (that will never be compensated for the breach of contract for not having service for 3 days.)

But lets drive their stock price up in the after hours, just because we can.

p.s. I hope someone at Netflix is reading this, because I'm going to switch -- either to amazon, apple tv, or something.  Netflix SUCKS!

Mon, 04/21/2014 - 16:44 | 4680691 Toolshed
Toolshed's picture

I agree completely that netfrix streaming service sucks. I regularly have connection issues. What really is unbelievable however is what they seem to consider "content". I have been shocked at the poor and embarassingly amateurish quality of some of their new "content". I watched, briefly, a documentary that would have received failing marks if submitted as a grade school project. And that is just one example of many. Thier new "content" should be clogging a toilet in a bus stop bathroom somewhere.

Mon, 04/21/2014 - 17:09 | 4680770 Emergency Ward
Emergency Ward's picture

I think that the carriers have started to throttle down Netflix speeds (causing slow loading and rebuffering on my Wi-Fi set as well as on my Cat5 connected set) in order to punish Netflix and the end users for being bandwith hogs (this is a convoluted issue).  I asked a Netflix support agent if that is what is happening and got a denial and a suggestion that maybe the problem was my internet connection or my router.  I stifled my laughter.

But where else can you find classic South Korean TV series like "Five Fingers" or "One Hundred Years Inheritance"?

Mon, 04/21/2014 - 20:19 | 4681247 Agstacker
Mon, 04/21/2014 - 16:28 | 4680651 NOTaREALmerican
NOTaREALmerican's picture

As long as a company is enriching its management you can't ask for a better predictor of its continuing success.

Mon, 04/21/2014 - 16:29 | 4680653 NDXTrader
NDXTrader's picture

It seems the algos made up their mind

Mon, 04/21/2014 - 16:30 | 4680656 Rainman
Rainman's picture

I can't think of Netflix without thinking of AOL for some reason.

Mon, 04/21/2014 - 16:31 | 4680660 NoIdea
NoIdea's picture

Bullish. All time high tomorrow on potential 2050 earnings

Mon, 04/21/2014 - 16:33 | 4680662 orangegeek
orangegeek's picture

Nothing but up.  GDP is declining, but WTF - it's all bullish.

 

NASDAQ100 up 26.  Dow Jones??  well that was up 40.

 

Looks like central banksters buy focus was in high tech.  Good job everyone.   Another day, another gongshow.

Mon, 04/21/2014 - 17:17 | 4680800 DosZap
DosZap's picture

Where they left me, was carrying the 1st 3-4 Seasons of a show(T.V.) series, and then not negotiating or wanting to pay for the rights to the following seasons.GOOD luck trying to find 2009 series episodes,much less newer ones(even in the ONE big video chain that's left).They have tons of foreign crap and lesbo flics,guess they have a huge audience of munchers?.Esp love the ones that say WHAT you have previously watched, and DID NOT!.

Idiots.

 

Mon, 04/21/2014 - 17:47 | 4680893 Squid Viscous
Squid Viscous's picture

I would love to know how they amortize their "off balance sheet" content costs think its like 6 billion and climbing, gotta be some serious accounting hijinks going on there,

Mon, 04/21/2014 - 17:59 | 4680929 CaptainSpaulding
CaptainSpaulding's picture

I cancelled Netflix service about two months ago because of all this talk about  how the content slowed to a crawl. I just reactivated my service last week and i must say, The speed not only improved 500% , But the new UI on my Tivo box looks beautiful. Bravo NFLX for thinking of the end user ( Consumer.)

Mon, 04/21/2014 - 18:25 | 4681003 1stepcloser
1stepcloser's picture

Ray, netflix sucks!

- Tom Cruise 

Mon, 04/21/2014 - 21:13 | 4681355 WageSlave
WageSlave's picture

oitnb bitchez

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