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Netflix Plunges After Cutting Q3 Outlook, Sees Q4 Loss
The endless saga of the rental and streaming company, that once had a vendetta with Whitney Tilson until the latter finally threw in the towel after he first shorted then went long Netflix only to blow up on both occasions, continues, this time by plunging 15% after hours following a cut in guidance for Q3 and announcing it will likely once again have a loss in Q4.
From the letter to what little investors are left:

- We expect content payments to cause free cash flow to trail net income in Q3
- In Q3, we expect to be profitable, while with the launch of a fourth international market in Q4, we will move to a consolidated loss
Some other observations from the attached spreadsheet:
- Gross Profit margin dropped to a multi-year low of 27.6% compared to 28.3% last quarter and 37.9% a year earlier.
- In Q2 only 556K paying domestic subscribers were added, compared to 1816K in Q1, and 1858K in Q2 2011
- Cash at the end of the quarter rose to $402MM from $395MM last quarter.
Finally, Reed Hastings' always amusing summary:
Our core thesis is that we can build a large defensible global business as an Internet network for TV shows and movies. Our technology and our content are both huge advantages in getting us to scale; with scale comes further ability to invest. We know our shareholders are depending on us to succeed at our global expansion, market by market, and eventually return to substantial global profits. Our growing US streaming contribution profit stream shows what is possible. We can’t wait to serve a global audience with an amazing Internet video experience.
End result:
Full letter for those who care (link):
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Dear fellow ZH'ers-I have a favor to ask as one capitalist to another. A couple of developers and I are building a news website, basically the genius of free commenting of ZH (no login required either) but a broad based news conglom without the garbage you see on most other sites (read: no Jersey Shore updates). I plan on having many ZH articles linked (one from GM earlier) so hopefully it will draw more traffic here, as well. Either way, the coding is not done to move up or down depending on votes, so this is a rough draft but all ideas are appreciated. www.topthenews.com is the website and if you want to email us, editor@topthenews.com PS-My son is in no way involved. Thanks-RT's Mom
The font, it BURNS.
THx-the thought was to keep it as simple and basic, asthetically, as possible. Again, thx
My advice is to load it up with a bunch of illuminati symbols & shit... That'll hook 'em 4 sure...
change it to a mysterious Annunaki ran website in their language
with full back catalog to all tombs from the Library of Alexandria for members only
DO NOT SPEAK OF THE ANNUNAKI!
The goggles, they do nothing!
good effort RTM, but i'm afraid the future of your website looks bleak, ironically like netflix share price.
1st it will spike coz ppl are like "wtf is this, funny top comment, lets see the site", which was your goal.
I'm sure you didn't intend to, but ZH can't be substituted and people don't care abt your site to use it as a compliment.
so yea, up spike, followed by crash down.
good effort regardless and your son isn't a half decent troll anyways
I hope you are wrong :)
It isn't intended to substitute, just a more broad source, with many probable links back here anyways. There is plenty of room on the interwebs, and again, this is just a rough draft.
If you have ideas, I am more than happy to listen!
Make the front page a little more aesthetically pleasing (I.E.. make the font a little smaller, Maybe organize the news into sections [Think drudgereport.. without going quite in their direction. just some kind of simple borders or sections that separates the news, or topics, or whatever]...
Also, what kind of news are you talking mostly about? Financial, Political, Science, Cultural, odd? Maybe all of them or more? Try and market that in unique ways (like if it's financial.. have a bar on the side that tracks CDS's, different indices. Or if political.. have a small bar listing things in the schedule that will be discussed on the house or senate floor or whichever place? Offer whatever large and small information)...
Beware of the direction the news site may go. Don't let it become a place where it's hijacked by Liberals, Neocons, weirdoes.. etc. Think of a way of preventing that from happening...
How do people feel when they visit the site and offer comments? Is it going to be like a standard news site where people can comment or offer opinions on sections? Will it be like a blog like zerohedge.. where it's a close community? I'm guessing these days with the blogs I've come across, it would be a good direction to make it a close community type of place.
Optional: Something I wish that other blogs have, or what even this site would have, is an encyclopedia of facts, terms, and information on a side bar or somewhere easy to look up. I wish tyler would have something on the side bar that lists all the charts he shows [or at least links] (like NYSE circuit-breaker rules, history of all reserve currencies and when they died, list of liabilities, or other terms). With definitions It should kinda be like what wikipedia has.. so people can contribute to them and update them..
Finally.. you should have a goal or an objective, it should be listed somewhere on the front page; why? Why do you have your unique news site? What do you hope to show, expose, or help? On the zerhedge manifesto.. it says "Our Mission: To widen the scope of financial, economic and political information available to the professional investing public"..... etc. etc.
Hope that helps man. Just my opinions.
Format it to look like a columned newspaper rather than an uglier looking tumblr.com page.
So is the intent to be a drudge report styled news-link page but with the old digg.com voting of stories?
Maybe you could do some work to add tags to each story so the stories can be linked, then have a separate page with a tag index?
Ie: the tag bailout would identify every story that was related to or contained the word bailout in it?
Maybe even have a tag index that could be further reduced more than one level, ie: click on bailout to show all stories related to or containing the word bailout, then show another tag index so one could filter out all stories except for bailout && goldman sachs
just a thought.
I admit it's my fault. I cancelled my subscription last month.
Allow me to introduce you to TORRENTS.
It's like NFLX but for free.....kinda bad for a fee based business model.
I wouldn't know myself, but I've heard that the Pirate Bay still works fine and that torrent magnets are the shit.
Pirate Bay??
Almost all UK ISPS have now blocked access to Pirate Bay. Thank you America.
But the Internet being what it is, if you're a UK Pirate Bay fan then try this, it's one of hundreds of proxies that work... http://tpb.alpha8f.com/
You do need to replace that number 8 with a 7
Their content is shit and worse, it's hard to browse on a mobile device. You literally have to go to a third party site which organizes it sensibly.
I cancelled mine this morning and it was a free trial subscription for a month. I was watching Doc Martin the other night and between 1 episode and the next they pulled it from the queue and all I got was some error message. When I called about it they gave me some song and dance about agreements with the owners that frankly had nothing to do with me, wasn't my problem anyway and frankly, I didn't care. I told them last night that I was unhappy and called this morning and cancelled my free subscription. The customer service person was surprised I would cancel because they pulled 1 series, but they offer very little that I was interested in. No way am I paying for their service. As far as I can tell they offer either terrible or very old movies and terrible or very old TV programs. I can watch those on Hulu if I'm in the mood for self abuse.
You're right but you were at fault for not engaging your brain before subscribing to a trial of a bag of shit.
Yes, but unlike never dating a muscian or getting involved in someone else's marital dispute, it was one of the cheaper lessons I've learned.
Lol the NasDapplflix wont be happy tomorrow.
Interesting, NFLX made their name by partnering with the Postal Service, and then decided to "get ahead of the curve" and go streaming and have done nothing but tank since then. Maybe the Postal Service will welcome them back....
Paging RobotTrader....
On a more serious note. Netflix's streaming content is total dogshit. Absolutely terrible. That's why they are losing subscribers.
We just cancelled our service. (see me post below)
Streaming is only useful for old kid's cartoons. Nothing but B movie junk.
About a year ago my wife and I decided to watch a movie. We spent an hour trying to find something to watch. No luck.
Netflix is done, especially since Amazon has movies and shows, and many are even free for prime members.
pods
You're another one. You subscribed to a service that is shit. Here in the UK you can check their website to see what wonderful content they have before you subscribe.
The word zero comes to mind.
Get excited by this... https://signup.netflix.com/BrowseSelection
RobotTrader is likely in the bathroom puking up blood because one of his momo stocks has not hit a world record, all time high. Oh, and btw....add AAPL to the list.
Robo always sells at the peak. He's busy buying treasuries as fast as he can with his netflix profits.
apple misses
Ha Ha Fuck you market
no way!
Wow ! Big miss on Apple!
Apple missing top and bottom lines by a lot. Ouch!
Everyone is dieing to go to the movies these days.
What? Too soon ?
another ho hum day in freedumb's land, execs get the gold mine, investors get the shaft.
freedumb isn't free.
Plenty of support at $0.00*
*Ref: BBI
Whitney'd
Moral of the story: don't invest based on Twitter quips.
You're telling me - I'm still waiting for my gold shorts to move into the money after taking the plunge based on Rube-ini's "where's your $2000 gold now?" quip back at the start of the year. But he was so convincing and sure of himself, I couldn't see any downside.
Ohhh, aapl.....
What a shame....
How'bout an article, Hilsenrath? Useful idiot....bernanke Turd.
Ooooooohhh
$609.68 to $567.80
$41.88 in one day?
Just as well as you gold bugs ignore the bigger swings in gold about 4 days a week.
Disclosure, I got out of gold at $1800 with a small loss. I wouldnt touch gold above $1300. I wouldn't buy AAPL if it guaranteed a profit.
I'm poor ;O)
I've just read the next post up, http://www.zerohedge.com/news/apple-falls it is funny!
So you sit in cash which loses value as the price of food and energy keep climbing
Apple guides down!!! Apple guides down!!!
expects $7.65 against analyst estimates of of $10.22!
Put a fork in it boys. Once the initial state of denial wears off, down she goes.
And if the Fed eases, gold and silver to the moon. Gotta love it.
Hopium is obviously very addictive.
And people "invest" in these broken markets. Beyond words all, just beyond words.
thats ok , they still have wi-fi for iPads at Chipotle that you can watch your Netflix on
I just cancelled my subscription for Netflix. Just returned a couple golf and kid videos from like 6 months ago. Never use it.
Decided to watch a TV series we watched last year (Falling Skies) but have not tuned in this year. Netflix doesn't have it streaming.
Amazon, $2 bucks to watch an espisode. Run time for the hour long show, 31 minutes. Bingo.
Netflix is dead because they cannot stream what people want to watch.
Bunch of garbage B movies, everything else is disc only.
They are dead as a company, but they just won't go quietly.
Where the hell are those Death Panels when you really need them?
Cancelled our sub. Will gladly pay $2 FRNs for a half hour show instead of wasting 29 minutes on commercials and an hour of my time.
pods
Fuck Netflix.
The people who use Netflix are those who either a) are 100% anal about feedback quality or b) don't know how to TRULY use a computer
It makes no sense that they can't stream everything. What is the point of mailing dvds? How does that benefit the movie makers? All having to mess with constantly mail dvds is to make people angry.
They haven't added any new content in well over four months.As others have stated, everything is B-Rate at best.
I'm thinking of dropping them, as their services are stuck in a time-warp, and are of little use. So, if people are dropping them, not renewing, then of course their stock value is going to drop.
Their woes are 100% completely self-induced.
All ZH hate and loathing aside, the concept is correct even if the execution is wrong.
-30-
Yes,
Now let's go find the inventor of webTV and well him that he was 10 years too early.
HTPC indeed.
"international audience"
LOL...
Maybe they need some content.
Yeah, but Sally Ride was a muff-bumper. Who new?
RIP, Sally. Ride, Sally Ride.
Yeah, but Sally Ride was a muff-bumper. Who new?
RIP, Sally. Ride, Sally Ride.
they have reached maximum subscription
But I thought Reed posted on Facebook that Netfux was going gangbusters?
Beautiful pullback into the channel edge. For non technical traders - this is a gift
you can no longer rent dvds by mail without also paying for the shitty streaming service as well?!?
blow me!
i couldnt even find a search box to see if they had what i wanted.
scrapetorrent ftw!
You can't get old stuff streaming either. For example Hogan's Heros or McHale's Navy - they are available on DVD only. I should listen to my wife and cancel - it is too expensive
NFLX keeps ramping up and then crashing and I keep asking myself why? Just for the ramping part, the crashing makes total sense.
actually, not long after Tilson made that reversal call and went long the stock rallied like 75% and hung there for 2 months. So if he sold he's alright, if he held then yes he's still an idiot.
Netflix mobile streaming is for the younger generation, not ZH audience. Kids no longer watch TV nor do they browse the web on PCs.
That means years of bigtime viewing hours growth while subs grow steadily. Bottom line, Netflix will be a strong part of next gen media entertainment.
Like most generational tech discontinuities, y'all won't grasp this until it becomes obvious.
Fundamentally flawed.
Kids don't pay the bill for their streaming.
Kids will get over 3 inch screens and go back to 42.
Content providers will always be the bottleneck.
As I said, you won't believe it until obvious.
Kids (12-22) grow up and shape media and buying behavior for the next 15-20 years. And parents support them in the interim.
Check back in about five years.
No, Netflix has a habit of pissing off their own customer base; not a good survival trait.
They are bare in the wilderness and bleeding enough for others to smell opportunity.
Cancelled 2 years ago. Never looked back. This generation can run BitTorrent and Tor. Get over it.
Sold my shares of Netflix as soon as they mentioned a change to their business model several months ago. The current management damaged the brand big time. The current management has to go as well as the board. It reminds me of AOL.
As a customer I also dropped the online portion and only use the mail in of CDs.
i guess that Brecken guy on CNBC was right after all .....what a acct scheme to enrich mgt.......
The whole scheme was to engineer EPS by defering the costs thru extending the streaming expenses vs. DVD.....as the sales shifted it appear to boost EPS but CF as I pointed out never followed thru and thus EPS wouldnt either......this the streaming boon doggle is what it is....and mgt has gotten away with it..10 years ago no way they would have.....
They're lying. They missed by more.
Eat your streamed peas!
I've been greatly enjoying my newfound appreciation for lattes. Thank you Reed Hastings for clueing me in to the complete waste-of-money proposition (aka NFLX) represented by your company.
Foreever flattered,
- MM&I
Will Whitney Tilson get into the buyout game, LBO Netflix, and then Merge it with the United States Post Office? #Synergy