MCN Blogs
David Poland

By David Poland poland@moviecitynews.com

More Netflix Hype: Citibank Edition

The Netflix headline of the day is “Analysts: Netflix Has Fully Recovered From Its Qwikster Debacle”

Citibank is bullish on Netflix. Good for them. But the logic, as laid out by PaidContent, is bizarre.

Although it is constantly been repeated as a fact, It is a to stretch one fact into a false perception to say that Netflix recovered from the Q3 loss of customers. The fact is, as offered by Netflix, that in their domestic streaming business, which is now their core business, they lost another 350,000 paying streaming customers in Q4, ending Dec 31. Q1 2012 doesn’t close until the end of this month. The company did add 581,000 FREE subscribers in Q4.

Netflix also lost 2,774,000 domestic paying DVD customers in Q4 with a marginal increase of 11,000 free DVD subscribers.

In combined domestic (Streaming + DVD), paid customers were up 15,000 in Q4.

The one area of real growth for Netflix in paid customers was internationally, up 458,000 paying subscribers. But expanding the business into new countries, which Netflix has openly acknowledged is not going to be a profitable business for years, isn’t really the same as recovering from the domestic losses of Q3 2011.

Citibank’s report apparently relies on the notion that Netflix’s paid domestic subscriber base will continue to grow. There is no reason to make that assumption. There is no specific reason to assume that there will be a massive exodus of subscribers either. But leaps of faith about a company in a significant transition seems sloppy, at best.

The second big issue is that Citibank is assuming that Netflix’s Cost of Revenue will be $2.1 billion in the next year… when Netflix’s Cost of Revenue was $1.1 billion in the last 2 quarters. So the theory is that Netflix is done spending on content?

And this brings me to the third and most serious problem with the oddly timed Citibank report. Netflix has, in the last month or two, opening admitted to a new paradigm… TV-programming first.

The assumption that the only issue facing Netflix is today’s customer satisfaction and that the only problem in the last year was “the Qwikster problem” is a sad joke. The company – which I still think is a terrific and interesting addition to anyone’s media mix – is not in the same business that it was in just 2 weeks ago. And the response from customers is not likely to settle in for another 3 or 4 months. The timing of the Citibank survey makes a mockery of its results. It’s not valid.

No question, one of the first steps for Netflix to get back to a growth mode is to stop the talk about it stepping backwards. But why is Citibank carrying their water against some very basic logic? Why is the media so anxious to help Netflix turnaround by continuing to run the myth instead of the not-that-ugly facts?

(shrug)

4 Responses to “More Netflix Hype: Citibank Edition”

  1. storymark says:

    David v Netflix: Round Whatever.

  2. David Poland says:

    Sorry, Storymark, but that’s just simplistic.

    I know that readers prefer the legend to the facts every bit as much as hack reporters enjoy lingering in them. But the truth is the truth and bullshit is bullshit and I don’t really care that I have to repeat it.

    As you certainly didn’t notice, I’ve been on the right side of this story for 18 months.

  3. Bennett says:

    i like your netflix perspective David. I may not always agree with you but I respect and appreciate your work…

  4. David Poland says:

    Oddly, it becomes less and less about my perspective, Bennett, and more and more just keeping the spin in check.

    As I was writing this piece, I realized that I wasn’t actually offering my perspective on the future of the company at all… just pointing out details that others seem to want to overlook as they drool over their precious.

Leave a Reply

The Hot Blog

Quote Unquotesee all »

“Let me try and be as direct as I possibly can with you on this. There was no relationship to repair. I didn’t intend for Harvey to buy and release The Immigrant – I thought it was a terrible idea. And I didn’t think he would want the film, and I didn’t think he would like the film. He bought the film without me knowing! He bought it from the equity people who raised the money for me in the States. And I told them it was a terrible idea, but I had no say over the matter. So they sold it to him without my say-so, and with me thinking it was a terrible idea. I was completely correct, but I couldn’t do anything about it. It was not my preference, it was not my choice, I did not want that to happen, I have no relationship with Harvey. So, it’s not like I repaired some relationship, then he screwed me again, and I’m an idiot for trusting him twice! Like I say, you try to distance yourself as much as possible from the immediate response to a movie. With The Immigrant I had final cut. So he knew he couldn’t make me change it. But he applied all the pressure he could, including shelving the film.”
James Gray

“I’m an unusual producer because I control the destiny of a lot of the films I’ve done. Most of them are in perfect states of restoration and preservation and distribution, and I aim to keep them in distribution. HanWay Films, which is my sales company, has a 500-film catalogue, which is looked after and tended like a garden. I’m still looking after my films in the catalogue and trying to get other people to look after their films, which we represent intellectually, to try to keep them alive. A film has to be run through a projector to be alive, unfortunately, and those electric shadows are few and far between now. It’s very hard to go and see films in a movie house. I was always involved with the sales and marketing of my films, right up from The Shout onwards. I’ve had good periods, but I also had a best period because the film business was in its best period then. You couldn’t make The Last Emperor today. You couldn’t make The Sheltering Sky today. You couldn’t make those films anymore as independent films. There are neither the resources nor the vision within the studios to go to them and say, “I want to make a film about China with no stars in it.”Then, twenty years ago, I thought, “OK, I’m going to sell my own films but I don’t want to make it my own sales company.” I wanted it to be for me but I wanted to make it open for every other producer, so they don’t feel that they make a film but I get the focus. So, it’s a company that is my business and I’m involved with running it in a certain way, but I’m not seen as a competitor with other people that use it. It’s used by lots of different producers apart from me. When I want to use it, however, it’s there for me and I suppose I’m planning to continue making all my films to be sold by HanWay. I don’t have to, but I do because it’s in my building and the marketing’s here, and I can do it like that. Often, it sounds like I’m being easy about things, but it’s much more difficult than it sounds. It’s just that I’ve been at it for a long time and there’s lots of fat and security around my business. I know how to make films, but it’s not easy—it’s become a very exacting life.”
~ Producer Jeremy Thomas