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Latest Netflix Earnings Report Mixed 303

Posted by Unknown Lamer
from the hive-of-profit-and-drm dept.
nmpost writes with one interpretation of Netflix's Q2 results (PDF). From the article: "The beginning of the end may be at hand for Netflix. On Tuesday, the movie rental company posted its second quarter results, and they were not promising. While the company returned to profitability following a first quarter loss, Netflix had a 91% drop in net income. The company's troubles began when it attempted to split its DVD-by-mail and streaming services, effectively doubling the price it was charging customers. External forces are now beginning to weigh on the company, and its doom appears to be within sight. The biggest challenges facing Netflix over the coming months are going to be competition and licensing fees. Three huge companies are competing against Netflix in the streaming arena, which has already surpassed its DVD-by-mail business. Amazon, Apple, and Google all offer streaming content as well. As movie and television studios began to demand higher licensing fees, Netflix will not be able to pay, while these tech giants will. Netflix will eventually be priced out of the market." Engadget, on the other hand, shines some positive light on the report: "The results are in from its Q2 2012 earnings report, and it's claiming 27.56 million streaming subscribers worldwide, up from 26 million last quarter. In the US alone that includes 23.94 million customers, after it reported 23.4 million in Q1, while DVD customers dropped by 850k to 9.24 million." So it appears that Netflix is either gaining new streaming customers, or converting those expensive DVD customers into more lucrative streaming-only customers.
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Latest Netflix Earnings Report Mixed

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  • No more DVD rentals? (Score:4, Interesting)

    by cpu6502 (1960974) on Wednesday July 25, 2012 @12:07PM (#40765321)

    If Netflix dies I guess that's the end of DVD-by-mail. I know at least one person who won't be happy. He rents the DVD and then he & his wife watch the movie or TV show together.

    • by h4rr4r (612664)

      This and streaming are the only ways I watch TV shows. If dvd by mail were to end I would just use streaming. It would be a loss but nothing for me to worry over.

      • by cpu6502 (1960974)

        Hard to stream at 50k. (dialup). Plus even if my colleague had highspeed internet, he still has to go out and buy new equipment so he & his wife can see the movie on the TV.

        • by h4rr4r (612664)

          A roku costs $50, even at minimum wage that is less than a days worth of earnings.

          The dialup is indeed an issue, but for any use of the internet not just streaming video.

          • by cpu6502 (1960974)

            I use dialup when traveling. The web works just fine especially with image compression turned on. It's only the streaming video that does not work.

            • by h4rr4r (612664)

              Clearly we define work differently. I hate when I lose 4G on my smartphone, 3G is just so damn slow.

              I would never use anything more demanding than ssh over dialup.

            • I use dialup when traveling.

              You could always buy an Android tablet with enough storage to hold multiple movies and then rent enough movies from Google Play to last you through your trip. I seem to remember having an option to download the entire rented movie to DRM storage before watching it. (Look for the push-pin icon.) Or what am I missing?

      • by ethanms (319039)

        Netflix streaming, You Tube and my personal DVD collection are all that I watch--no cable, DVD by mail, antenna or other streaming.

        Netflix makes up greater than 90% of what I watch, though You Tube is actually quite good for European (BBC) shows split up into thirds, and very old movies (collection of Chaplin movies is good).

        I almost never watch my own DVDs because I'm too lazy to seek out what I want to watch and put it in the player... there's just too much commitment in that act and I feel like I must wa

      • by steveg (55825)

        If DVD by mail were to end, I'd just stop watching. I often don't have time to watch an entire movie (or TV show, but I don't watch many of those) at one sitting, and it might be a week or more before I get a chance to finish one I've started. My DVD player will remember where I am over that time. Does the streaming service?

        If it goes away, it does. I've got other things to do anyway.

    • by Quiet_Desperation (858215) on Wednesday July 25, 2012 @12:16PM (#40765477)

      I maintain one DVD out with my Netflix streaming. Sometimes the DVD rental the only way to get certain things, which is why I laugh in the face of anyone saying "discs are dead, grandpa!" It's not a tech issue but an IP one.

      All I want is a flat rate, one stop shop for streaming anything ever made. Completely possible techwise, utterly undoable from an IP standpoint. iTunes works well enough with my AppleTV, but sometimes the cost of a series is more than buying used DVDs (or even Blu-Rays) on amazon. It's variable enough that I have to check every time.

      I'm lucky enough to know people with similar tastes who like to buy DVD box sets, and I can borrow/copy a lot of stuff.

      • by jeffmeden (135043)

        Sooner or later one of the studios is going to step into the vacuum of streaming rentals and realize there is a ton of money to be made there. Think about it, the day the movie hits theaters just start a streaming rental service starting at a premium (say $50 per view). Then concoct an algorithm (this might take a few runs to get just right) that decrements the price based on the day's demand for that title (relatively low demand, price goes down). That way, each day the price goes down (theoretically) b

        • I think this will not happen from a current studio. Once one of the indy groups grows enough to get big talent and big movies then they will be the first to enter this gap. After they break ground the legacy studios will move in. We already see stuff like this in the audio side of the industry, where on-line sales are concurrent with the CD release, sometimes at a lower price and often in MP3 format.

          The big companies don't like change, are afraid of it even. I think this one change you suggest would vas

      • All I want is a flat rate, one stop shop for streaming anything ever made. Completely possible techwise, utterly undoable from an IP standpoint.

        Unless the BBC re-used the archive tapes.

      • by Hatta (162192) on Wednesday July 25, 2012 @01:02PM (#40766245) Journal

        All I want is a flat rate, one stop shop for streaming anything ever made. Completely possible techwise, utterly undoable from an IP standpoint.

        There's a technical work around for that.

    • by jeffmeden (135043)

      If Netflix dies I guess that's the end of DVD-by-mail. I know at least one person who won't be happy. He rents the DVD and then he & his wife watch the movie or TV show together.

      Nonsense, either Netflix will stay open, or there is always Blockbuster dvd-by-mail which is a nearly identical service. At the top-tier of title popularity, Redbox and other kiosk style rentals are everywhere (which is why they are eating up Netflix revenue like crazy.)

      Plus, if Netflix is gone maybe the vacuum will spur someone to finally crack the enigma that is "Streaming Rentals" that don't cost an arm and a leg. It's clearly an issue of licensing and not technology or logistics, so it has to happen at

      • by h4rr4r (612664)

        The blockbuster service is not near identical.

        1. they commonly do not have any discs but make it appear as though they do
        2. if you do not have an available item in the top 15 it will mail out nothing.
        3. blockbuster sucks

        The rest of your comment I agree with

      • if Netflix is gone maybe the vacuum will spur someone to finally crack the enigma that is "Streaming Rentals" that don't cost an arm and a leg.

        The enigma in question is the rural last mile, and that's an issue of "technology or logistics" for ISPs to solve. Disc rental by mail is the only practical service if all you can get in your area are dial-up and satellite, not DSL, cable, or fiber.

        • by h4rr4r (612664)

          There is another solution one we already adopted, most people do not live in rural areas.

          For those people that do, DVD by mail will be around a long time.

    • by na1led (1030470)
      I can't even remember the last time I rented a DVD. It must have been about 5 years ago. Maybe this will be good news for the local DVD rentals at the Mom and Pops stores.
  • by gl4ss (559668) on Wednesday July 25, 2012 @12:10PM (#40765371) Homepage Journal

    q on q it's.. well, I don't know how you'd use percentages to turn a negative into a positive, but over(under) minus -100% ?

    they're profitable at least now.

  • Naturally (Score:5, Insightful)

    by DanTheStone (1212500) on Wednesday July 25, 2012 @12:12PM (#40765397)

    Since nearly all the content people want to watch needs to be licensed willingly be the major studios, this should be no surprise. They'll just keep raising their rates until Netflix goes out of business. This is the inevitable failure of a permission-based service provider.

    At least with DVDs they weren't existing at the whim of the studios. They could make them horribly angry and still operate legally. With streaming they have no such independence.

    • by ewieling (90662)
      It seems that if the studios keep raising their streaming licensing fees then DVDs eventually will be cheaper for Netflix to handle than streaming. I don't think this will force Netflix out of business.
      • Re:Naturally (Score:5, Interesting)

        by The Moof (859402) on Wednesday July 25, 2012 @12:37PM (#40765829)

        It seems that if the studios keep raising their streaming licensing fees then DVDs eventually will be cheaper for Netflix to handle than streaming.

        That's a good way to make DVD piracy popular again.

        Most average users I know only got into copying DVDs (via Netflix mail discs) so they had movies on hand when they wanted to watch them. Streaming took that need away for most people since they could just fire up their device (Xbox, PC, PS3, Wii, TV) and watch what they wanted. Take away that ability with streaming, people will just start copying DVDs again.

    • Re:Naturally (Score:4, Insightful)

      by Quiet_Desperation (858215) on Wednesday July 25, 2012 @12:26PM (#40765639)

      That's what is so sad about the whole thing. Netflix had a handy villain in the need to eliminate streaming as a freebie, but their horrific PR made them look like they were just increasing prices for no reason (I saw a *lot* of people online who believed that). Doing that and trying to split the service at the same time only compounded things. It's definitely going to show up in business school texts as a case study.

    • This is what will eventually kill Netflix. It also means in the future I'll probably watch a LOT less movies. I watch netflix every night, either movies or TV series (I have streaming and 3 DVD package, and a member since 2003). That's about 60 hours of programming a month, which would cost ~$60/month for Amazon/Google but I pay 1/3rd that, and can watch even more, amortizing the costs further.

      If the studios have their way, eventually we'll all be paying $15 per streaming movie at home, and Megaplex tick

    • Re:Naturally (Score:5, Interesting)

      by glassware (195317) on Wednesday July 25, 2012 @12:36PM (#40765817) Homepage Journal

      Netflix replaced a model whose business parameters they controlled (DVD by mail) with a model whose business parameters they do not control (licensing streaming content). Eventually, Netflix will be forced to become a Cable TV provider that streams videos on demand; you'll sign up to Netflix and then pay an extra $10 per month for access to Universal movies, $5 for access to Comedy Central, and so on.

  • "The beginning of the end may be at hand for Netflix. [...] its doom appears to be within sight." Are you kidding? The company with 28+ million subscribers is not going to fold any time soon. In fact, it's not going anywhere ever. Worst case scenario, they get bought by someone else who can do it for cheaper.
    • Oh, good. I guess that means AOL has nothing to worry about, either.

    • by alen (225700)

      WTF is there to buy? a few content licenses that expire in a few years?

      • Like most technology companies, the value is customer loyalty/information, branding, and the platform.
        • by alen (225700)

          amazon has a platform, netflix uses it to run their corporate IT

          what does netflix have? PS3/blu ray/x-box/roku now have the amazon and netflix app. child's play to use one instead of the other

    • How about Yahoo buying Netflix ? Get back in the game against Google-tube, Amazon and Apple.
  • by jxander (2605655) on Wednesday July 25, 2012 @12:17PM (#40765487)

    NetFlix may not survive, but even if they die out I couldn't be happier for their contribution to the world.

    You may not like their policies, business decisions or CEO, but NetFlix was a pioneer in their field. They were the first company to provide cheap, easy, unlimited streaming compatible with dozens of devices. That genie is out of the bottle now, and while there's a long battle ahead over licensing fees, royalties, etc ... there has been a permanent shift in the way we watch movies.

    NetFlix has also established a very nice base price-point. If Amazon, Apple, Google or any other competitor want to charge more than $8-10 a month, they'd better provide some added value.

    • by Githaron (2462596) on Wednesday July 25, 2012 @12:38PM (#40765841)
      NetFlix should consider multiple pricing points. First off they need a nearly complete collection of movies and TV shows. After that, they could have multiple plans based on how recent a movies/TV shows come out. For example, $15 a month will get you access to all movies/TV episodes that are 3 years or older; $30 will get you everything 2 years and older; $50 will get you everything 1 year and older; and $100 dollars will get you everything from the day of release. If you want access to a movie/TV episode that is newer than your tier allows, you can either upgrade tiers or pay per view. NetFlix should guarantee at least two simultaneous streams.
      • by jxander (2605655)

        I wouldn't be surprised to see something similar to this as the future of streaming. Though as AC points out, age may not be the best criteria.

        Whatever they decide though, NetFlix (or whichever competitor) must provide a basic service on par with what we know and are accustomed to for $10/month or less. From there, any upgraded plans will have to add value for the money.

        Honestly, what I'd really like to see are à la carte entries. Basic service for $8 per normal, but then (just an example, don't

  • by FBeans (2201802)
    Perhaps one of the competitors will actually provide a service that is DRM free, or at least value for money like Spotify. Until users get uncontrolled access to the media they want to purchase, their will only be one company that will remain solid and stable: p2p sharing. Die or survive, I don't think I could care less for netflix.
  • by JWW (79176) on Wednesday July 25, 2012 @12:18PM (#40765513)

    A note to the MPAA. You better be careful what you wish for.

    My family loves and adores Netflix. It is an creative and innovative method of consuming entertainment.

    If the MPAA succeeds in their obscene desire to destroy Netflix at any cost, I WILL NEVER EVER respect their "IP" rights. I will steal any content I want.

    I am sick to death of the entertainment industry on bing hellbent on not letting me enjoy the entertainment they are selling in the way I choose to.

    They should view Netflix as a godsend that enables them to have a future. Instead they view it as the enemy.

    If they destroy Netflix, I will have no ethical problem stealing what the movie and TV industry creates. Their obscene greed and arrogance doesn't give them any moral standing to lecture the customers who they depend on for their existence.

    GIVE US WHAT WE WANT! Oh and what we want is to not wait months after DVDs are released to stream movies, and we don't want to pay $5 to rent a streaming video, and we don't think ridiculous DRM schemes (hello ultraviolet) are reasonable.

    • by MetalliQaZ (539913) on Wednesday July 25, 2012 @12:45PM (#40765959)

      They owe you nothing. If you convince yourself that you don't have to pay for entertainment, then you will be surprised when their lawyers come-a-knocking.

      I'm not saying it's right, but they don't give a fsck about you or what you think. You REALLY want to stick it to them? Read a book.

    • by Jeng (926980)

      I wonder by how much was music piracy reduced by the introduction of legitimate digital distribution methods?

      Considering the insane amount of music iTunes sold in their first year alone it has got to be rather substantial.

    • by ethanms (319039)

      If the MPAA succeeds in their obscene desire to destroy Netflix at any cost, I WILL NEVER EVER respect their "IP" rights. I will steal any content I want.

      They will not be satisfied with "flat rate" pricing for given periods of time, and frankly that will only lead to the Viacom-DirecTV styled battles we've just recently seen anyway--with Netflix or the studio content provider superimposing text over your stream airing out their contract laundry, etc.

      I think the ultimate model will unfortunately be cell-phon

  • by Sebastopol (189276) on Wednesday July 25, 2012 @12:21PM (#40765557) Homepage

    If I want to watch Breaking Bad I can pay google $8 per season or $2 per episode, or I can pay Amazon $22 per season (!!!).

    Or I can pay Netflix flat rate of $20 and watch all four seasons, then watch Dexter, Weeds, Black Adder, for no extra cost.

    How is Google/Amazon's model even remotely a threat to Netflix?

    Clearly I'm missing something.

    • by alen (225700)

      that's just one show. netflix selection is crap in general and they lose shows daily.

      amazon is $80 a year and includes free shipping and book borrowing. and i can rent a movie that's not on prime direct from the x-box or ps3 app.

    • by Githaron (2462596) on Wednesday July 25, 2012 @12:44PM (#40765931)
      NetFlix is pricing at a price that consumers like. Google/Amazon is pricing at a price that publishers like. If publishers refuse to sell licenses to Netflix, Google and Amazon win. I think publishers need to realize that their content is not nearly as valuable as it used to be.
  • by vlm (69642) on Wednesday July 25, 2012 @12:22PM (#40765571)

    wife acceptance factor?

    OK I got the roku box. So, honey, I can sign up for amazon prime or netflix. If I sign up for amazon prime I'll never pay for postage again and it'll all be 2 day instead of next week or so, but netflix offers nothin extra. You can guess how that discussion turned out.

    The crazy thing is amazon prime is basically free for me because I buy so much stuff from them that I profit WRT to annual fee vs no more postage. I assume this free postage stuff will go away if I buy too many 40 pound bags of kitty litter from the other side of the country. I have to look into that. I'll need road salt in a couple more months and I was thinking ten 80 pound bags of crystal solar salt might work.

  • Let's hope the whole proprietary streaming industry collapses. Not just Netflix, but Amazon's and Apple's too. If you need a weirdo client to play the videos, then you have taken a technological step backward from OTA TV or analog cable TV. I am not going to pay for their weird luddite religion.

    The current state of the art is offered by pirates: here's the file and it Just Works, with whatever software you want to use, on any box that you want to play it on, to be played at any time of day that you want

    • by dkleinsc (563838) on Wednesday July 25, 2012 @12:46PM (#40765975) Homepage

      The current state of the art is offered by pirates: here's the file and it Just Works, with whatever software you want to use, on any box that you want to play it on, to be played at any time of day that you want.

      Why would that surprise you?

      Free market economies only work when something is scarce - for example, there's no market for breathable air, nor is there a market for seawater on a coast. Sequences of bits aren't naturally scarce, because computers are really good at copying sequences of bits for very very low cost. So in order to make something that is not scarce scarce, there's a giant legal and technological mechanism put in place. That technology and law must by necessity cripple the normal abilities of computers to prevent them from doing what they normally can do.

      • by Hatta (162192)

        Free market economies only work when something is scarce

        The correct thing to do when we have a non-scarce good is not to artificially destroy the scarcity, but to abandon the free market model.

    • by alen (225700)

      i want to watch TV on a gasp,,,,,,,TV. not on a laptop. i have no time to transcode or whatever. i'm not going to pay most money for faster internet. i'm not going to buy hard drives or NAS or whatever. i'm not willing to pay more money for electricity to keep my stuff on 24x7.

      unless you live in mommy's basement and have no bills the cost of "free" is more than legit

      when i cancel cable i'm going to pay $40 a month for 5mbps internet. no reason for anything faster. in fact i'm going to downgrade from my curr

    • by DogDude (805747)
      "We already have something much better, more convenient, more reliable, more interoperative, which also come with that good feeling that the technophobes in Hollywood aren't getting your money."

      And this thing is...?
  • I've tried HULU and for the most part their offering of recent TV shows is pretty bland. If Netflix focused on streaming TV shows the day after it aired then I would be more interested. Get steaming of other TV shows other then the 4 main networks (ABC, CBS, NBC and FOX). More from History Channel, Discovery, SciFi, FX, TNT and so on.

  • by teaserX (252970) on Wednesday July 25, 2012 @12:33PM (#40765765) Homepage Journal
    Netflix had an opportunity to transform their business and their clientele but chose instead to overreact. They should have slowly phased out DVD-by-mail by paring down the available DVD catalog in favor of streaming offerings without charging their customers higher fees. I personally would not have been offended by having to stream a show or a movie because it was no longer offered as a DVD. I might have been disappointed that Blu-Ray was no longer an option for certain things but doubt I would have quit as a subscriber over that. They took exactly the wrong action: cut down my options and ask me to pay double. Instant ragequit.
    • Re: (Score:2, Flamebait)

      by DogDude (805747)
      The DVD rental is the only part of Netflix that's worth using. Maybe if you're from TV-land (cable, satellite), and you're used to having what you watch dictated to you, then you'd find Netflix streaming adequate. I tried it for a while, but to say the selection was bad wouldn't be fair to the word "bad". It's fucking terrible.
  • Last I heard streaming content was nowhere in size near DVD based content

  • As planned (Score:4, Informative)

    by wytcld (179112) on Wednesday July 25, 2012 @01:07PM (#40766333) Homepage

    The drop in net income for Netflix is according to plan. The plan is to rapidly expand into new markets, investing current income in growth, rather than taking it as profit. Subscriber numbers and hours of content streamed both show the plan is proceeding nicely. The size of the subscription base gives them the income to buy the content to keep subscribers happy. In my house, we watch about 3 movies a week streamed from Netflix, and about 2 movies a month individually rented from Amazon. So they're each getting 8 bucks from us. But Amazon Prime isn't worth it - the selection is far slimmer than Netflix's, and with our purchases of other stuff from them over $25, the shipping's free anyway.

    Anyway, Netflix wasn't looking for immediate profit this last quarter. They were looking for income to reinvest. They got it. They grew. Since when was it the wrong strategy for an Internet company to get really, really big first, and worry about profit afterwards? Worked for Google. And Amazon.

  • by Un pobre guey (593801) on Wednesday July 25, 2012 @01:56PM (#40766919) Homepage
    I get the Netflix DVD service, not the streaming. The streaming is heavily skewed to boring, hyper-commercial new releases, whereas the DVD collection is a vast library of indie, foreign, and artistic films and videos essentially unavailable anywhere else. Losing that would be a tragedy. I don't give a flying fuck about the latest movie star vehicles or blockbuster action crap. I can't stand the cardboard acting or shallow and contrived writing of most commercial movies that are on the streaming service. Bummer.
    • The streaming is heavily skewed to boring, hyper-commercial new releases

      It's actually even worse. New releases usually aren't available on the streaming service. So, its more like hyper-commercial year-old and older releases.

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