Guest Post by Simon Black
Shares of Netflix soared on news the company lost a record $859 million in cash in the third quarter.
Why are investors applauding this egregious destruction of capital?
Well, it’s because investors only look at one number when Netflix reports earnings – subscriber growth.
And on that metric, the company outperformed, adding 6.96 million subscribers, bringing the global total to more than 137 million.
At 137 million subscribers, Netflix has about 2% of the global population as customers.
There are still around 90 million traditional TV accounts in the US (and about 36% of those also have a streaming account).
So there’s definitely room for Netflix to grow in the US and abroad (where the majority of growth is coming today).
But there’s a lot of competition for those new subscribers.
Netflix is up against YouTube (Google), Facebook, Amazon, Apple, Disney, AT&T, Fox… and all of the traditional cable companies that are fighting to maintain subscribers (and testing new offerings to compete with NFLX).
These are companies with DEEP pockets. They also have hundreds of millions of existing subscribers (in Facebook’s case, billions) to market to.
At the very least, all of the other companies in the space are going to drive the cost for programming way up… bringing margins way down.
But let’s not forget the price Netflix is currently paying for that growth…
The company has burned $1.7 billion in cash this year through the third quarter.
So every new subscriber comes at a giant loss.
And Netflix is making up for those losses with debt.
The company has $8.3 billion in long-term debt, up from $6.5 billion at the end of 2017. And it’s paid $291 million in interest so far this year.
With interest rates rising, that interest expense is only going up.
The company has also spent $6.9 billion on content this year (meaning it should surpass its estimates of $7-8 billion). And it’s on the hook to pay out another $18.6 billion for content in the future.
Still, the market values this money-losing, debt-laden and fiscally irresponsible company at $156 billion today.
That’s almost as much as Disney (at $174 billion), a beloved company with a nearly 100-year history that makes billions of dollars in cash every year and, gasp… pays a dividend.
All of the popular companies that are losing money today (Netflix, Uber, Tesla, etc.) are simply a transfer of wealth from investors to customers… because the companies don’t charge enough for their product.
Uber has never turned a profit. But it’s about to go public at $120 billion.
And Tesla is worth more than Honda, despite losing money, missing production deadlines and having a borderline psychotic founder.
I got an email from a company called TransferWise – a tech company that provides low-cost international transfers.
It explained the company has been losing money on every single transaction it makes.
They clearly said they can’t continue providing this service at a loss… and that prices are going up.
They even thanked their customers for hanging in there while they “learn from [their] mistakes.”
Who’d of thunk it?
When you deliberately sell something for less than what it costs you to provide the service, it’s not sustainable.
What a revelation.
It’s as if these companies don’t realize the fact going in… you can’t lose money forever.
TransferWise understands now… all these other companies won’t be that far behind.
But for now, the madness continues…
Uber’s about to go public at $120 billion.
Tesla is worth more than Honda.
Netflix is worth almost as much as Disney.
Lyft, another rideshare service, is also looking at an IPO. But it’s only expected to fetch $15 billion – about one-tenth of Uber.
If Lyft could figure out how to lose more money, then maybe it would have a real business.
These companies are run so poorly, you’d think they were managed by the US Congress.
On the topic, it’s a similar mentality with people still believing the US is the wealthiest country in the world.
It’s got $21 trillion in debt, debt-to-GDP is at 106% and the country is running $1 trillion annual deficits.
Yep, other than that, it’s the wealthiest country in the world.
How is it possible for uber to not make a profit? All they have is an app, correct?
Compare that to a company manufacturing 7000 cars a week. Things that make you go hmmmm….
netflix and it’s competition actually has competition that costs the consumer nothing,streaming for free on the net.
One can make the argument that streaming does cost the consumer time,a precious commodity perhaps spent watching junk.
“So every new subscriber comes at a giant loss.” ——- article
In other exciting news, shares of MoviePass are at TWO CENTS today.
Some of you saavy investors (like, starfcker) need to jump on this pronto.
?
“We lose money on every sale, but make it up on volume” says every Internet company.
No, Netflix is run by the constant barrage of homo-erotic programming that the sex freaks in Congress enjoy a little too much.
The US is collapsing.
Americans say the US debt must be increased because debt worked out so well for Rome.
Americans scream that the US should have wars because the USA needs more refugees.
Americans say tyranny is the American way.
Americans think trade wars are good because Chinese products are too cheap and tariffs will fund US wars, debt, and tyranny while killing US exports.
Americans insist Obama was an asshole for destroying the US with wars, debt, and tyranny, but Trump is a god because he loves wars, debt, and the police state.
Americans are so retarded that they think government overlords should have rent control instead of getting rid of regulations that drive up housing costs.
Americans believe anyone who wears a costume, badge, and a gun is a saint.
Instead of losing weight, Americans think the government should make a decree forcing airlines to provide large seats that will drive up ticket prices.
Americans feel that bankers who committed fraud should receive billion dollar bailouts.
Americans say being a Nazi or being a Communist are the only political options.
Americans insist the only possible way to solve any problem is force.
Americans say the US should build a wall to keep Americans IN because closed borders helped make North Korea rich.
Americans scream war is good because Libertarians oppose wars.
Americans would rather beg for government job-killing decrees that raise the minimum wage instead of starting a business or learning a skill.
Americans believe fighting the British during the Revolutionary War was a huge mistake.
Americans scream that the government spends your money better than you can.
Americans say killing chickens to eat is okay, but eating cats must be illegal.
Americans insist that restaurants would have a vested interest in killing their customers if the government did not require businesses licenses.
Americans fought the Nazis, but have now become Nazis.
Americans are so stupid that they say baseball hats must be outlawed to help the state meet their private prison quotas.
Americans swear government decrees made the USSR successful.
Americans say George Washington was a faggot for supporting freedom.
Americans think the desires of neighbors are more important than the rights of property owners.
Americans believe withdrawing less than $10,000 from your own bank account should be illegal because you might use drugs.
Americans insist protests must be illegal because protesters might break windows.
Americans feel that the government must close newspapers to prevent fake news.
Americans say the government should shut down churches because there might be terrorism.
Americans scream guns must be banned because blacks might buy guns to kill white people.
Americans feel being groped by the TSA is good because they have nothing to hide.
Americans say NSA wiretapping is fine because it is just metadata.
Americans believe forfeiture is okay because the police have been doing it for years.
Americans insist torture is great because other countries do it.
Insanity.
The USA feels like it is committing suicide.
How can Americans sleep at night now or look in a mirror without feeling utterly disgusted and ashamed?