Thursday, April 1, 2010



How come Netflix has a market capitalization of $4 billion, on 2009 net income of just $116 million? That’s about $325 per subscriber, even as each subscriber generates on average about $145 in revenue and $10 in net income per year.

Ethan Epstein makes a pretty compelling case that Netflix’s business model is threatened by problems at the US Postal Service: a rise in postal rates would be bad, and the abandonment of Saturday delivery would be much worse.

1 comment:

PD said...

kinda interesting i looked at the numbers and i am not sold it is a good short. here is from the epstein article

"Even if Netflix did wish to abandon mail delivery altogether, it wouldn’t be possible. Hollywood studios actively limit the number of films they allow to be streamed, because they want to avoid cannibalizing their highly profitable DVD businesses. (Studios collect about 80 percent of the sales of DVDs.) That’s a big reason why Reed Hastings, the founder, CEO, and chairman of the company, recently told Bloomberg News that he expects Netflix to continue mailing DVDs for 20 more years."