Oh Look, Tickerguy Was Right... (NFLX)
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2012-03-28 13:23 by Karl Denninger
in Company Specific , 1 references Ignore this thread
Oh Look, Tickerguy Was Right... (NFLX)

Who predicted this? smiley

Comcast internet subscribers  can rejoice. Comcast has recently announced that they will not be counting  content streamed via their Comcast  Xfinity App on the Xbox 360 against their bandwidth caps.  Comcast  claims that since the data is only traversing their internal Comcast network  that it will not count towards your 250 GB limit a month.

Bye-bye Netflix.  That was a very pretty bounce your stock has had but the cat was, in fact, dead. 

From 10-22-2010:

So Netflix has a $9 monthly service plan that in effect, counts on you being able to push a $50 monthly service toward a traffic profile that the cable company would charge you $200 for, without paying the $200.


The cable company and other last-mile providers have an advantage here that Netflix never will - a near-zero cost of last-mile transport on an incremental basis.  Disks these days are basically free, and in addition most of the last-mile providers have existing deals with the content owners for distribution.  As such I expect a collateral attack to show up soon with cable providers installing disk farms and using their digital delivery systems to provide what amounts to Netflix's service at the same or lower price, undercutting their business.  At the same time the company will be forced to either duplicate infrastructure that their competitors already own or pay for long-haul transport (either directly or via a "Hot Potato" charge to them), which will wind up impacting their margins as well.  They can tattoo Netflix on COGS (Cost of Goods Sold) and once that realization sinks into the heads of the CableCo executives they will, I predict, do exactly that.

It was just a matter of time.

The erosion will continue and IMHO this firm is eventually either a zero or will be taken out at pennies on the dollar for their content agreements -- assuming they don't expire first.

Disclosure: No position at present but stalking for a nice fat short.