Stocks and Trading Thread - Channeling your inner Mono

[Admiral Yi]

What infrastructure is there apart from the internet? 

Commodity in the sense that, with the aforementioned Star Wars franchise exception, there is no streamer that consistently provides must see programming. 

[Josquius]

Is it really commodity business?  Commodity business sounds like an old-school kind of business, as opposed to a network-effect winner-takes-all snowball kind of business.  Netflix strikes me as the latter kind of business:  we're all collectively worse off with having two streaming services competing with each other, because we have two infrastructures to support, and each one would be diminished due to exclusive content being present on only one or the other.

Yes. Yes we are.
But are the companies selling content worse off?

It is tempting to draw a parallel to satellite TV where once upon a time there would be multiple competitors. But the barrier to entry there was huge with massive infrastructure requirements.
With streaming... Competition is far easier and a lot less reliant on actual infrastructure (only servers really).
I do worry where streaming is headed. It seems unlikely to be great for consumers.

[Threviel]

The streaming market is obviously ripe for consolidation and I think HBO and Netflix are some of the smaller fish around to be eaten by Disney or Apple or some other giant.

[DGuller]

What infrastructure is there apart from the internet? 

Commodity in the sense that, with the aforementioned Star Wars franchise exception, there is no streamer that consistently provides must see programming. 

The overhead required to build and sustain membership.  Software on these site is not just of the write once and forget variety, you have to make sure that your IT is always up to scratch to ensure smooth experience, you have to advertise to attract new subs, and so on.  Most of these expenses are duplicated or even cannibalistic between the different providers.

[crazy canuck]

The streaming market is obviously ripe for consolidation and I think HBO and Netflix are some of the smaller fish around to be eaten by Disney or Apple or some other giant.

Netflix does not have a significantly smaller market capitalization than Disney - and all it does is streaming.

[Admiral Yi]

The overhead required to build and sustain membership.  Software on these site is not just of the write once and forget variety, you have to make sure that your IT is always up to scratch to ensure smooth experience, you have to advertise to attract new subs, and so on.  Most of these expenses are duplicated or even cannibalistic between the different providers.

Marketing costs are not infrastructure.

[DGuller]

It's still a fixed cost, it's an investment that's required to build the network so that you'll profit from the effect.

In other streaming news, CNN+ folded just one month after launching.  I'm sure there was a cheaper way to get rid of Chris Wallace.

[Barrister]

Is it really commodity business?  Commodity business sounds like an old-school kind of business, as opposed to a network-effect winner-takes-all snowball kind of business.  Netflix strikes me as the latter kind of business:  we're all collectively worse off with having two streaming services competing with each other, because we have two infrastructures to support, and each one would be diminished due to exclusive content being present on only one or the other.

Yes. Yes we are.
But are the companies selling content worse off?

It is tempting to draw a parallel to satellite TV where once upon a time there would be multiple competitors. But the barrier to entry there was huge with massive infrastructure requirements.
With streaming... Competition is far easier and a lot less reliant on actual infrastructure (only servers really).
I do worry where streaming is headed. It seems unlikely to be great for consumers.

The barrier to entry is the cost of content.

Netflix got started in an era where the content owners didn't really value the streaming rights, so Netflix was able to get them cheap and got an early start on the streaming wars.  But the cost of content has gotten more and more expensive.  That's why Netflix has been investing so much on its own content, and why the competitors are largely from companies that already own huge libraries of content (plus Amazon, which can afford to just throw gobs of money at content).

[DGuller]

What made Netflix far less useful to me over the years was the fact that the space became so fragmented.  If there are five old shows I would be interested in watching, I'd probably need to have 3-4 different streaming services.  Some time ago Netflix felt like the Google of streaming content, a central repository that has almost everything, now it feels like it just has some scraps.

[Barrister]

What made Netflix far less useful to me over the years was the fact that the space became so fragmented.  If there are five old shows I would be interested in watching, I'd probably need to have 3-4 different streaming services.  Some time ago Netflix felt like the Google of streaming content, now it feels like it just has some scraps.

Without a doubt Netflix has less content on it - or at least less of the "classic" old movies and shows I might want to watch.

I think my household has 4 streaming services right now: Netflix, Disney+, Amazon Prime, and Crave (which mostly has HBO/Warner content), which definitely feels like too much.

[garbon]

It's still a fixed cost, it's an investment that's required to build the network so that you'll profit from the effect.

In other streaming news, CNN+ folded just one month after launching.  I'm sure there was a cheaper way to get rid of Chris Wallace.

From Variety it looks like bosses at launch thought it was doing well but new leadership axed it as it didn't like plan to have CNN+ as separate offer.

[Barrister]

It's still a fixed cost, it's an investment that's required to build the network so that you'll profit from the effect.

In other streaming news, CNN+ folded just one month after launching.  I'm sure there was a cheaper way to get rid of Chris Wallace.

From Variety it looks like bosses at launch thought it was doing well but new leadership axed it as it didn't like plan to have CNN+ as separate offer.

Yeah - looks like it had very little to do with CNN+ itself, and more the fact that new corporate masters were coming into place just as it launched.

[Admiral Yi]

It's still a fixed cost, it's an investment that's required to build the network so that you'll profit from the effect.

It's a variable cost.  You don't build a gigantic marketing supertanker that costs the same whether you market to one person or a billion, you spend incremental dollars to market to each person.

https://www.youtube.com/watch?v=aQZm89ELZbU

I found Josh's arguments persuasive and am now considering buying Netflix. 

[Valmy]

So I am following Hab's advice from facebook and waiting for May 1st for the new I series US savings bonds. Supposed to get 9%+ rate on on them. I plan on buying them on May Day while wearing a top hat and monocle.

[DGuller]

It's a variable cost.  You don't build a gigantic marketing supertanker that costs the same whether you market to one person or a billion, you spend incremental dollars to market to each person.

I think it's a fixed cost from the point of view of needing to create a network of a certain size in order for your business model to be viable.  A lot of startups spend absurd amounts of their venture capital acquiring customers, it can be many times over the revenue from the customer. 

Are they doing it because they think it's a viable business model to spend 300% of customer revenue on customer acquisition?  Probably not, I think they realize that it's hard to be profitable when your variable expense is more than 100% of your revenue.  The reason they're doing that is because they need to get the critical mass, before their business model starts generating a momentum of their own.  Until they get that critical mass, it doesn't make sense to relate their customer acquisition costs to their revenue.