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25Oct/11Off

Netflix’s Buzzsaw

TechOps Guy: Nate

The blurb I just heard out of CNBC which was kind of funny was was anyone willing to go long into that buzzsaw last night?

I know I said it'd be a while since I wrote about Netflix but I have written some other things since. The situation is just so funny I wanted to laugh in public with their stock down to $76 in pre-market trading from about $118 when the market closed yesterday (off original highs of $280 in early July).

Again from CNBC

Headline from a few of the analyst reports

  • Broken story
  • Unsustainable model
  • Nuclear winter
Name of FirmPrice target
(today)
Price target
(yesterday)
Susquehanna$60$124
Goldman Sachs$75$200
Citi$95$220
Barclays$125$260
JP Morgan$67$205

The boldest call on Netflix Janney Capital with a target of $51.

For some reason I was thinking of it more along the lines of a wheel falling off a car when it was going 60 MPH down the highway. It was a momentum stock after all right.

The main story seems to be the loss of subscribers, and not being profitable over the next year or so due to costs associated with expansion into other markets. They lost more than 800,000 subscribers in the quarter, myself being one of them.

“What we are seeing is a second wave of cancellations from the pricing increase,” said Chief Executive Reed Hastings, during a conference call with analysts.

Oh, and this is AFTER they reversed course on the whole Qwikster thing. I would love to see what Netflix management is talking about now, let me get some popcorn first though.

A guy from CNET says Netflix actually had a net loss of roughly 1.8M subscribers for the quarter, since Netflix typically adds 1M subscribers in the quarter and this quarter they lost 800k. so 800k lost + 1M not gained = 1.8M lost on a service that has less than 24M subscribers.

Hey Netflix, I'll probably be willing to come back(and pay more) if you increased your content catalog by at least, say 500%.

Content certainly seems to win over distribution in this story.

(I'm not an investor in anything, situations like this are why I like to watch CNBC - it's so funny for some reason)

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19Sep/11Off

BOOM! What was that noise?

TechOps Guy: Nate

It was Netflix shooting themselves in the other foot.

Seems they can't get enough of pissing off their die hard fans. I've seen a lot of people try to claim that the DVD by mail business is dragging them down (really I think it's the opposite these days) because it's so expensive to mail DVDs. I don't think it's too expensive -- if there are some abusers out there (the ones that rent, rip and return) Netflix should target those users and have them pay more or cut them off, much like consumer internet services do for people that abuse the service.

One good comment from the Netflix blog (which has around 12,000 comments at this point) sum's it up pretty good (I'd link to it directly but don't see a way to do that, it's near the top of the list though) -

Thanks for the explanation and apology. That helps, but your arrogance is still so thick it's palpable. The "I'm sorry if you were offended" is no apology at all. It just makes things worse.

I have been a Netflix customer and fan for many years. Have been a Netflix evangelist, turning on many friends to your service. I am still a customer but no longer a fan -- I feel betrayed.

(I feel similarly about VMware at this point)

Though it sounds more like they are going to try to grab onto more hype and spin off the DVD by mail service and stick to streaming. In any case it seems like their remaining customers lose from pretty much any angle you look at it. I think the jig is up for streaming - I mean if Hulu can't pull it off with such big content producers as investors - who can? I don't think anyone, not for a while at least. Which is too bad.

The upside is maybe by the time the licensing and legal stuff is worked out the internet architecture will be to the point where it can better support streaming (I'm looking at you multicast over IPv6 assuming your ever widely deployed and assuming you work on a large scale).

This is obviously a panic move for them to take in response to the plunge in the stock price(the least they could of done is announce this last week with their other news since the change won't be happening for several weeks seems this decision was made in the past few days), otherwise they would be taking their time and making the sites inter operable with each other (whether or not one of them is spun out).

Netflix predicted losing as many as a million subscribers recently, I would expect this change to increase that number significantly.

OK no more posts about Netflix for a while - there just isn't a lot of things in the tech industry happening that interest me these days (enough to write something on).

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15Sep/11Off

Netflix in a pickle

TechOps Guy: Nate

I wrote on why I canceled my Netflix subscription when they jacked up their rates, it all came down to content - or lack thereof. I see people tout Netflix quite frequently, claiming to be willing/able to "cut the cord" to cable or sattelite or whatever and go Netflix/Hulu/etc. I'm in the opposite boat myself, I'm more than happy to pay more to get more content. Netflix is too little content for obviously too little money. They haven't achieved the balance for me (and it's not as if they had a more expensive tier that had more content).

They announced today they expect to lose a million subscribers over this, compound that with them losing a content deal with Starz recently things are not looking so hot for Netflix, if I were a betting person I'd wager their best days are behind them (as in now their content costs are skyrocketing and their growth will likely slow significantly vs past years). Their stock is down roughly 41% from the recent high when they announced the change.

I understand Netflix had to raise rates because their costs have gone up and will continue to rise, they just handled the situation very poorly and are paying for it as a result. It is too bad, at one point it seemed Netflix could be 'the thing' as in having a model where they could be potentially the world leader in content distribution or something(and they had the market pretty saturated as far as types of devices that can talk to Netflix to stream -- except of course for WebOS devices) - but at least with the way their negotiations are going with the content producers that seems unlikely at this point. As a side note, I read this about Netflix as well and that made me kind of chuckle at their operations as well. Though I'm sure in the grand scheme of things pissing a few million down the tubes for "cloud services" is nothing compared to their content costs.

Something I learned in the midst of these price changes and the uproar about them that I really didn't know before is that streaming titles come and go on Netflix, what is available today may not be available tomorrow (for no obvious reason - unlike losing a content deal with Starz for example). Could it be that they have rights to put up only x% of someone's content at any given time ? I don't know. But I was kind of surprised when I read(from multiple sources) claims that the same titles can be available, then not available then available again. There apparently is some means to get a gauge as to how long something might be available(don't remember what it was), just goes to show how far we have to go until we ever get to this.

Next up - the impact of the vSphere 5 licensing fiasco. This will take longer to unfold, probably a year or more but I have no doubt it will have a measurable impact (dare I say significant impact) on Vmware's market share in the coming years. I was talking to a local Vmware rep not too long ago about this and it was like talking to a brick wall - sad really.

I've spent more $ buying old movies and tv shows that I want to have copies of in the past week than a year's netflix subscription would of cost me(I went on somewhat of a spree I don't do it all that often). But at least I know I have these copies they aren't going anywhere, I just have to rip them and upload them to my colo'd server for safe off site backup.

25Jul/11Off

Netflix acknowledges significant customer backlash

TechOps Guy: Nate

Was watching some CNBC recently and they were talking about the upcoming Netflix results and how much of an impact their recent price hikes may cause.

I wondered over to Yahoo! and came across this:

SAN FRANCISCO (AP) -- Netflix Inc. is bracing for customer backlash that could result in its slowest subscriber growth in more than three years amid changes to its online video and DVD rental service that will raise prices by as much as 60 percent.

[..]

The shortfall stems from an anticipated slowdown in Netflix's subscriber growth amid the most radical change in the company's pricing since it began renting DVDs through the mail 12 years ago.

Nice to see. I don't blame Netflix for the price hikes, I didn't like them so I quit the service, but it seems clear they are losing money pretty badly (apparently they've been using fancy accounting things to try to cover this up), and their licensing costs are about to skyrocket.

Netflix spent nearly $613 million on streaming rights in the second quarter, a more than nine-fold increase from the same time last year. The company so far has signed long-term contracts committing it to pay $2.44 billion for streaming rights.

So they're doing what they have to do. Though I'm sure most everyone agrees they could of handled the situation far better than they did. They also apparently face some stiff competition in the latin america markets where they are expanding to, places where bandwidth pipes are smaller(making streaming less feasible), and cable bills are much cheaper than they can be here in the states.

While Netflix's price hikes have gotten quite a bit of press at least in the business news recently I am kind of surprised that the same hasn't seemed to be true of the VMware price hikes (outside of the tech community at least). The outrage continues to build..

For me it all comes down to selection - increase the streaming catalog to at least match whatever they have on DVD now and I would probably jump back on board.. in the mean time I'll stick to cable(+Tivo), I'll pay more but I get a lot more value out of it.

12Jul/11Off

Netflix jacks up rates – I cancelled

TechOps Guy: Nate

All that trouble tracking down why my Netflix HD streaming was not working for nothing? I guess so. Netflix sent me an email a short time ago said they were going to increase the cost of my plan from $10 to $16. So I closed my account. They raised the price by a buck from $9 to $10 last November.

I normally wouldn't mind the increase in charges if I was using the service, but I checked my email archives I've had the same DVD sitting waiting to be played since May 31st, and the last time I streamed a "full" movie or tv show from their streaming service looks to be January 2010 based on the "How was the quality of X?" emails. I didn't think it was that long ago. I have streamed short segments of a bunch of stuff over the past year but always got bored of what I was watching so never watched more than a few minutes at a time.

If they had a better selection .....especially on the streaming side, I swear every time I've gone there in the past 6 months I have not noticed a single thing I wanted to stream. I suppose part of that is having a Tivo for so long I really don't keep track of what kind of things come out, frequently coming across TV shows for the first time long after they had been canceled.

I have a week to return this DVD that has been sitting here for almost 2 months, I guess I will go pop it in the mail because I likely won't get around to watching it in the next week.

What would of been nicer of course is if Netflix was better at being able to bill based on actual usage, if so my bill probably should of been $0.99/mo :)

Netflix's content costs are apparently about to skyrocket so they need to get ready for that by raising rates..

[..] Barclays analyst Douglas Anmuth: He figures Netflix will have a total streaming commitment of $2 billion by the end of 2011.

Let me know when we have a video streaming service that is fulfills the dream of this Qwest commercial. I'm not holding my breath.

I'm more than happy to pay for premium services or products, in this case I was just paying them for the convenience that I might use it. I've rented 11 DVDs (10 of which I have watched) so far in 2011 through Netflix, and 17 in 2010.

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15Jun/11Off

Could not stream Netflix HD for months – solved

TechOps Guy: Nate

I have been a Netflix subscriber for a couple years now but really haven't been using it much I can't find much on it that I'm interested in watching.

One issue that cropped up several months ago for me was I was no longer able to stream in HD. No matter what various "internet speed tests" reported Netflix always resorted to SD streams. Most recently speedtest.net reported my pipe as having 27Mbps of throughput.

Since I don't use it that much I didn't care too much, and just stopped streaming stuff for a while (I stream to my Tivo Series 3). Today I decided to try to dig a little deeper, there wasn't much help on the Netflix site, and calling them was not too helpful they just suggested I ask my ISP to perform a longer running test to see if the connection was stable and reboot the modem.

Before trying that though (well I did reboot the modem to no avail), I decided to run tcpdump on my firewall and see where Tivo was sending it's packets, and then use something like mtr to measure latency to that destination.

I noticed within seconds my Tivo was sending packets to a Lime Light node in Miami, not exactly next door to the Seattle area where I am at. Sure enough the Miami node is 16 hops away and right at around 100 milliseconds of latency.

Why was this going there?! Well it has to be related to DNS, as I'm sure at some point I started forwarding all of my DNS packets to my personal virtual server(same one that runs this site) which is run out of Miami. So Limelight must be using BGP Anycast for their DNS which is common among other global DNS providers, but it ended up biting me in the ass.

I originally was routing all of my DNS traffic over to my personal system (across a VPN no less) because I don't know what kind of crap might go on on my consumer broadband connection with Comcast (at one point I remember some ISPs doing funky things with negative DNS responses for example). Probably nothing but I thought what the hell, why not (the VPN is already in place, and I'm already running local caching name servers as well as a remote caching name server (not the same name server that hosts my domains externally those are different), it's 1 line in a config file to forward the traffic).

Well now I know why not.. at some point I may invest the time to try to figure out how to send Netfix DNS traffic to a local site and the rest go to my server, but for now I'm not going to spend the time.

Once I disabled forwarding of DNS packets to my remote system, and restarted my name server to flush the cache, Tivo started using a Seattle Limelight node, and the hops dropped to 10, and latency dropped to around 15 milliseconds, HD streaming was now possible once again.

It's also gotten me wondering how many other services that I use that may of been impacted by routing my DNS traffic 3,000 miles away. Though other than Netflix I have not noticed any ill effects, though the amount of data that traverses my connection is pretty minimal (62GB of data since the beginning of March until June 15th according to Comcast, that includes a pretty big backup I did of my personal server to my local network a few weeks ago).

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25Apr/11Off

Netflix: more users than Comcast ?

TechOps Guy: Nate

Netflix seems to be unstoppable for the moment, with their stock continuing to go through the roof and their subscriber numbers climbing all the time.

Just saw this on slashdot

NEW YORK (CNNMoney) -- Netflix knocked over a new milestone Monday: It now has more subscribers than the largest cable TV operator in the U.S.

[..]

Revenue rose 46% to $719 million.

Sooner or later I think investors, and customers will realize that the streaming model Netflix has doesn't scale, the unicast nature of the platform just won't scale. Doesn't matter if your on every CDN on the planet. Maybe with IPv6 multicast (assuming it works as advertised as far as I know nobody has ever deployed multicast on anything remotely approaching the size of a cable network over the internet).

Myself I already do have trouble streaming from Netflix on occasion (and I rarely stream from them, because I rarely find anything I am interested in watching). I can't remember the last time I was able to actually stream HD. (I'm on Comcast and have what is advertised as a 16Mbps connection, which speedtest.net claims at this point in time - 9:48PM on a Monday, I get 22Mbps download and 5Mbps upload)

Here's hoping Tivo can survive. My 70 season passes give me a whole hellva lot more entertainment than Netflix can hope to provide me.

That being said I am still a Netflix customer, but I tend to watch maybe 2-4 DVDs a month (average), and stream, at this point 1-2 hours/month (there was some points where I came across a series or something that I liked a lot and watched the whole thing but it's been a while since that happened).

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