Can Netflix Survive?

Netflix's debt is rising at an exponential rate. And not once since inception has it made a profit. This cannot last.

The above chart is from the Seeking Alpha article Netflix Problem In One Simple Chart.

I condensed the chart so that it better fit on a page and I also added a bézier curve.

The full chart shows Netflix has lost money every quarter since 2012.

I seldom link to Seeking Alpha because they make you register to read articles in one page, otherwise, they make you scroll through stuff one page at a time. In this case, five pages.

This kind of user unfriendliness does not promote link sharing. Some people do not like subscribing out of fear there email address will be sold and they will be bombarded with crap.

I am an actual subscriber, yet the site cannot even bother to remember that. It asked me to login or subscribe to keep reading.

I stopped reading on page 2. It does not take five pages to understand that chart.

Netflix is very dependent on the bond market. If the bond market revolts before it can turn a profit, the company will cash in bankruptcy.

Mike "Mish" Shedlock

Comments (27)
No. 1-25
ArtyMcPeak
ArtyMcPeak

Mike, Tip: if you use Firefox and click on "reader view" it sucks in the whole article and presents it in a clean single-page format. Don't know why it works but it does for all the times I tried it, ymmv.

ML1
ML1

Netflix has made many people billionaires. Can they defy gravity for 1-2 years more? In the long run current Netflix value is really 10-20 times too high. . The problem is market has rewarded what Netflix has done so the current Netflix strategy has been rational until now and will be rational as long as market continues to overvalue the company and give them more debt financing cheaply. In order for Netflix to survive long term they would have to start cutting their debt levels and lessen the amount that they spend on content but if they would do that someone else would eat their lunch because debt financing is so cheap so Netflix will keep going until financing dries up. When financing dries up they will double their prices and lose 20%-30% of their subscribers quickly but still end up with profits with which they can manage their debt levels.

Carl_R
Carl_R

Your language is a tad bit ambiguous. You say "The full chart shows Netflix has lost money every quarter since 2012." The chart actually appears to show that they have reported both an operating profit and positive net income in every quarter, which is what most people think of when they think "made money". Cash flow is actually more important, and after reading the chart, I deduced that that what you were referring to. Your language would have been less ambiguous had you said they "bled cash in every quarter", or similar.

2banana
2banana

That chart looks like a classic ponzi. Kinda like the rest of the "dot com bubble v2" companies.

MntGoat
MntGoat

Speaking of tech narratives.....I wonder if Uber can continue to survive off a model that rests upon the backs of part time low income immigrant drivers that run their cars into the ground to NET $8 an hour. Now Uber/Lyft and are buying bike and scooter companies for the uber sharing model that is more capital intensive (they own the bikes and scooters and have to manage them). And Airbnb with more regulation from local municipalities like Japan now.