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  • Writer's pictureSean D. Emory


Netflix is out with its latest earnings report and here are some of the highlights


152M total subscribers 21.9% y/y

91M international 33.7% y/y

60M domestic 7.4% y/y

$4.8B Sales ex. DVD, 27.1% y/y

-$594M free cash flow burn (-)

6.8% avg rev per sub q/q (+)

$18.5B content budget (+)

US net adds hits negative (—)

The battle for streaming hasn't even started and Netflix is showing some early signs of fatigue. 152M total paid users is really impressive overall and clearly provides Netflix ample runway for adjacent opportunities.

I wanted to go ahead and highlight some of the good, bad, and great for Netflix today.

Revenue Per Subscriber

Netflix saw a rise in its revenue per subscriber during the latest earnings report. The figure rose by 6.8% quarter on quarter and was realized both domestic and internationally. This is a positive signal overall and the first test of whether Netflix has pricing power on its consumer. Pricing power is key evidence of the defensibility of a companies economic moat.

Subscriber Net Adds

Netflix experienced a deceleration in subscriber growth, along with a clear sign of net addition weakness, particularly in the domestic market. Below are two charts. First is the growth in subscribers year over year, and second is net additions overall. Notice the drop in domestic subscriber adds. This is the first NEGATIVE reading on record that we can find. International did not help either, with 2.8M net additions, the lowest on record. We are clearly seeing some fatigue in price to value for new and existing users...

Content Budget Stable

One highlight is the stability in the overall content budget. This figure ballooned over the years but has stabilized in the $17B to $19B range. This quarter was the first back to back declines in this figure since they began reporting this.

Cash Flow Concern

If you have heard me speak then you know cash flow remains our biggest concern for Netflix. This quarter is no different. They expect to burn nearly $3.5B in this fiscal year. Here's the chart.


Competition is coming. Apple, Amazon, Google, and Disney are all trying to get deeper into the content game. The question is, are consumers interested. We say yes! Since about 2016 people have been on a rampage to find the best streaming service. Actually this reading is hitting all-time highs. As the competition gets better, they will have options.

What are they looking for? We analyzed Google searches for "Netflix or Hulu", "Netflix or Amazon", and "Netflix or HBO". Hulu remains the dominant comparison, but Amazon is seeing increased interest, along with HBO remaining rather dormant.

Value Per Subscriber

At current pricing, Netflix generates about $122 per year per subscriber. The company is also being valued at ~$160B or $1,100 per subscriber. So right now, investors are paying about 9x each subscriber. Keep in mind, the domestic market just showed a decline in net additions, while International added, but much less than prior periods. Also, pricing internationally is lower than the domestic market overall.


That is it. Hope you enjoyed.

Sean D. Emory

Disclaimer: This is not a recommendation for purchase or sale of any securities. Avory is a not a shareholder of either company, but this can change at anytime.



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