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Comment by dilemma | Hacker News Reader

Netflix is in the red, I believe.

Nah, they reliably make ~$100M per quarter in net income and have a few billion in cash reserves. They're on very stable financial footing.

income =/= profit

Isn't net income == net profit?

A person can have an income of $300k a year but spend every penny of it on debt and necessities. That's generally not considered making a profit.

EDIT: Sorry, I misunderstood something. Netflix has indeed been making a profit.

Sure but if a corporation makes 300k a year that's called revenue, the revenue minus costs are profit, no?

Revenue-Expenses=Profit

Basically, it depends on the size of the company - the numbers reported by Netflix are GAAP. The tricky part is depreciation and amortization v. cash which would create a different outcomes in a cashflow and GAAP.

A company with a positive cashflow and GAAP profitable is in the best spot, followed by a company with a positive cashflow and losing money in GAAP-land, followed by a negative cashflow and positive GAAP-land, followed by a negative cashflow and negative GAAP.

Their content production is amortized over 5 years. In reality, they're in the red.

Cash flow might be negative but that's not the same as being in the red. And I'm not even sure cash flow is negative.

Content should be amortized as it will generate revenue for years. It's essentially being treated as a capital expense, which isn't unreasonable.

Recognizing both expenses and revenue over time is part of generally accepted accounting practices (GAAP).

Intuitionistically, it makes total sense that you get a clearer picture of the true state of the finances of Netflix as a going concern if they recognize the costs of a show on their balance sheet over five years when they expect subscribers to still be watching it for the first (or second, or third) time several years on.

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