Netflix is now worth more than Comcast
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Comcast owns NBC and bunch of cable companies and has an ownership stake in Hulu. Comcast gets your money either way.
Netflix has to spend money on content and only has one way to recoup the cost -- subscriptions. Comcast also produces content via its TV and movie studios but makes money off of content via broadcast networks, cable companies, video on demand, and licensing to streaming companies and pay tv.
Right now, people pay $150+ for a package with all the TV channels, while you can get the broadband for $50 or so. Cable companies could dramatically raise prices on the basic broadband service to compensate. But that’s not going to fly in this next generation with 5G and satellite competition.
The average Netflix user watches 600 hours per year, or 50 per month. HEVC is 1.5 gigs per hour for 4K, so that’s under 100 GB per month. If data caps for 5G increase at about the same pace as for 4G, wireless data caps will be within that range within five years. Heck, AT&T’s fixed wireless is already at 160 GB per month. And Verizon has publicly stated its 5G service wonkt have the kind of data caps its 4G service has: https://www.pcmag.com/news/357374/verizon-no-4g-level-data-c....
The idea that cable providers can raise prices to compensate for lost TV revenue is predicated on the assumption that there are no alternatives. That assumption ignores just how much bandwidth 5G gives you to play with.
Interestingly, you can get a cheaper promotional rate if you bundle local TV channels (cheaper than $75/month for both internet + tv) so Comcast can inflate its video subscriber (to boost their stock price) amount and they hope you forget you're on a promotional rate your bill jumps $30-40 after you drop off promo. You're free to negotiate (most people do) to get back on the promo rate; many people have success with this, but it's just a cat/mouse game and a hassle.
And Comcast also has a 1TB monthly usage cap. When the era of 2160p + HDR arrives in the next few years, people will chew through that cap rather quickly.
Comcast will continue to jack up standalone broadband prices to hedge against fleeing video subscribers. Why? Because they can, and have very little competition in most markets.
That's coming from the perspective of an HN reader, for whom wireless isn't "competition." (I get it, I've got two fiber lines to my house; 3 gigabits total. My daughter uses it to stream Magic Schoolbus.) But for the typical user, 5G wireless services (say 50-100 mbps with 100GB data cap) is going to be enough. We're already at 15% of households making $100k+ ditching wired Internet for 4G. That number is growing, and will explode when 5G service rolls out.
Bandwidth caps are yet another issue. 4G is NOT a suitable alternative for me today, and won’t be in the foreseeable future. Maybe if I had a dedicated antenna transceiver on the roof (also not allowed at most apartments) and they massively upgraded tower capacity had a 10-100x increase in bandwidth caps, but....I’m not holding my breath. If Verizon can keep getting >$100/mo ARPU providing 5GB of data with Comcast getting the same for providing 1TB and both have monopoly / duopoly conditions, they have no incentives to compete or upgrade their infrastructure.
As to bandwidth caps: for $100 including fees, you get unlimited on Verizon, which has a 22 GB soft cap per line (in practice, you can use way beyond that).
Your point about duopoly is completely divorced from facts. The cell carriers are in a market with four competitors, and invest massively in infrastructure (tens of billions of dollars a year). Cellular has improve way faster than many other areas of technology over the last decade. 10 years ago, I had a Core 2 polycarbonate Macbook and AT&T 3G service. The former is still a perfectly serviceable computer (the new Macbook is maybe twice as fast). But my Verizon LTE is probably 10-20 times faster than my 3G service.
What else do you use that is 10 times better than it was a decade ago? Google Search? Gmail? Facebook? iOS?
Heh, ironically, the "wired" internet is surely 10X or more faster than a decade ago. Anecdotally, I have a 1 Gbps connection now; year or two ago I had a 250 Mbps connection, and 2-3 years prior to that it was 50Mbps. Ten years ago it was, what, 5Mbps or 2Mbps.
But the price of cellular data has come way down. For instance when the iPad was first introduced, it was only available in the US on AT&T and was $25 for 2Gb of data per month. Now I'm paying an extra $20 a month on T-mobile for unlimited data for my iPad.
The cellular iPad wasn't even worth it for me until I could get unlimited data for $20. For that amount the extra convenience of not having to tether and basically having a second phone is worth it since you can get and receive regular phone calls to your paired cell number from an iPad even if your phone is dead.
I pay a total of $180 a month for 5 phone lines unlimited data on each + an iPad, unlimited 512Kbps tethering on each + 10Gb of high speed tethering on one for my son who uses his cell phone for his only internet. This is with T-mobile. They also throw in a family Netflix plan (4 simultaneous streams) with it.
The other idea for small cells is femtocells, but in that situation you are running traffic over home internet connections so it is definitely not a way to cut out comcast.
Even at 5G speeds and 100 GB data caps, home internet being run over wireless would completely overload most of our current wireless infrastructure. The cell sizes are just too large for that kind of capacity.
Small cells are still way cheaper than building land line. I had Comcast run fiber to my house recently, and it was very interesting to see the process play out. Aside feom waiting months for a permit, running fiber along the main street was quick. Running it down my weird little side street took just as long as running it half a mile down the main road. And running it through my yard took just as much time as that. Getting rid of the last 1,000 feet is a huge benefit.
Several of my renters are single, and their streaming usage for an individual is ~450GB/month.
Remember, 5G doesn't need to be an alternative for everybody to wreck the ability to raise prices to compensate for lost TV revenue.
Given their recent push for data caps (and make money off of overages), I'm sceptical of their numbers. They have a pretty obvious incentive to misrepresent (if not understate outright) the value to make their caps appear generous.
Also, is median (same as 50th percentile, right?) really the right statistic to consider? I'm not sure any one number is sufficiently meaningful, as the shape of the graph can be particularly informative.
More importantly, how has that changed over time, as compared with the penetration of 4K TVs versus 1080p ones (or the availability of 4K content or some similar metric)?
Conversely, I think mobile data is also more likely to be significant as competition in multi-person households, even with the caps you mention, because those have a chance of being per person/handset (absent family/share plans), while Comcast is likely to be one cap per household no matter how many people/screens stream at one time.
All of the major cell carriers are already offering unlimited internet with SD video streaming. My older son doesn't have home internet service at all. He streams everything either from his phone or his PS4 and tethers from his phone. That's good enough for him.
Right now, people pay $150+ for a package with all the TV channels, while you can get the broadband for $50 or so
I pay $70 a month for AT&T's gigabit internet and on top of that I pay $35 for DirecTVNow and $12 a month for Hulu without commercials. I would be paying $13 a month for Netflix, but it is free with T-mobile.
The actual price of TV service is a wash. I won't go back to TV via the cable company because of the BS fees -- cable box rental (for us it would be $50), Broadcast Access, Sports Access, Regulatory fees (that aren't mandatory government fees) add up to another $80.
On top of that DirecTVNow+Hulu is a lot more flexible. We can watch from anywhere. That's a big deal for my wife. She has a split shift and when she isn't at the gym she can catch up on TV on her phone.
WiFi the best I can get is around 400/400 when standing right by the router on either my phone or laptops.
Video needs at most 20Mbps and I don't know how much bandwidth that my son's PS4 or Xbox can't take advantage of.
Every bedroom in our house, the living room, the gym, and my office are wired. But my 3rd Gen AppleTVs only have 100Mbps connections, my Roku sticks/TVs are WiFi and only the game systems, my computers in the office and my one 4th Gen AppleTV actually have wired gig-e connections.
On the other hand, the gigabit plan is the only one that doesn't have a cap.
But if I had XFinity (thank God I don't) even thier gigabit Service is limited to 35Mbps upload.
To get the equivalent channel access as such a service, you've got to pay for YouTube TV or PlayStation Vue or the like, and you're looking at $40 a month there.
Obviously, prices vary by where you are, but in a lot of cases, cord cutting actually removes efficiency. And note that Netflix is rapidly abandoning the "buy all content" model in favor of just having it's own shows. So you'll need Netflix + Hulu + CBS All Access + Disney's new service, etc.
(Insert pet peeve about paying a regional sports fee if I don't watch sports here.)
Which is increasingly correct, since the same entities that sre cable operators not only largely own the fixed consumer internet connections, they also largely own the mobile broadband providers and satellite broadband providers, and, even if they didn't own the pipes, they own a lot and are in the process of buying up more of the video content channels and the content itself.
But agreed that the realistic threat isn't Netflix or Youtube or Sling or Hulu, it's wireless broadband. I'm not as optimistic as you, though, based on my experience with cell phone service in my apartments. :|
I'm not familiar with domains that have a huge dependency on latency other than high frequency trading (who are already next door), but I imagine it's a problem we'll have to solve at some point.
Sooner or later, despite the ridiculous monopolies, the lobbying power, the borderline illegal obstacles to newcomers, regardless of how deeply entrenched they are, these ridiculous $100/month providers will eventually be disrupted.
So I see Comcast's revenue source under a considerably more realistic threat than Netflix's. Moreover, both have fixed costs but I'm sure Comcast's are higher, having to maintain tons of last mile connections to individual homes.
So yeah, that multiplier disparity may be excessive, but not by much. If Comcast hadn't invested in Hulu, some might even had considered the disparity too small.
US: 9.8 million km^2, 33 ppl/square km
Germany: 350 000 km^2, 231 ppl/square km
But regardless, serving anything with a population density high enough for car-price-competitive bus service of once per hour, walking distance max. 10min, between 7am and 9pm, should not be more expensive than Germany. At least if you can get fiber deployed without superfluous fees enacted by NIMBYs. E.g., along other occasions where the street get's dug up.
Also Netflix is not a Comcast competitor. Healthy Comcast network helps Netflix too. It is like saying SpaceX is bigger than Disney. Comparison makes no sense.
Netflix is not gonna hurt cable as much as ipod did not hurt FM radio. So I think people need to take a chill pill.
Also, the comparison makes sense as long as Comcast is purporting to be anything other than a dumb pipe.
It's frequently the case than an industry gets disrupted by a company that's "not a competitor".
As for me, I stopped listening to FM radio when I got an ipod. Not a competitor? Uhuh.
That is, for me, it's not about money so much as control over distractions in my home. People have been clamoring for a la carte cable for years if not decades, and since the cable services either decline or are unable to provide this, technology finds a way.
The $5-10 (or whatever) per subscriber that ESPN gets in kickbacks is commercially offensive to me (and who knows how much they get from home shopping providers), but if there's a way where I can avoid that whole thing, well that's worth the same amount I might otherwise give a cable company that would just as soon shovel a bunch of garbage I don't care about into my programming guide.
In 2018, why the heck is it that I can't click on something to indicate, "I want to watch this," then I get a notification when it airs, and have a list of shows/events now available to watch? If media companies want their advertisements to be worthwhile, why don't they get their act together and do this?
Now you can buy Netflix, Hulu, HBO, CBS All Access, Disney whatever, etc. each for $10 a month. You still end up paying $60 a month, but now you get six channels instead of 100.
And 94% of Comcast channels are trash. I have no problems with people who subscribe to Comcast based on the number of channels they carry, though. Personally, I don't need hardly any of them.
My new ISP relies more heavily on individual channel streaming sites rather than hosting their own central portal for it, but again, the on demand experience is more or less the same I was familiar with from Hulu, CBS All Access, and other online sites I've used.
In fact, if there is any issues with the comparison, it'd be that a real TV service will let you watch things live if you want to, whereas streaming sites often won't carry something until the day after. And if you get a DVR, you can hold live TV almost indefinitely, whereas on demand services tend to expire shows after several weeks.
Funny enough: My friends who never see television ads, I sometimes feel like they miss out on a lot of meme-worthy things. Sometimes I'll reference a commercial (like Grammarly, which is pasted all over YouTube), and people don't know what I'm talking about. It's weird. As annoying as ads are, they've become a significant part of our culture and it's odd when people don't see them.
Imagine if you happened to not know what the Geico gecko was or have heard the commercial from which the pronunciation "diabeetus" came from.
On top of that, they understand when cable goes out it just happens. But if thier internet went out and they couldn't watch TV, they would be really frustrated. Besides they live in a small town with a 150GB cap on thier DSL and a 300GB cap on thier cable internet. My family blew right through that when we stayed with them for the summer.
If you add the corresponding channels to Plex, you can watch them without commercials. Plex channels scrape the content from the official web channels in real time so while the networks may not like it, to the websites it looks just like you are viewing it on the web so it wouldn't be considered "piracy"
For instance. This is the latest episode of The Flash. No login required. It's usually available the next morning
http://cdixon.org/2012/07/08/how-bundling-benefits-sellers-a...
They have poor customer sentiment, and their existing capital is an aging dinosaur waiting to die.
Netflix can also multi-home closer to their customers to reduce bandwidth costs. Comcast is stuck burying cable.
Some apartment complexes and even HOAs force all of the tenants/homeowners to pay for internet + TV.
When I stayed in an apartment part of the lease agreement was that you had to pay $100 for a cable + Internet package and then had to pay more for extra boxes, etc. the complex racked on the minimum payment as part of rent then you paid any overage to Comcast.
We had a 300MB cap and the only way we could get internet without a cap when they first started was to get a business account. But you still had to pay the mandated $100 for cable to the apartment complex and then had to pay extra for the business account. We moved shortly afterward.
One of the requirements when we were looking for a house was that Comcast was not the only option.
http://www.condoassociation.com/blog/is-cable-tv-contract-wi...
http://articles.orlandosentinel.com/2010-08-19/business/os-c...
This! Mobile data plans will make WiFi and cables obsolete.
They admitted as much themselves: https://www.mediaplaynews.com/comcasts-solution-to-video-sub...
Advertised rate is half that. It's a scam.
Netflix is present in around 200 countries around the world, some of them with significantly higher population than the US, and is available to anyone with an internet connection of some description. It's very possible that the valuation is in large part because of this potential.
You're penalizing Netflix for investing in its business. When people refer to short term Wall Street silliness, this is the kind of thing they mean.
Why pay $40 for Netflix stock today if it’s damn near guaranteed to be a massive business in the future? You will pay $350+.
Why aren’t we paying $350+ for Comcast if it has 81x the net income of Netflix? Because Comcast is going down the shitter.
Does Netflix have a "live tv" strategy? Hulu currently offers one (although I ended up dropping it due to their hobbled DVR)
Also you seem to have cherry picked quarters to compare, as last quarter Comcast actually had a net income of $3.12bil. The quarter previous was $15bil and the quarter before $2.9bil. I'm unsure what accounts for that single quarter spike, but using it as synecdochic of the whole is disingenuous at best.
Comcast has to employ thousands of support people in India, thousands of technicians all across the USA, cut deals with city administrations, ply those cable lying vans and what not. It is sad that despite all this Herculean work Comcast gets bad rep and very little profits.
BTW Comcast has reduced its expenditure considerably by moving nearly 80% of its support jobs to India.
This also gives Netflix more room for growth compared to Comcast.
Just because people are currently eating shit a lot doesn't mean the outlook for them is any good.
Not sure what you're getting at.
P.S. A little thing called "sports" is compatible with shit, but not filet mignon. And after years filet mignon has make negligible progress in this area.
Also, filet mignon is shipped inside shit tubes, and probably will be for a very long time.
P.P.S. I hate shit analogies.
Just look at the list of Disney subsidiaries[1], then look at how bad the average Netflix original movie is and then tell me if the market caps makes any sense at all.
[1]https://en.wikipedia.org/wiki/List_of_assets_owned_by_Disney
I'd recommend shorting Netflix if you believe it is significantly overvalued.
What is the chance that Disney can execute implementing its own Netflix? What is Disney's batting average on projects like that?
"The company's major clients include the NHL, HBO (for its HBO Now service), the PGA Tour, Riot Games, WatchESPN, PlayStation Vue, WWE Network and TheBlaze." [2]
"Marvel, Star Wars films to ditch Netflix for Disney service" [3]
I'd say they have both the content, technical expertise, and tenacity and perseverance to pull it off.
[1] https://www.thewaltdisneycompany.com/walt-disney-company-acq... [2] https://en.wikipedia.org/wiki/BAMTech [3] https://www.cnet.com/news/marvel-and-star-wars-films-will-di...
No one has ever accused Disney of not being able to leverage its brands. They also have a good track record when it comes to acquiring other companies like Pixar, LucasFilm, and Marvel.
If the deal with Fox goes through, they will have even more content to leverage.
Disney effectively owns Hulu, which was already the #2 or #3 competitor to Netflix in the US for many years.
Disney may not need to execute implementing anything, since they already own a fully-operational and fairly successful one of their own.
It'll increasingly be as the other content producers feel threatened by Netflix and balkanize their content into their own services. Netflix has to convert to more of an HBO model where they have their own quality originals that bring eyeballs, and they're already on their way towards that.
Plus I do genuinely believe that Netflix has been successful in creating new interesting, quality content and partnering with a variety filmmakers. Some of their docu-series have rivaled HBO's Documentaries!
For this, we no longer need cable companies; we need internet service providers.
I just checked, and it seems revenue-wise they're still more TV than Internet, but the trend is towards Internet revenue, and in subscriber-count, it flipped in 2015. I'm guessing, though, that the ISP revenue won't grow a ton, whereas the TV revenue will continue to drop.
If I was in charge of a TV network, I'd start dropping the amount of ad time during programming and start adding more time to my hit shows. I know there is an ecosystem that makes this challenging, but would you rather spend you life bailing out the water or would you rather just fix the boat?
I settled on YouTube TV, however their policy regarding commercials is even worse than Comcast.
For example, if I record something to my YT DVR, AND the show is also available "on demand" YT will force me to watch the ON Demand version (with unskipable ads), or will block me from skipping commercials on the DVR version.
Whereas Comcast restricted skipping commercials on On Demand content, they did not force me to watch the On Demand version, and did not block my ability to skip commercials.
Hulu Live TV blocks commercial skipping completely on DVR content.
You can do some analysis on iTunes. When I look up "Leave it to Beaver," which came out in the 50s?, it was 4.2 minutes per 30 minute show, so it has more than doubled. You can tell by the run time of the show: 25:38 for Beaver vs 21:00 for Pawn Stars.
Some syndicated shows have been sped up slightly and edited so stations can add more commercials.
A la carte cable offerings is what NFLX should be worried about. 10 live stations (maybe a small premium station surcharge) for a small fee will compete for the same limited number of leisure hours in a day we have on average.
The idea we could use (or want) 500 channels was always a mistake.
Here in the SF bay area I have gigabit internet through comcast and allow them to shove their "basic" cable TV service in my general direction (it's not even hooked up) because it 'saves' me $5 or $10 or whatever per month on my internet charges. (All I know is the total bill is $144 which is less than the advertised rate of $169 for Gigabit, but I've been through this excercise many times in the past 5 years, where I try to get JUST internet, and they offer me tv+internet for $5 or $10/mo cheaper; last time I didn't even ask for the full numbers)
Fees:
Broadcast TV Fee $8
FCC Regulatory Fee: $0.08
Franchise Fee: $2.01
PEG Access Support: $0.55
Local Utility User Tax: $1.55
State Sales Tax: $0.23
So, $12.42 in taxes and fees, only $8 of which is clearly related to broadcast TV (and here I'm assuming I don't pay that fee just by being a subscriber to a cable company, even if I get internet-only).
I plan on calling sometime soon to clarify, but I've done it many times, and it never saves me a penny.
We're definitely not getting charged an extra tenner for an HD box.
The answer is that they will try to implement this only for their own company, and this will fail. Such a thing could only succeed with a standard that everyone used.
We desperately need other options besides just Comcast!