Yeah, from the start MoviePass reminded me directly of that quote attributed to Steve Jobs (about Dropbox) that the company was a "feature", not a product.
It reminds me of The Sharks saying "a product is not a company". It's a virtually meaningless statement.
There is no better evidence that Dropbox is just a feature than for the same price that Dropbox charges for 1Tb of storage, you can get the full Microsoft Office Suite for up to six users and a total of 6TB of storage.
> Are they profitable?
Profitability isn't the end-all metric for a company. Amazon famously circles around the profitable/not-profitable line frequently and few people have doubts about Amazon's viability as a company.
Dropbox reported ~20% growth in revenue YoY and seems to have dumped most of that into R&D (you can see their R&D costs have grown by nearly as much as their revenue has). Other operating expenses remain mostly the same.
> There is no better evidence that Dropbox is just a feature than for the same price that Dropbox charges for 1Tb of storage, you can get the full Microsoft Office Suite for up to six users and a total of 6TB of storage.
Ok, but a growing subset of people clearly choose Dropbox. There are huge advantages to being a first mover that are sometimes insurmountable, even for gigantic companies. The zune was in many ways "superior" to the iPod, but we all know how that story ended.
Most of Amazon’s profit comes from AWS where they do have economies of scale and relatively high marginal profits. What are the chances that Dropbox will ever find a high margin profitable pivot? What is their customer acquisition cost? The lifetime value of a customer? What type of pricing power do they have.
Everyone loves to point at Amazon as evidence that all of these money losing companies will be highly profitable one day but it hasn’t happen.
Let’s not forget that out of all the big tech companies - Facebook, Amazon, Apple, Google and Microsoft. The only one that wasn’t profitable before they went public is Amazon.
Other operating expenses can’t remain the same. Storage cost real money on a marginal basis unlike software (Microsoft) and search (Google) which has close to zero marginal cost.
I always thought that was selling ("aggregated") access to user's files.
I dont agree with this common saying. Amazon was founded in 1994, IPO in 1997, and made a profit by 2003. Amazon's philosophy is to reinvest money, thus they swing between profit/loss. Amazon went from selling books online to everything online + AWS + Echo + Go Store, etc etc. So it took Amazon to make a profit, but they truly were growing, not paying people to buy movie tickets.
Conversely, usually when people say 'look at Amazon' when talking about profitless companies, we are talking about companies that spent a decade + private, IPO with huge valuations, slowing growth, and huge losses with no profit in site.
Dropbox for example, founded in 2007 and IPO'ed 11 years later with an 8 billion valuation. A 100$ investment in Amazon would have yielded 127k$. To give you that kind of growth, dropbox would have to reach a market cap of 10+ trillion. This is a huge problem because people are treating these unicorns like growth companies, when their best years are behind them and with their valuation, its mathematically impossible for them to have the huge growth that companies such as Amazon, Netflix, Google had.
I think rules need to be enforced / changed to prevent companies from staying private so long. This shenanigans is going to cost generations saving for retirement significantly.
> This is a huge problem because...
Why is it a problem?
Suck it up; if you’re an investor do your due diligence, just like with any other company.
But they admitted that they didn’t sign up as many new customers last quarter because they didn’t have big new releases to attract customers.
They are still taking on billions of debt for both licensing deals and to create new content while their major upcoming competitor - Disney+ - has multiple income streams from their content and most of the cost of content has been repaid multiple times by the time it reaches Disney+.
Streaming is also a feature and not a standalone product for Amazon, Disney, AT&T and even Apple. None of these companies live or die based on their streaming product, it’s just a check mark.
Profitability is a proxy for "going concern" in most of the companies including Dropbox.
This is basically accounting fiction. Amazon is profitable; they just reinvest their profits so aggressively that they’re writing off tomorrow’s expenses against today’s revenues.
But now the reverse is true and I don't know the last time I used Dropbox.
Office 365 Business Essentials, which is the cheapest plan and comes with 1 TB of storage (as you said) is $5/user/month*6users = $30/month
So same price for the storage, but you also get the web and mobile versions of the Office apps. The desktop versions cost extra. I've gotten along fine the last few months with just web and mobile though.
• https://products.office.com/en-us/compare-all-microsoft-offi...
Edit: I guess having 6 accounts isn't the same as 6 contiguous TBs though.
With Dropbox if you have 1TB and someone shares a folder with you that has 1TB, your total allowed storage is still 1TB. With Office, you can share folders across users and the storage is contiguous.
https://www.marketwatch.com/investing/stock/dbx/financials
https://www.marketwatch.com/investing/stock/dbx/financials/c...
It would be safe to say that they are "printing cash".
They also leave out in their free cash flow calculation some relevant things (capital leases). Amazon for example provides three free cash flow calculations, Dropbox only the good-looking one.
https://www.cnbc.com/2018/03/21/dropbox-may-have-intentional...
But this doesn't neglect the fact that they're at 70% GM. They're spending 750M/750M split between SGA and R&D, which means you could basically cut those both out significantly (assuming support/hosting costs are in the COGS) and the company stops growing (on a $1B+ revenue top line) but just starts printing cash. The ~$100M in capital leases is a rounding number then. Not to mention, since their data centers appear to be capital expenditures, it means they have the possibility of extracting even more ROI out of that in the long term.
PS - your article is from 2018 speaking about 2016 and 2017 numbers. Anything updated since? Dropbox has continually increase FCF YoY regardless...
Servers breakdown, while we don’t have any statistics of how often Dropbox needs to replace hardware, we do know how often hard drives fail at scale from Backblaze’s frequent reports.
Yes and no. They are trying to grow the product breadth (collaboration for example) so they can upsell enterprise businesses. That's where most of the R&D is going.
> Do you also think that the rest of the tech industry could cut their R&D and stay relevant?
Yes - easily. I've personally worked with over a hundred of them and you'd be shocked to understand how sticky software is once it's been implemented. This is the dirty little secret you never heard about when discussing software valuations.
> Servers breakdown, while we don’t have any statistics of how often Dropbox needs to replace hardware, we do know how often hard drives fail at scale from Backblaze’s frequent reports.
As I understand it, this is where Dropbox's major capital expenses are going right now. I don't have any information on where it hits the P&L and if it's calculated in the CF statement. However, having worked with similar businesses before and calculated pro formas, there is very clearly an ROI (similar to AWS, Google and Facebook all building out their own data centers).
I would argue the exact opposite. This is one of those products where most people just "set it and forget it". As long as the desktop sync continues to work as it does for all major OS's then they most certainly can milk their product for cash.
> I was just pointing out that the numbers are not necessarily as good as they seem and some care is needed to compare it with other companies.
I mean, you can make the argument that any company comparison requires "care" when analyzing it. This is literally why analysts still exist.
> But I'm not sure it is so easy to "print cash".
I think we're getting bogged down in semantics here. For most users of Dropbox, it's literally just a file sync - that's it - and it already works fairly flawlessly (compared to their competition at least). Which means at 70% GM it requires very little effort to continually advance the product. ~$700M alone is being used to continually fuel growth.
Fun question:
Q: Do you know when NetSuite turned a profit for the first time?
A: 2009[0] Yes that 2009, when the economy went to shit. Weird huh?
[0] - https://a16z.com/2015/05/15/a16z-podcast-why-saas-revenue-is...
iOS and MacOS have changed how they have handle third party syncing a few times over the past 4 or five years. Microsoft and Apple are both adding features to make Dropbox unnecessary and Microsoft has a large enterprise and consumer marketing budget to chip away at Dropbox’s profitable enterprise base.
While Google isn’t as entrenched in the enterprise as Microsoft, it is becoming more entrenched in education and it gives away a lot more storage for free.
If you think any software maker can just sit on its laurels, see what happened when MS tried that with IE.
I love Dropbox (well, OLD Dropbox, I do not like the new desktop app at all) and have been a paying user basically since you could pay to use it (and a general user since it launched in what, 2007? 2008?), but Steve Jobs wasn't wrong. The original service Dropbox offered has indeed become a commodity. Dropbox (like Box before it), has had to pivot into other areas like "collaboration" and has had to change its focus from consumers to small business/enterprise in order to grow, and even then, it's struggling.
I don't actually think MoviePass and Dropbox are that analogous though. Sure, both are middlemen (or "features") and reliant on their potential competitors, but Dropbox's value prop strikes me as better.
MoviePass could have licensed its technology around geo-fencing/ticket-buying to theater chains so they could do their own subscriptions -- the impact wouldn't be as big, but there is a services story there. But MoviePass is always tied directly to the theater chains and the margins there aren't negotiable and won't change. Whereas Dropbox might be reliant to an extent by the OS makers it supports -- and Apple/Google/Microsoft might be able to theoretically build in better native integration with their services vs Dropbox -- but Dropbox can still come up with solutions and be elegant and cross-platform in a way that is better than the platform options. Whereas MoviePass can't do anything unless it wanted to try to start its own theater chain.
In contrast MoviePass was truly 'cross-platfrom' while the new alternatives (A-List etc Al) mostly work within one theater chain.
That said, there are a fair number of would-be products that seem fairly clearly destined to be a component of another product.
Of course Dropbox is doing All. Of these because it's a company that has to grow.