Understanding Netflix

  1. Be available to anyone who enjoys passive entertainment and has more than $10/month in disposable income.
  2. Replace continuous and expensive marketing spending with discrete, much-less-expensive content spending.

Ubiquity

  1. Investing in Internet infrastructure, both directly by giving ISPs servers, and indirectly by convincing smart TV manufacturers to target the Brazilian market.
  2. Offering better payment options; credit cards aren’t as ubiquitous outside of the developed world.
  3. As a distant third, offering localized content.

Why Originals Work

What Netflix Tells Investors; What They Could Tell Investors

  1. We’ll know what their actual customer acquisition cost is. (If you look at average marketing spend per net add, it jumps all over the place, especially when net adds are low. But average cost per gross add should be more stable.)
  2. We’ll know the lifetime value of a Netflix customer. Ignoring the time value of money — a popular decision among people who started investing in the last five years — LTV = (monthly subscription)/churn. If people are paying $9.99/month, the most popular price point, and their churn rate is 3%, their LTV is $9.99/.03 = $333. If churn is 5%, LTV is about $200.

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I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/

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Byrne Hobart

Byrne Hobart

I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/

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