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« Disney and Netflix
This is a sub-selection from Almost there


Jim Kirk
Premium
join:2005-12-09
Westerville, OH
reply to FFH5

Re: Almost there

Prove it.


espaeth
Digital Plumber
Premium,MVM
join:2001-04-21
Minneapolis, MN
kudos:2

3 recommendations

said by Jim Kirk:

Prove it.

Netflix has 30 million subscribers, this new venture will cost $350m/year, or about $30m/mo. That's about $1/mo per subscriber in additional expense.

Netflix net profit margin is < 10%, so on an $8/mo streaming account they have less than $0.80 in profit margin.

Unless they raise prices, Netflix will be losing money to offer this content.

Profit margin chart for reference:



anon anon

@charter.com
said by espaeth:

said by Jim Kirk:

Prove it.

Netflix has 30 million subscribers, this new venture will cost $350m/year, or about $30m/mo. That's about $1/mo per subscriber in additional expense.

Netflix net profit margin is < 10%, so on an $8/mo streaming account they have less than $0.80 in profit margin.

Unless they raise prices, Netflix will be losing money to offer this content.

Profit margin chart for reference:
[att=1]

You're not taking into the account increased subscriber base because of this deal.


cpsycho

join:2008-06-03
HarperLand
reply to espaeth
They could raise the rates by 10-20 cents and keep all subs no problem. Better then the $10 ish a cable demands.

dra6o0n

join:2011-08-15
Mississauga, ON
Reviews:
·ITalkBB
reply to espaeth
The reason why the deal is 350 million in the first place is because Disney KNOWS Netflix can make that much money and isn't going to give contents unless:

1) They gain total control of Netflix
2) They drain Netflix's profits dry and find another business to suck blood out of.

Disney still needs to profit from their DVD and Blu-Ray discs so giving Netflix a lenient stick without charging them that much would mean the usual DVD and Blu-ray shoppers who buy Disney films will all end up jumping on the Netflix bandwagon and they make most of the revenues from those discs alone in terms of merchandise.