
Netflix Stock Price Crashes in After-Hours Trading - prateekj
http://techcrunch.com/2014/10/15/netflix-stock-price-crashes-in-after-hours-trading/
======
brownbat
I know the Netflix story is all about streaming now, but I'm kind of sad that
according to the financials, Netflix's DVD section has halved its subscribers
over the last two years.

That service definitely seems to be degrading, almost everything in my queue
has become perpetually stuck on "very long wait," something rare for me of a
couple years back. They're clearly winding things down.

I don't know what happens in a couple years for anyone who wants to see an old
movie. The streaming libraries are still incredibly thin. New releases will be
available somewhere, sure. But we're facing the death of access for film
history buffs or hardcore genre fans.

~~~
thefreeman
This is pure fantasy, but I feel like a good solution would be for Netflix to
legally be allowed to stream X concurrent sessions of a movie with X being
limited at the number of physical copies they own. Perhaps if all concurrent
sessions are being used you could schedule your session for a different time
window.

It obviously wouldn't work for new content but might solve the issue for rare
or older movies which you cannot find elsewhere.

~~~
ASneakyFox
I beleive public libraries that support kindle use a system like this with
books.

~~~
IceyEC
The library near me actually has to pay licenses for digital copies of books
that they then get to 'check out' z number of times rather than based on the
number of physical copies they have.

------
RockyMcNuts
I would say mostly about the lower subscriber growth.

When expectations are high, if expectations aren't met, the adjustment can be
abrupt.

Time Warner (HBO + Warner Brothers + numerous cable channels) is in the same
content/TV distribution business, $4.3b in profit, market cap of $62b.

Netflix, $0.2b in profit, $5b in REVENUE, market cap of $27b (well, now $20b).

Netflix is competing with Amazon streaming, Apple TV/iTunes, to a lesser
extent Google, Hulu.

Also now HBO, they announced today they would start letting people subscribe
over the Internet without a cable subscription, all the other channels are
getting in the over-the-top streaming business.

Comcast + Time Warner Cable (different from Time Warner) are looking to merge
and perform a cashectomy on Netflix via 'fast lanes', before TV subscriber
losses from cord-cutting really start cutting into their flesh. (Can anyone
doubt that's about to happen? Anyone who has compared the experience of e.g.
Roku with a cable box can see over-the-top is a 10x improvement in UX at a
lower price. And with even HBO available over-the-top, literally the only
reason left to subscribe to cable is live sports.)

Growth is not a given. It's a tough landscape and no guarantee Netflix will be
the last one standing.

$20b is still a lot of money for a company with no profits, in a fight for its
life.

~~~
rorski
I'd add as a cable-cutter sports fan that even live sports is not a big deal
without cable. Buy a HD antenna and you get ABC, CBS, NBC, and Fox, which
covers at least the NFL and a bunch of other prominent sporting events. Buy
mlb.tv if you're into baseball, NBA league pass if you're into basketball, or
NHL center ice if you're into hockey - or just find live streams of the games
online (but YMMV on the quality of course). Throw in a shared login with a
friend for Comcast/DirectV/whatever, and you get ESPN/ESPN2, TBS, Fox Sports,
NBCSN, and others.

~~~
ptk
I disagree wholeheartedly as a fellow sports fan cable cutter. The problem
with those sports packages is that you can't follow your home team. You can
follow literally every other team, but not your own. As a White Sox fan, I
would have missed probably >70% (a guess) of their games had I paid for the
MLB.tv package.

~~~
RockyMcNuts
hmmh... how about with a VPN?

ESPN's attempt to block World Cup in USA if you didn't have a cable was pretty
easily circumvented. And then there's the option of using a buddy's cable
login.

------
maguirre
I think there is plenty of growth opportunity for Netflix 1- After hours
trading is notorious for volatility 2- HBO announcement today 3- Subscriber
growth did not meet expectations

Are all likely affecting the stock. However when it's all said in done who
else is competing with against netflix?

~~~
johneth
> However when it's all said in done who else is competing with against
> netflix?

Well, HBO, Amazon and Hulu in the US. In my country (the UK), there are
several local competitors; Now TV, Sky, BT, 4oD, BBC iPlayer (sort of),
Amazon. I would assume it's a fairly similar situation in most of the markets
they operate in (e.g. HBO Nordic in Scandinavia).

~~~
nknighthb
That raises the question of what it means to "compete" with Netflix. All three
you mention currently have severe deficits compared to Netflix.

HBO won't be available to non-cable/satellite subscribers until next year, has
limited content, and at this point unknown pricing. (Seems unlikely to be less
than Netflix, might end up being 2x Netflix.)

Amazon has limited content, a crappy UX, and a pricing perception problem
(your only option is $99 up-front).

Hulu has very limited content, ads even for paying customers, and a crappy UX,
all while charging the same amount as Netflix.

A cord-cutter is almost certainly going to be paying Netflix. They might pay
some of the others, too, but maybe not, and probably not all of them. It seems
unlikely they'd pay any of the others without paying Netflix.

Is it really competition when your competitor's customers are your customers?

~~~
johneth
> All three you mention currently have severe deficits compared to Netflix.

I agree to your points to a certain extent. However, you're forgetting that
Netflix also has deficits to the other three. HBO, as I understand it, would
most likely have up-to-date recent films, something Netflix severely lacks and
people actually want. Amazon is bundled with Prime, a big draw for a lot of
people which makes it's offering look more desirable in many ways. Hulu is
free (except Hulu Plus). Probably most importantly, all three have unique
content which is not available on Netflix (especially true of HBO).

> It seems unlikely they'd pay any of the others without paying Netflix.

I don't think this is necessarily true. With VoD services like these, people
will use the ones which have the content they want to watch. As the
'incumbant', Netflix will have certain first mover advantages in terms of
brand recognition, but this won't last forever and the market still has lots
of room for growth.

~~~
CocaKoala
>However, you're forgetting that Netflix also has deficits to the other three.

This is a pretty good point. I subscribe to both Hulu and Netflix, and I feel
like they provide very different services. Netflix provides a large back-
catalogue of movies and TV shows, while Hulu is more for watching things which
are currently airing. If netflix was able to get episodes of shows on a real-
time basis, instead seasons at a time the season after the season is over, it
might be competing on a more direct basis with Hulu. As it stands, I feel like
they are for different markets, and somebody who wants a Hulu subscription
isn't going to be satisfied with Netflix.

------
xiaoma
I used to be really bullish on Netflix, but then Amazon started giving Amazon
Prime members streaming access to a huge collection of free TV and movies. The
offerings aren't exactly the same and each platform does have its own
exclusive shows, so a huge TV fan might want both. But for a lot of people,
one is enough and if that one is Amazon Prime then you get free shipping of
all your Amazon deliveries as a bonus! For those of us who had already become
Prime members for the shipping, Netflix has even less of a hope of competing.

Due to its size, Amazon can also expect to extract an better selection of
streaming titles from media companies.

Netflix should be terrified.

~~~
w1ntermute
I don't think Netflix has to worry about Amazon Instant Video at all. The
problem with AIV is a total lack of consumer awareness. If I'm talking to a
friend about the movie they saw last night, or what TV show they binge-watched
over the weekend, they're almost always going to say "Netflix" (and it's not
like "Amazon Instant Video" exactly rolls off the tongue). And there's not
even any discussion about how there's an alternative. As far as the majority
of consumers are concerned, Netflix is _the only_ player in its category. It's
basically like iPhone vs. Android in the US, but a lot, lot worse.

~~~
bigtunacan
If we are making the comparison that they are iPhone vs. Android respectively
(Netflix == iPhone && Amazon == Android) then we should expect that Amazon
will eventually dominate the US market place, just like Android is doing now.

[http://bgr.com/2014/07/01/android-market-
share-2014/](http://bgr.com/2014/07/01/android-market-share-2014/)

TL/DR; Android market share in US = 61.9%/iPhone US market share in US =
32.5%.

~~~
w1ntermute
The comparison has nothing to do with the change in their market shares, or
who will dominate in the future. I'm purely giving an example of how _consumer
awareness_ is completely different between nerds and the general population.
Just because everyone on HN knows about AIV doesn't mean that the average
consumer knows about it.

Predicting whether or not AIV will _gain_ consumer awareness is a completely
different matter, and I don't think that comparisons between iOS and Android
have any place there, since the markets are completely different.

------
staunch
It's not a zero sum game. The only limiting factor is how much really great
content can be created. When the market for premium streaming matures it's
going to effectively be what we always wished cable was. Netflix can only lose
if they fail to keep going.

~~~
freyr
_> When the market for premium streaming matures it's going to effectively be
what we always wished cable was._

Which is what, exactly? A la carte programs? Netflix isn't that. A la carte
channels? Netflix isn't quite that either.

Netflix is positioning itself as something between a streaming TV network
(producing original content) and a streaming Time Warner (bundle all the
content, acting as gatekeeper to the end consumer). I like Netflix, but I
doubt it's long-term intent is to be the streaming utopia we've dreamt of.

In that context, Netflix currently enjoys the advantage of being one of the
few popular streaming networks/content providers right now (along with Amazon
Prime, and perhaps Hulu Plus in the U.S.). Moving forward, they could swallow
up or crush new competition, consolidating their power and pushing them more
into the Time Warner category. That would be very good for them, financially.
Or competition could build up around them, relegating them to the streaming
network category.

------
kolev
I find myself using Amazon Instant Videos, Vudu, and Google Play Movies more
and more, so, no wonder if I'm not the only one. The DVD service is a
friction, I have it, but I have DVDs with me for over 6 months, and no time to
watch them and get new ones. Before that, I had a DVD with me for nearly 2
years! Weirdly, Redbox Instant just died, so, this should've helped Netflix by
a tiny bit, but still... Why are the movie studios so greedy? People still
steal their movies and torrent them, so, I'm missing a lot of movies for which
I could've paid a premium, but having kids, and all prevents me from watching
them at the premiere, so, I rent them later and they make a lot less from me
and many are like me, I'm sure. It's not about the price, it's all about the
convenience, and I hope those old crooks get this once and for all. I'm sure
if people had an option to watch a new movie without going to the theater,
piracy would drop significantly, but I know there are people who'd always
pirate even if the movie is $0.99 - people who don't value their time, nerves,
and don't mind the risk of getting sued, I guess.

------
click170
I'm no finance expert, but looking at the graphs, hasn't it already recovered?

[https://www.google.com/finance?q=NASDAQ%3ANFLX](https://www.google.com/finance?q=NASDAQ%3ANFLX)

The story reported it was at 339. Looks like it's currently at 448.

Edit: Nevermind, didn't notice the "After Hours" price in tiny-text above the
graph which shows similar numbers to those reported in the story.

~~~
mbrubeck
You can click on "Settings" and then check the box for "Extended hours" to see
the after-hours trading in the graph itself.

------
mathattack
I think people are missing the big picture on what happened... This is not
that the market is giving up on Netflix. It's that most of Netflix's value is
based on an enormous increase in growth.

Taking a look at their financials [0] their PE was 139 pre-announcement. It's
still north of 100. Compare that with 27 of Google. Very high growth
assumptions.

Another way to look at it is they are still up ~250% over the past year and a
half.

When you're this highly priced, there is no room for mistakes or missing Wall
Street expectations.

One other note... There is a lot of hedge fund activity on Netflix, which can
increase the immediate pop before or after a hit.

That said... Speaking as a subscriber... I'm still paying, but I'm not using
nearly as much as I used to, and I'm using Amazon Prime more and more.

[0]
[https://www.google.com/finance?cid=672501](https://www.google.com/finance?cid=672501)

------
th0br0
The reason for this is their EPS being down by about half of the expectations:
[http://www.zerohedge.com/news/2014-10-15/netflix-
obliterated...](http://www.zerohedge.com/news/2014-10-15/netflix-obliterated-
after-guiding-half-expected-q4-eps-streaming-adds-hit-brick-wall)

------
tzz
Sorry not relevant to the subject, but who is allowed to trade after-hours?
How come some people are allowed to take advantage of trading while the
general public is not allowed?

~~~
sdeyerle
Anyone is allowed, but there is lower volume and more volatility.

~~~
grecy
genuine question - how come when I submit an after hours trade through my bank
it says "trading is closed, your order will be submitted first thing tomorrow"
?

~~~
minimax
It could be your bank just doesn't offer it. For most retail brokerage
accounts you have to specifically request an extended "time in force" if you
want to send orders outside of the core session.

------
neovive
With so many players in the mix, I wonder if some consolidation is likely in
the near future. Less streaming services with more content breadth is much
more valuable to consumers than figuring out which services offer which
content.

------
Steko
Price increase killed their U.S. growth. Hulu makes over half their money from
ads, I'd expect Netflix will eventually go down that road -- $4.99/mo or free
with ads and $9.99 without.

------
fvinci
I know comcast is more diversified, but wouldn't this be a threat to them too?
Why no effect on their after hours price?

------
notastartup
Blame Popcorn Time. Why would people pay for far fewer selection and mediocre
movies and tv shows when they can have unlimited access to every movie and tv
show?

~~~
jaredmcateer
I just installed popcorn time, I tried a few tv shows but couldn't find many,
or any, peers on many of them and the show wouldn't play well, with lots of
buffering, or at all, or it was missing aired episodes in available seasons.
No tv show on Netflix does this to be and that's why I pay. While the
selection seems better on Popcorn Time, it's really just the most popular
shows near the latest episodes that seem to work so the "extra" selection just
made it a more frustrating experience.

~~~
notastartup
it worked fine for me. although i watch movies more than tv shows. i think it
works pretty good given that its free and they are constantly improving it.

------
icantthinkofone
After hours trading almost always means nothing. Ignore such headlines.
Reality takes place during normal trading hours. After hours is for amateurs.

If you want to get stupider than this article, I've seen some stocks trade
down 50% after hours but open normal the next day.

Besides, the whole market took a nosedive today.

Means nothing.

~~~
minimax
That is true in some cases but not for NFLX today. You should pull up the
chart. Volume in NFLX _exploded_ after the earnings announcement.

~~~
icantthinkofone
Any chart you pull up is not for after hours trading.

Note that, while you agree what I said is true for most cases, I was
downvoted. What is this? Reddit?

~~~
minimax
Go here

[https://www.google.com/finance?q=NFLX](https://www.google.com/finance?q=NFLX)

At the top left of the chart set zoom to 1d. At the bottom left of the chart
click settings and tick the box for "Extended Hours". That gets you volume
data for the post market session. I didn't downvote you, but I do see these
kinds of comments ("hey don't trust the post-market session") after earnings
announcements a lot, and I usually try to cross-check the chart to see whether
they're on point or not.

~~~
icantthinkofone
I was a day-trader for 15 years so I know how to find that info. I'll say it
again, after the market closes, the professionals go home. Anything you see
after that is by amateurs.

~~~
minimax
Ok the market just opened on 10/16 and NFLX is trading around $342, which is
around $100 below yesterday's closing price but almost exactly equal to the
after hours price from yesterday. The after hours trading was 100% real and
not amateurs trading in a thin market.

------
ycskyspeak
Netflix has strong fundamentals. They could be a good buy actually considering
the stock is down

~~~
hnnewguy
> _Netflix has strong fundamentals._

It has a P/E of over 130, and just reported slower than expected subscriber
growth. Of what specific fundamentals do you speak?

