Two fun facts to start this one:
1) Netflix is planning to spend $15 billion on content in 2019.
2) The company added 4x the number of international subscribers than in the US.
2018
International additions: 22.94 million
US addition: 5.68 million
1) Netflix is planning to spend $15 billion on content in 2019.
2) The company added 4x the number of international subscribers than in the US.
2018
International additions: 22.94 million
US addition: 5.68 million
1/ We'll start with competition. Obviously, streaming is heating up.
Netflix believes there is still a lot of room for growth but attention is a scarce resource.
This will not be a breakdown of Netflix's stock, but its business.
Netflix does have a BIG content lead though.
Netflix believes there is still a lot of room for growth but attention is a scarce resource.
This will not be a breakdown of Netflix's stock, but its business.
Netflix does have a BIG content lead though.
2/ Netflix has three revenue segments
1. Domestic streaming (US)
2. International streaming
3. Domestic DVD
US streaming makes up about 75% of the contribution profit even though it has 22 million fewer subscribers.
1. Domestic streaming (US)
2. International streaming
3. Domestic DVD
US streaming makes up about 75% of the contribution profit even though it has 22 million fewer subscribers.
3/ In the last 6 years, Netflix added 33 million US subscribers and 76 million international subscribers.
2018 # of subscribers
US: 58.49 million
Int'l: 80.77 million
2018 # of subscribers
US: 58.49 million
Int'l: 80.77 million
4/ In the US, memberships have become much more saturated than international.
You can see that in the US, Netflix has added between 4-6 million subs vs. the accelerating net additions from international.
You can see that in the US, Netflix has added between 4-6 million subs vs. the accelerating net additions from international.
Contribution margin = revenue - cost of revenue - associated marketing costs
In the US, contribution margins are much more mature.
In the US, contribution margins are much more mature.
6/ This is a key chart. It's the US contribution profit as a % of overall operating income.
Netflix still makes 165% of its EBIT from the US, even though the international memberships outnumber the US by 22 million.
Netflix still makes 165% of its EBIT from the US, even though the international memberships outnumber the US by 22 million.
7/ One main reason for this is the average revenue per user.
The US ARPU is 24% higher than international.
The US ARPU is 24% higher than international.
8/ Netflix has raised prices a few times.
1) The current standard plan is $12.99/month
2) ARPU's decreased with the move to streaming and an increase in international subscribers.
1) The current standard plan is $12.99/month
2) ARPU's decreased with the move to streaming and an increase in international subscribers.
9/ Here's a look at the company's EBIT margins. Bonus points for guessing when they starting investing heavily in streaming.
For 2019, guidance is for 13% margins.
The improvement in international contribution margins is a huge piece of this.
For 2019, guidance is for 13% margins.
The improvement in international contribution margins is a huge piece of this.
10/ I'll end with this chart.
Netflix's "moat" is having a low cost per subscriber. It has 151.6 million subscribers so it can maintain a lower cost structure on a per sub basis.
And now it is actively monetizing the content through partnerships and licensing.
Netflix's "moat" is having a low cost per subscriber. It has 151.6 million subscribers so it can maintain a lower cost structure on a per sub basis.
And now it is actively monetizing the content through partnerships and licensing.
