As many of you know, Netflix is the most highly valued (or, overvalued) stock in the universe. Therefore, we come across lots of breathless reports about how amazing its business is. Investors are willing to pay $85 for each $1 of earnings, which is roughly in the Google range when Google went public.
This little snippet caught my eye when I looked at Google News last night.
Wow, 1 in 8 Americans have Netflix, that's a lot of people! With roughly 300 million people, 1 in 8 would be 38 million customers. As a non-subscriber, I would feel left out!
Then, I clicked on the link, which led to a CNN Money article.
The strange thing is the article has a different headline. I'm not sure if the Google machine created a different headline for use in Google News, or someone at CNN Money wrote a headline specifically for Google News, or what, but it's interesting they are different.
Now, 7% of Americans is not the same as 1 in 8. Seven percent of 300 million is 21 million, which is close enough to the 24 million reported in the article. Alternatively, divide 300 million by 24 million, and we have 1 in 12 or 13 Americans. That's still a lot of people but 1 in 12 ain't 1 in 8.
The article notes that Netflix just surpassed Comcast's number of subscribers. How impressive is this feat? Perhaps the writer should look into "price elasticity": demand goes up when price goes down?
Netflix is getting roughly revenues of $30 per user per quarter, or $10 per user per month for its 24 million customers. Comcast, by contrast, gets $80 per user per month, 8 times as much, with a similar number of customers. (Comcast has a price-to-earnings ratio of $20.)
From a revenues perspective, Netflix needs to add 8 customers for every customer Comcast adds. One wishes CNN Money tells you about this while it breathlessly reports on Netflix's rampant growth.