Can Netflix do college sports? When they get into VOD, Let the college produce the event, advertise it to their Alumni (slide it into the envelope begging for money) and netflix can use their systems to distribute and bill.

Big time college football/basketball fans that border on fanatical would seem to be a demographic ripe for the picking.

When the TV adds start running this fall. The gift giving subscriptions should soar for Christmas. I am curious what form they will take.

Will it be two people at their mailboxs talking about the red envelope, or someone racing through nighttime traffic trying to get back to BB before the late fee kicks in.

No confusion here. And confusion on your end is best explained by my poor writing skills. So I will try again. Until Nflx has established a record of earnings I believe the PE ratio is of little value and can even be misleading.

What I am trying to do, is estimate the worth of a the company by determining the value of the assets.This is done all the time although usually with hard assests like cash and property. Nflx has no gold deposits or oil wells. It does have a few million DVDs, $70 Million, a Patent and 1.1 Million subscribers. The cash is easy, the DVDs are used and the Patent may be worthless if it is not defended. That leaves the bulk of the value in the subscribers.

Lots of emerging companies are purchased for their customers, they do have value. AOL bought tens if not hundreds of ISPs on their way up. AOL did not want the switching gear, they wanted the customers.

When a cable tv company is purchased, the assets that are sold are a few miles of cables, some switching gear and the monopoly, which is customers. A wireless phone company I looked at had customer aquisition costs of $292. Once these people have signed a contract they are worth money to someone buying them out.

As far as 24 months goes, that was my guess for the average life of a customer. I would like to understand what the average life of a customer is, but I donot understand the churn very well and netflix is not very forthcoming with clear numbers of the churn of established customers.

I agree the best way to value a company is earnings but if a company does not have them others methods need to be used.

Hope this helps
Verne

Doug

Not suprised. Every year during my reviews I get told my communication skills are lacking. I will also admit my conclusion is a little touchy feely. But a little help from others may clear things up.

One critical item I have neglected is the assumption that all subscription services price themselves at a level to make money. If you are losing money on every subscriber you cannot make it up on volume. At this point Netflix is essentially breaking even. So we need to assume they are priced at a point which will become profitable.

Next, the value of a customer is how much money they will bring in. Lets assume $20 per month for 24 months = $480. Again this is subjective on my part as the churn for this company is as of now, not clear. It is headed down but the lower limit is not yet known.

Some companies with good service in captive markets (think small cable companies or local phone service) have churns as low as 1 to 2 percent. Properly priced and managed these companies generate piles of cash.

A little help from an accountant on how to convert from the churn numbers, to the average life of a user would help us both.

So $480 per costumer times 1.1 million gets us to $530 Million with an allowance for growth in subscribers (say 25%) makes the company worth $660 million dollars.

Play with numbers up or down as desired I would welcome some rational for changes and or refinements. As it sits I believe netflix is fairly priced and its value will track the subscriber number.

In until retirement.

To estimate time to double, simply watch the subscriber numbers. Other factors count but the overriding indicator of value is subscribers. I currently feel the value of about $600 per subscriber is high but if you include a projected growth of 50% it is reasonable.

Time to double about 16 months.

What is the value of a nflx customer?

For discussion purposes I have found the following information from various articles on the Web.
Market cap / number of subscribers = customer value

Dial up internet costumer is worth $202
Wireless internet ----$196 (Limited data)
Cable internet -------$249
Business internet customer $1,656 (Range of $300 to $9,000)
Cable TV Includes internet value $2,000 to $2,500
(peaked at $5,000 during 2001)

Churn information is hard to come by.

I have always wondered how other subscription services value their custumors. What is a magazine subscriber worth, A cable customer, How about a beer of the month club member, A health club member, Golf club, Local phone service subscriber. The list is endless. Are they worth 10x monthly fees or 100x monthly fees.

I will look into this and compile some numbers and would appreciate any leads.