Netflix: Can Its Business Model Survive? -Karl Denninger on Seeking Alpha

In a rather interesting move, Warner Brothers apparently is making available "Dark Knight" through Facebook on a pay-per-view basis.

Barriers to entry? Moat? What's that? There isn't one for online video streaming, which is a huge problem. Well, for Netflix (NFLX) it is anyway.

I have long pointed out that Netflix has a major issue with their basic business model, which I argue is basically one of poaching transport charges and billing out only at some reasonable multiple of the licensing charges for the exhibition. That's a nice model, if you can manage to (1) defend it against other entrants, and (2) not get hammered for the distribution costs you managed to shift onto others.

Unfortunately #2 isn't likely to work for long, and now #1 is under attack from all sides. Coinstar (CSTR) (Redbox's parent) and Amazon (AMZN) have announced intent to enter the market, and Amazon has actually done so, making available some of their already-licensed "instant view" content to those with PRIME memberships - without an additional fee.

Facebook has one advantage - 600 million accounts worldwide. Whether there's an actual business model here with a PPV sort of setup is another question entirely, especially considering that Facebook isn't exactly a revenue monster - in fact, I'd argue that there's no revenue of note at all. Oh sure, they've got some advertising money and will for a short while, until advertisers figure out that (1) people don't come to the site for ads, and (2) if you get annoying people will either block display of those units or turn you off. You can only sell advertising in that environment until the buyers figure out that they're wasting their money, at which point your "revenue model" collapses.

read Karl Denninger's full article on seekingalpha.com

Posted via email from Siobhan O'Flynn's 1001 Tales