They Just Don't Get Netflix!
NEW YORK (TheStreet) -- Posting on Facebook(FB) , Netflix(NFLX) CEO Reed Hastings trumpeted the happy-faced fact that his company's monthly viewing total topped one billion hours -- and all heck broke loose.
The stock ran up, and much of the media nodded approvingly. After all, Netflix reported two billion viewing hours in the entire December quarter.
Many media outlets -- such as MarketWatch -- put the showy "one billion" in the headline. They gave no context; instead, they reviewed the old pricing kerfuffle. (In a public relations blunder, Netflix raised prices indelicately.)There are several deeper levels of understanding, though. When a CNBC reporter noted that Netflix had "reached a really big milestone," @herbgreenberg rightly pointed out that "we don't know the economics of those streaming hours." Though MarketWatch was happy to call Hastings "upbeat" and leave it at that, @herbgreenberg pointed out that Reed also bragged "House of Cards" and "Arrested Development" will blow those numbers away, and will raise expectations for the company to deliver bottom-line progress to Wall Street. Bloomberg also added to a level of understanding that went deeper than a flashy headline number: It examined the streaming-media giant's balance sheet. Speaking of a billion, Netflix has less than that in cash, which doesn't look so great set against its nearly $1.5 billion in current liabilities -- money due in the next year. Worse, as Bloomberg points out, is the matter of its minimum of $3.7 billion not on the balance sheet, due to Netflix's contention that it doesn't know precise fees, or that the movie title the fee is designated for is not yet available. That's quite a bit more complex, not-suitable-for-a-happy-Facebook post. But it's the sort of complexity that might, in the end, have more impact than the happy-faced one-billion hour number.