Horace Dediu: Netflix is a real blockbuster

"The market loves movies and the internet and who doesn’t. It’s just that movies and the internet don’t make a great business."

From "Movies and the Internet" posted Thursday on Asymco.com:

Almost a year ago, on March 1st, 2021, I tweeted a snapshot of the “FAANG” P/E ratios. They were:

    • Netflix: 88.63
    • Amazon: 73.94
    • Microsoft: 34.65
    • Google: 34.75
    • Apple: 32.89
    • Facebook: 25.53

Today same companies have the following ratios:

    • Netflix: 19.34
    • Amazon: 46.08
    • Microsoft: 30.17
    • Google: 22.35
    • Apple: 27.79
    • Facebook: 13.67

What a difference 13 months makes. Microsoft and Apple saw modest falls 13% to 16%. Amazon, Google and Facebook saw large falls in their ratios: 38%, 36% and 48%. Facebook (now renamed pitifully as “Meta”) in particular saw its valuation collapse by half!..

But the star of the show, the real blockbuster, is Netflix. It fell from P/E of 88 to P/E of 19. Even six months ago the P/E was close to 70. What happened?...

Several paragraphs follow summarizing the history of Netflix as a business, from a DVD catalog to a streaming catalog to a hit-or-miss movie catalog with subscriptions reaching saturation and starting to decline.

That all happened rather quickly. The market loves movies and the internet and who doesn’t. It’s just that movies and the internet don’t make a great business...

Movies look to be more of a feature of an internet service bundle. That’s Apple’s approach. They don’t see video as a business but as hygiene: must-have something to put in a bundle.

My take: Like Horace, I never understood why FAANG had an N in it.

5 Comments

  1. Fred Stein said:
    There’s something deeper. It’s about leadership. We and the market trust Tim Cook and all his team. Hence every rumor, the macro issues, all the legal and regulatory issues have less impact on AAPL. Apple will deal with it.

    Netflixx simply failed to see that their first mover advantage did not grant them long term price premium and high growth at the same time. When reality hit, they made excuses. Not a good way to get better.

    Similarly Meta’s ruler (the company lacks good feedback mechanisms) blamed Apple for giving the vast majority of users what they want, privacy. While his meta-vision is garbled, armies of self-declared experts promote it virally because the new thing must be hip. The market knows better – you’re buying Zuckerberg, not Meta.

    3
    April 21, 2022
  2. David Drinkwater said:
    Maybe Netflix is a more of a Blockbuster than a blockbuster.

    We all know how Blockbuster worked out.

    6
    April 21, 2022
  3. Michael Goldfeder said:
    Bob Ackman had $1.1 billion invested with Netflix while crowing that it was the best of all the FAANG names. Didn’t care much for Apple as its growth prospects weren’t nearly as compelling. That thesis went into the ditch to the tune of $430 million for this hedge fund operator.

    6
    April 22, 2022
  4. Kirk DeBernardi said:
    The outright size and breadth of streaming content from the pile-on of streaming services “givin’ ya all we got” of the last few years stupefies most of us and seems to make the one proffering the most woefully holding the least customer loyalty.

    0
    April 22, 2022

Leave a Reply