Comment by nostrademons | Hacker News Reader

Comment by nostrademons | Hacker News Reader

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They have 100M+ subscribers who each pay ~$10/month. That's a billion dollars a month, or $12B/year. $12B/year can pay for a lot of $300K/year salaries.

(Most people have trouble wrapping their heads around just how huge consumer markets are. If you have 300M users - a la Whatsapp when Facebook acquired them - and charge them just $1/year, that's $300M/year in revenue, or enough to afford 1000 $300K/year engineers [or actually more like 1000 $200K/year engineers once you figure in overhead]. Similarly, if just one person out of every 100 acquaintances you know uses a product but they spend $10/month on it, that's about $400M/year. The challenge for consumer businesses is usually that they have to spend more to reach those customers and get them to open up their wallets than they make from each one, not that there aren't enough customers.)

> $12B/year can pay for a lot of $300K/year salaries.

Of course out of those $12bn, 7-8 will go to cost-of-goods-sold (buying or making the content they serve up). Still, 3-4bn of gross income pays for quite a few engineers.

Their latest quarter:

$2.98 billion sales, $991m gross profit, $208m operating income

Tracking toward $11.75b - $12b in sales for fiscal 2017, with a mere ~3,400 employees or so.

They've historically had relatively slim margins (especially in the streaming business), probably explains the very thin employee base versus the sales.

> $300M/year in revenue, or enough to afford 1000 $300K/year engineers [or actually more like 1000 $200K/year engineers once you figure in overhead].

I think you're massively underestimating overhead. Each person who works on a product should make a max of 15-25% of what they bring in. If you have a repair shop and you charge $100/h, you should be paying your techs $15-25.

Back of the envelope calculations:

$1 billion a month is about $1.4 million an hour 24/7.

$300,000 + ~$50,000 in benefits / 260 working days yearly / 8 hour work days is about $170 an hour.

That works out to earning about 0.012% of what they bring in.

Netflix is a bad example because, like most media companies, the vast majority of their expenses go towards media licensing and production. So while it's easy to paint their engineers as overpaid compared to the labor market, it's very difficult to paint their engineers as overpaid relative to their product.

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