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Comment by louwrentius | Hacker News Reader

As a lay person, Netflix is just the victim of basic capitalism. You need to show endless growth no matter what the circumstances are. Fundamentally unsustainable.

I don’t care about Netflix, I was never a subscriber. But I wonder if this is really about Netflix or about the absurdity of the larger system.

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Victim is the wrong word, more like loser

I would agree but the game is rigged / unfair so it’s victim.

The game is rigged against netflix? one of the most elite and well capitalized companies in the world?

Basic capitalism does have something to do with Netflix' problem. However, nowhere in capitalism does it say that you need endless growth. Netflix' valuation was dependent on growth (as signalled by its' PE ratio). Basic capitalism says you need a profit. Netflix will be fine if their profit never grows anymore, and they pay out their profits constant dividend. Even investors will not be terribly disappointed by the zero-growth scenario under its current valuation, which given their PE-ratio would be equal to a 5.8% yearly dividend and no capital gains.

Theoretically, you are correct. However, growth and non-growth companies are valued significantly different. Growth companies have a P/E multiplier, while non-growth companies can be valued like an annuity.

No member of the board would ever sign off on a plan that involves valuing the stock at 20% the current price. That’s why no CEO will have a no-growth plan.

Content creation is a hit making business. Video games, movies, tv shows, music, literature, etc. People are passionate and work in the industry because it’s a creative effort and you can make a lot of money. But as an investor you should value content businesses with low multipliers because it is difficult to repeat the success. This is also why sequels, formulaic stories, downloadable content, subscriptions, and all manner of solutions to derisking content is applied because of the inherently risky nature of hit making businesses.

> Netflix is just the victim of basic capitalism. You need to show endless growth no matter what the circumstances are. Fundamentally unsustainable.

What's basic capitalism? Is it bad that capitalism victimizes fundamentally unsustainable companies? And to whom does netflix need to show endless growth?

Lots of people and even companies do not require or have endless growth, many are content (or at least sustainable) turning a relatively constant profit.

Why is Netflix 'fundamentally unsustainable'? Hollywood studios are some of the oldest and biggest companies (notwithstanding overvalued tech stocks) on the planet. They've been 'sustainable' for decades. Netflix has (had?) quite good tech with CDN and recommendation engine, their engineers were well paid, they had sufficient users to be profitable, and one of the strongest, well regarded brands. I'd say fashion or bottled sugarwater companies have more 'fundamentally unsustainable' models because their main product is the brand. Netflix has a lot more than that.

> Why is Netflix 'fundamentally unsustainable'?

I was replying to parent who said that. Or at least that's how I read it.

Netflix works fine, they make plenty of profit. The problem is the endless growth requirement (be it from IP owners, share owners, or other stakeholders). It's unrealistic and Netflix could just coast along as-is with very few issues. But they don't want that, they want growth and ever increasing counts in subscribers, content and money.

I still don't understand what exactly is "the problem".

Capitalism punished the people who had unrealistic expectations of netflix's growth.

The problem is that a profitable entertainment service used and enjoyed by many is somehow going to "not survive" based on unrealistic models applied by people that are neither consumers or producers of the profitable service itself.

If it's profitable it will likely survive in some form, thanks to capitalism.

Not if 'profitable' is not deemed enough, which is the problem. It's simply never enough (hence the many references to unrealistic infinite growth), so what is most likely to happen is some way to 'restart' the growth count, so we can have a pretend-infinite-growth party again. Maybe a merger, maybe a spinoff, maybe a some other construction.

> Not if 'profitable' is not deemed enough, which is the problem.

This is not the case under capitalism, it happens under regulated economies.

Under capitalism, "profitable" _is_ the signal of the net value something generates, and that is its own motive.

> It's simply never enough (hence the many references to unrealistic infinite growth),

Untrue. Many people and companies operate under steady (or even declining) profits, still run while they generate profit.

> so what is most likely to happen is some way to 'restart' the growth count, so we can have a pretend-infinite-growth party again. Maybe a merger, maybe a spinoff, maybe a some other construction.

A great number of good options for valuable companies and products and services are available under capitalism yes, this is one point I will agree on.

We're talking about the silly Netflix story here. Not capitalism and/or other companies.

Strange retreat, but no we were talking about capitalism as well.

If we were just talking about netflix story, in that case what we're talking about is a CNN article claiming these things might happen which really has little basis in actual reality or how capitalism works. The _actual_ Netflix is still here, and it is still here despite being deemed not profitable enough by many.

Okay. We're still just talking about Netflix, mainly because I have referred to the article and to Netflix in every reply, and because I've explicitly stated it in the first and last reply as well.

If you would like to interpret it differently, that's up to you and I can't really help you with that.

No, we weren't just talking about Netflix and not capitalism. Not in the original thread you first came to, and not in your replies either.

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