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anon

instant has always had this problem for me

David

Yes, it's been happening since yesterday.

Also, a few days ago the streaming rates changed from 500/1000/1500 to 250/560/1050/1750 playing over a web browser, using ctrl-alt-shift-D and ctrl-alt-shift-S to display or change the rates.

Bob

Started having this problem yesterday.

Mark

More and more often.

Sandra Bellezza

Yes, I first noticed the issue Sunday. It appeared all the shows I viewed through yesterday, Netflix didn't recognize. However as of 9:00am this morning it seems to have recognize all my viewing activity.

alan

yah problems with netflix and roku sometimes will not open the channel store keeps telling me to redo the network which i do but the same thing happens again .if i re-boot the roku then channel store works again till next time .

John

A few weeks ago it put up that I watched an episode of a show from its third season but I never watched the show.

Matt

I have a different problem, sometimes when I put shows/movies in my queue the order get mixed up. This occurs alot lately, especially if I use Instantwatcher.com. It worked fine until the start of the year.

The Netflix website has been going dowhhill lately, it's time for netflix to redesign their site.

Mike Clark

For about a week ive been unable to watch the last four episodes of "Battlestar Galactica:The complete saga".

When I click on any of the last four titles, I will get a message telling me that Netflix is in the process of improving the media quality, and to check back in a couple of days. On instant watcher the last four episodes arent even shown, and have been waiting 7+ days already for a resolution.

Kimberly

Yes. It started Sunday for me. It is driving me insane, and I thought it was a bug with my player (PS3).

Lacey

We've been having problems since Sunday, too. We watch on ps3. It kept having errors and wouldn't start up. When it finally did log in it kept saying that our queue was empty or that it couldn't load the titles. It finally loaded our list but it wouldn't go to the screen to let us actually view them. When we did try to view them it took a long time to load and kept pausing to retrieve. Super annoying!

Dan

Also having the same problem here. It's obviously not happening to everyone, but hopefully that doesn't mean they won't fix it for those of us it affects.

jolly

Netflix Business Model Is Not Sustainable

Read through the transcript of Netflix's (NFLX) most recent conference call and, in terms of keeping things close to the vest, the company makes Apple (AAPL) look like a firm that provides a live webcast of executive retreats. Netflix offers an endless stream of short answers that are light on specifics. When an analyst dares to "ask" about expenses -- and oddly, few of those types of questions get through -- the response amounts to: No worries, we've got it covered.

As an investor, it concerns me that Netflix conference calls, particularly the last one, tend to be light on, if not void of, talk about the surging expenses the company pays now, puts off to a later date, and can expect to incur going forward.

Even more troubling is Netflix's conference call format. It does not occur in real-time with analysts on board. While other companies use similar methods, Netflix use of a Q&A session only, conducted via email, smacks as curious, at the very least. The protocol appears to give the company the ability to preselect questions and craft ideal answers only to the ones they choose, as opposed to having to answer potentially tough questions exposed and on the fly. Regulators ought to banish this approach, as it provides little value to investors. Netflix's last call amounted to nothing but a dog and pony show.

What's even worse is how they attempt to make what, for all intents and purposes, is a canned Q&A session appear live. In Netflix's earnings press release, the company notes that it "will host a live Q&A session" where VP of Investor Relations, Deborah Crawford, "will read the questions aloud on the call and" CEO Reed Hastings and CFO David Wells will "respond to as many questions as possible." For good measure, the company even throws in the following head fake to feign a "live" call (click to enlarge images):


As always, I reserve the right to be wrong or off-base. I am not one of these guys who lives and dies with being right. I simply go on the information that's out there and available to me. I could have missed something. I welcome clarification as to how the company conducts its conference calls. From what I can logically glean, it appears that they sift through email questions and then go "live" in a somewhat, if not wholly, rehearsed back and forth between Crawford and Hastings and Wells. Was Reed really talking to Mark in that clip? Or was he picturing Mark as he looked at Deborah from across the room? To blame the new format on saving us from management's "boring" discussion before questions, technical glitches, or noise from a speakerphone insults our collective intelligence.

Why the lack of willingness to delve into the numbers and talk expenses? Alongside revenues, investors certainly care most about the costs a high-growth company like Netflix incurs and will incur at it ramps into its next and, most likely, largest expansion phase. Given the time waste of the company's conference call, the best thing we have to go on is an annual report that consists of crafty bookkeeping, to put it mildly. Any investor who goes the extra mile with their due diligence -- and Netflix surely realizes most, even ones with substantial amounts of capital to invest, don't -- can figure out that Netflix's numbers just don't add up. They'll need a Herculean surge in revenues to keep up with growing expenses.

In its most recent annual report, Netflix explains how it accounts for the costs it incurs to stock its streaming content library (you'll need to click the excerpt to make it bigger):


Pay close to attention to what Netflix says in that excerpt because it's critically important to the company's ability to maintain such a high valuation. Or, more aptly, to keep up with what will be an exponentially rising valuation over the next several quarters, assuming it's price per share does not plummet. I'll go as far to say it's vital vis-a-vis Netflix's chances to maintain a stock price above $100 going forward. Let's take a look at the numbers associated with each of the area's Netflix's speaks of in the above-referenced excerpt.

Current content library, net. 2009: $37,329M, 2010: $181,006M, Increase: 385%

Acquisition of streaming content library. 2009: ($64,217M), 2010: ($406,210M), Increase: 533%

Amortization of content library. 2009: $219,490M, 2010: $300,596M, Increase: 37%

Accounts payable. 2009: ($1,189M), 2010: $139,983M.

Other non-current liabilities. 2009: $16,583M, 2010: $69,201M, Increase: 317%

Footnote 5 (straight from the 10-K; emphasis added):

The Company had $1,075.2 million and $114.8 million of commitments at December 31, 2010 and December 31, 2009, respectively, related to streaming content license agreements that do not meet content library recognition criteria.

The Company also has entered into certain license agreements that include an unspecified or a maximum number of titles that the Company may or may not receive in the future and /or that include pricing contingent upon certain variables, such as domestic theatrical exhibition receipts for the title. As of the reporting date, it is unknown whether the Company will receive access to these titles or what the ultimate price per title will be. However such amounts are expected to be significant.

Prepaid content. 2009: $26,741M, 2010: $62,217M, Increase: 133%

A look at year-over-year revenue shows an increase that pales in comparison to the rise in costs associated with content acquisition. For instance, total revenues grew from roughly $1.7 billion in 2009 to $2.2 billion in 2010, an increase of 29.4 percent. Net income ticked up by 39 percent, from $115,860M in 2009 to $160,853M in 2010. And to top it off, Netflix's average monthly revenue per paying subscriber declined 8.3 percent, from $13.30 in 2009 to $12.19 in 2010. The company blames this on growth in its lower-priced subscription options.

Bringing it all together, between 2009 and 2010 Netflix saw its cost of subscription revenues rise by a $244.6 million. They jumped from about $909.5 million in 2009 to almost $1.2 billion in 2010. Content acquisition and licensing expenses accounted for nearly $166 million of this growth. And this does not take into account content costs that do not presently "meet content library recognition criteria" (that pesky billion dollars or so referenced above).

What's even more startling about the amount of money Netflix has and will continue to put out in the future relative to revenues is that the preceding discussion about expenses focuses solely on content acquisition costs. I make no mention of the further hole Netflix will dig for itself as it dives into its international expansion plans.

International expansion, particularly the costs associated with it, represents another area of its business Netflix executives don't seem to like to talk about much. One of the few hard numbers they have provided is an expected $50 million international operating loss for the second half of 2011 alone. Outside of this, the company does little more publicly than hinge their international ambitions on an "if" regarding anticipated success in Canada. There's no mention of how much it will cost to secure international content rights and other "infrastructure," conduct marketing activities to build the Netflix brand where it does not yet exist, lease buildings, and hire staff. Just trust them, they'll get it done.

Obviously, I expect items such as accounts payable to increase when looking at a growth company like Netflix. If they did not, I would be concerned. In addition, I understand the transitional growing pains associated with the shift from a DVD-delivery model to a streaming one. These factors, and nothing else that I have heard thus far, do a thing to ease my concerns over Netflix's ability to grow enough to justify expenses. In fact, I expect them to announce a shocking earnings miss within the next year or so or provide unexpected Coinstar (CSTR)-like guidance.

In the company's most recent letter to shareholders, Netflix anticipates 2011 Q1 revenue to come in on the high-end at $704 million. If we extrapolate that out to $2.8 billion for the year, it represents year-over-year growth of about 27 percent. If Netflix Acquisition of streaming content library line item, for instance, grows by only a fraction of the 533 percent it grew between 2009 and 2010 -- say 100 percent -- that number would fast approach $1 billion. And this does not account for new content expenses that hit the books in 2011, international charges, and other general operating costs.

I don't see any way Netflx can substantially decrease the costs it will incur to acquire content. Content creators certainly aren't in the mood to cut any deals. And if they do, it won't be with the seemingly arrogant, new kid on the block Netflix. As Hastings said himself, in one of the few substantive comments he made on the last conference call, "cable service providers," for example, have little incentive to "help [Netflix] grow."

And with just $350 million in cash on its books for 2010, up from $320 million in 2009, Netflix can ill afford to purchase a programmer such as Discovery Communications (DISCK) or Scripps Interactive (SNI) or a division of a company like Time Warner (TWX). Hastings almost brags about being a "$100 million a year customer for Warner Bros.," but he's being taken to the cleaners.

To his credit, Hastings did address the issue of content costs right here at Seeking Alpha when he warned Whitney Tilson to cover his NFLX short. But the CEO's treatment of the issue did not inspire confidence:

Moving on to the widely-discussed issue of increased content costs, it is true that we are paying more for any given piece of content than we were two years ago, and that in two years, we’ll pay more than we pay today. Part of our goal as a business is to make money for content producers and to become one of their largest and best revenue sources. Fortunately, our subscriber base is growing fast enough, and DVD shipments are growing slow enough, that we can afford to pay for the existing streaming content we have, and also get more content. We try not to comment on specific deals, like the Starz renewal, as that rarely helps us get deals done.

Investors sometimes see the content cost threat as an issue around our margins. But we have no intention of overspending relative to our margin structure, and there is no specific content that we “must have” at nearly any cost. In our domestic business we spend 65-70% of revenue on COGS (which is mostly content and postage). So if content costs rose faster than we expected, then in practice we’d have less content than otherwise, rather than less margin. This would ultimately show up in less subscriber growth than we wanted from a not-as-good-as-it-would-otherwise-be service; it would not likely show up as a sudden hit to margins. Management at Netflix largely controls margins, but not growth.

In a nutshell, Hastings said content will continue to get more expensive to acquire, but Netflix will not overspend for content at the expense of their bottom line. If the company adheres to such fiscal responsibility, its product will undoubtedly suffer just as competition from a broad range of players intensifies. Netflix will ultimately face a chicken versus egg dilemma (or is it a double-edged sword?). It needs to secure more and more content to compete, but it cannot survive on the trajectory of its current and necessary shopping spree. While it really cannot afford to cut back strategically and theoretically, it will need to cut back from a financial sustainability standpoint.

As it stands, the Netflix business model of impressive growth combined with mind-boggling expenses that will only go up is simply not sustainable. Sooner rather than later, Netflix will run into a cash flow problem. Netflix has short written all over it. Two years from now, I think we will be talking about one of two things: a sub-$100 NFLX share price or Netflix Streaming by (take your pick of) Apple, Google (GOOG), Verizon (VZ), or AT&T (T)


Dan Geiser

Jolly,
WTF does this have to do with the question at hand?

vio

Never once had this problem with any ISP in my area, be it a hard wired or wireless connection, in the 3 or so years I've been streaming now.. My guess is you either have slow broadband, a garbage router($30 Actiontec router from Walmart perhaps?), low signal strength or limited bandwidth or a combination of these. I wouldn't be so quick to place the blame on NF.

Pat

I have been watching Cheers. My xbox loads ok but it takes about 5 minutes on my Roku. 275 episodes total. Individual episodes load fast once I am into the Cheers page. It would be nice to have these back to seasons so they only load 24 episodes or so at a time.

Tim

I'm having this problem on the PS3. The Roku too.

Jason

I've on rare occasion had delays on watch history but never seen stuff not show up. They've had a technical issue with queue positions for some titles for some customers, perhaps the two are remotely related and there is some sort of database issue? They have troubleshooted the queue on my account and I'm told that they are working on something related to the queue and all will be normal soon.

Jon

Since Vio, you seem to have such an air of smugness, clearly its more than just one person having this problem and as for inferior products? I use a Belkin N+ F5D8235-4 with a wired ethernet connection off the back that pulls 20-22 mbps down and 3-4 mbps up consistently. So kindly STFU? Thanks...

vio

It's not smugness, it's called giving you a dose of reality. I work tech support(i'm not saying for what company, sorry) and I swear if I had a dime for every person who has issues streaming Netflix and simultaneously claims to have the best router and fastest internet service money can buy... It's a bunch of nonsense.

Why have I never experienced any problems streaming Netflix on a computer, Wii, Roku and Blu-ray player on 2 different routers and 2 different ISPs? Care to explain that one? Otherwise, kindly STFU and except that your crap sucks.

Mike

I'm having trouble with Cheers on instant streaming. It streams fine to my computer but when I try it on the TV (on Sony Bluray players), it shows "Disc Only". I haven't been able to find anybody else talking about this issue. Anyone one else having this problem or have any helpful suggestions?

alan

this vio person seems to have big problems and it's not netflix or roku

vio

Piss poor attempt at trolling alan. You know nothing about me. Calling someone out on their BS hardly translates to me having "big problems" and you damn well know it.

JCL

Back to the question asked...'recently watched': happens from time to time!

My problem noted to NF, Roku, ISP and Hacking over past 3 months has been, (same as many other people): the 'loading-reloading', 4 dots down to 2. Happens with 'old-new' titles, TV eps, etc. Time of day makes no diff. I have a basic Roku,(2+yrs) never any problems. No problems with any of the other Roku channels that I view regularly.

Answer I keep getting 'it is a NF' problem. Most think they have just not been able to keep up with 'consumer use'. Need faster tech platform updating. Mr. Hastings, "HELP".

george

Yes, problems.

But never for video. Often for audio. Sometimes streaming audio is a little garbled and "tinny." Usually, restarting the program a time or two fixes the problem.

What is irritating is almost every poll or questionnaire or online complaint Netflix provides ALWAYS asks only aboud "video quality" I have yet to run across anything from netflix that allows me to complain about audio. Get with it Netflix. Video quality is irrelevant if the audio quality is crap.

JCL

You can use the 'report problem' click-on across from title watched.

The first section box is labeled 'audio'. The questions asked may not be 'specific' to your problem, but check off all of them, and get their attention as to a 'problem exists'.

You can also call NF direct on toll free number and voice problem with a live rep. Call each time it happens.

BS03

My RokuHD and RokuSD seem to have lost my 'Recently Watched' queue. My Xboxes and media PC still have it and, of course, my TiVo never had it. We have not had any changes to hardware or network, so I assume it is a Roku issue. Everything is still streaming OK, but we have to search for it.

I was just wondering if others were having this problem.

B

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