THB #370: Strike Analysis - Netflix Is An F-Boy

“When people won't tell you how well you're doing, you can bet they're doing awfully well or awfully poorly. They're hiding the money. And that's what they do, they hide the money. We've got to find it.”

This quote is from Chris Keyser, co-chair of the WGA negotiating committee in a Hollywood Reporter interview last week.

And it scares the crap out of me… because it is suggests a profound misunderstanding of where the industry is right now.

I support the WGA. I support the strike (though I think it should have been delayed a month or so). And I like Keyser’s work as a writer… huge fan of Julia. (Sarah Lancashire should have won the Emmy last year and Season 2 is already in the can.)

However… the current state of the industry is not one of “secret prosperity” and one of the main reasons the bad infrastructure for writers that is now damaging working screenwriters is that there is no consistent revenue model for the shows that are being made… even as more shows are being made than ever in the history of humanity.

The Pot o’ Gold - aka “the money they are hiding” - is not, for now, in the return on investment on any show or shows, but in stock prices. In other words, it’s elusive and the measures that inspire stock investors are not as simple as how a show is drawing audience.

As you can see in this chart, Netflix was a great little company… stable and successful… until streaming…

The Week of House of Cards launching (Feb 1, 2013), Netflix went for $27 a share… which was not its all-time high, but at the high end of the norm for the stock.

A year later, the stock was $48… a year later, $64… a year later, $88… 2017, $145.

And then, it went nuts. February 2018, $279… 2019, $348… 2020, $367… 2021, $557.

What was the driving idea behind these increasingly wild valuations?

An idiotic idea (hi, Rich Greenfield!) that the more Netflix spent on content - while still not profitable, mind you - the more valuable the company would be… in part, because subscriptions were still growing.