Business

Critics say “Netflix burning money, lacks good business model”

Gene Munster, renowned technology investor wary of Netflix spending amidst rising competition

Netflix recently released its quarterly report on Tuesday. The online video streaming platform is happy with its performance which saw a 3% rise in its stocks. Gene Munster, co-founder and managing partner of Loup Ventures, a reputed analyst said he failed to see how Netflix is going to make money anytime soon. He provided his views on the business model of Netflix on CNBC’s ‘Fast Money’. In its earnings report, Netflix NFLX, +3.04% said it added a record 9.6 million subscribers in the first quarter and posted a healthy increase in revenue, to $4.5 billion from $3.7 billion in the year-ago quarter. But it warned that its spending will increase, and said it expects around a $3.5 billion free-cash-flow deficit for the year.

This is where the sirens went off for Munster. “At $10 a month they would have to add 30 million [subscribers],” he told CNBC. “At the current run rate, that probably puts it toward the end of 2020 before they kind of alleviate that cash burn. Now, they can do some things in terms of making some of the content costs a little bit more efficient. But I think that in general, more competition is not good for that.” The competition that he is referring to is Apple Inc, Disney Co. and AT&T planning to open their own respective video streaming sites. These are sure to cause Netflix to lose some of its viewers and that will not bode well with their expenditure heavy business plan.

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Joseph Kevin Abraham

Joseph Kevin Abraham's interest lies in Global events, politics, technology and business. He is a vociferous reader and writes apt and informative articles on topics he feels are important.

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