April 25, 2011

Netflix has 23.6 million subscribers and HBO has 28.6 million

Netflix has 23.6 million subscribers (March 30, 2011)

Comcast (as of the end of 2010): 22.8 million

HBO (as of the end of 2010): 28.6 million

Showtime (as of the end of 2010): 20 million

Hulu Plus (projected by end of 2011): 1 million

Netflix is morphing into a premium pay TV channel, with the licensing of original content," Nissen said in an e-mail. "It is likely that Netflix will have to adopt a multitier pricing system, so that subscribers pay more for the original content. It appears the industry is ganging up on Netflix, with content producers refusing to license their most popular programs to them, thereby aiding the broadcast premium channels and the cable/network TV online portals. I think we are going to see quite a bit of change in Netflix over the next year."



Estimated value of ESPN and HBO

1. ESPN: $5 billion in Revenue and 32% of Disney’s Stock

ESPN has around 98% penetration and charges cable / satellite operators a monthly fee per subscriber of about $3.20, which is much higher than the fee charged by its competitors. The average subscriber fee for the majority of cable channels is less than $1 per month. ESPN accounts for about 32% of the $37 Trefis price estimate for Disney’s stock, and is valued at $23 billion due to the high amount of free cash flows it generates for Disney.

2. HBO: $3.7 billion in Revenue and 24% of Time Warner’s Stock

HBO to generate about $3.7 billion in revenue for Time Warner in 2010. Unlike ESPN, HBO earns revenue only through only subscription fee. HBO is a premium cable channel and charges a high subscriber fee of more than $7 per subscriber. However, due to its high subscriber fee, HBO only about 39% of US pay-TV subscribers receive HBO.

Time Warner 39 billion stock valuation. HBO worth $10 billion.

3. Fox Sports: $2.6 billion in Revenue and 19% of News Corp’s Stock

Fox Sports generated about $2.6 billion in revenue for News Corp in 2010. This is about half the $5 billion in revenue we expect for the sports TV market leader ESPN. Like its rival, Fox Sports makes money by charging monthly subscriber fees to cable / satellite operators.

Fox Sports’ subscriber fee of about $2.10 per month is less than that of both ESPN and HBO. However, Fox Sports enjoys a much higher penetration of about 84% compared to HBO.

News Corp worth $45.8 billion. Fox Sports $11 billion.

Netflix has a 13.3 billion stock valuation as of April 25, 2011


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