Netflix – why can’t it add up?

2 08 2007


An amusing, if cautionary piece from Bloomberg columnist Jonathan Weil sheds light on the somewhat unusual arithmetic used by Netflix (NMS: NFLX) when calculating its churn rate. Just over a week ago the company’s latest numbers wiped 18% from its stock value (and currently down 32% since the start of 2007).

The logic goes like this:

  • Netflix reported a churn rate of 4.6% (up from the previous quarter’s 4.4%), equivalent to a drop in quarterly subscriber numbers from 6.8 million to 6.74 million.
  • But churn was calculated on a monthly average for the quarter: 13.8% divided by 3.
  • Had NFLX used common practice for the calculation, the numbers are even worse: quarterly churn of 16%; monthly churn of 5.3%; annual churn of 63.4% for the 12 months ending 30 June 2007.

Try spending your way out of that…



One response

10 08 2007
Blockbuster bags Movielink « The Beyondness of Things

[…] acquisition bolsters Blockbuster’s online video services and will likely put troubled competitor Netflix under even greater […]

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