In Defense Of Netflix

Netflix recently announced that it was jacking up its prices 60% to its existing customers, which — surprise! surprise! — caused nearly every Netflix customer with a Twitter or Facebook to bitch, moan, and complain about it on their social network of choice.

I have a message for Netflix customers: Quit your effing whining.

Netflix was well justified in doing what it did. Here’s why:

1. The CEO took a pay cut in 2010 and has to make it back. In 2009, Reed Hastings made $1 million in salary. In 2010, his salary was cut to a little more than $500k, which is where it stands for 2011. How the hell can he be a titan of industry if he isn’t making a mill per year? He can’t. You have to pay for that, Netflix customers. Sorry.

2. It’s the right thing to do for the country. Netflix’ provision for income taxes in 2010 was 5% of revenue, which came in about $2.1 billion. In other words, it paid out more than $100 million in taxes. If Netflix’s revenue jumps 60% as a result of its price increase — to more than $3.5 billion — than it will pay out roughly $173 million in taxes this year. And that’s good for America, folks.

3. You deserve to pay. If your lazy ass is sitting around watching all those DVDs every day, then you should have to pay for that privilege.

Netflix should have raised its prices by 70%. Enduring a little criticism on Facebook is a small price to pay for making this country a better place.

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How To Reduce The U.S. Deficit

It’s a shame that my background couldn’t pass the media scrutiny I’d get if I ran for president (I got disciplinary probation in college for not leaving the dorm on a timely enough basis during a fire alarm). A shame, because I have an idea that could help reduce the U.S. deficit by billions, if not trillions, of dollars.

How? Through something I call the Decimal Tax.

It’s come to my attention that some of you are quite profligate in your use of decimal places in graphs and charts.

Take, for example, this chart from eMarketer:

Really, now. Is it important to know that fifty-eight POINT SEVEN percent of marketers measure clickthrough rates? If they had rounded it off to 59% would we have lost any critical information? I think not.

Then there’s this chart I pulled off the Internet:

Forget for a second that two slices of the pie appear to have the same color. Is it really important to know that James or Perez accounted for thirty POINT OH ONE percent of sales? No.

One more example: Toolbox.com reports that “IT professionals consumed social media at a rate of 6.77 hours per week, versus 4.29 for editorial content, and 4.16 for vendor content.” In case you’re not too good at math, IT pros spend 8 minutes more per week on editorial content than they do vendor content. If the Tools at Toolbox had rounded to one decimal place we might have underestimated this difference by 2 minutes.

———-

We have a problem in this country, my fellow citizens. We’re experiencing decimal inflation. And the only way to control this runaway inflation is by taxing the people responsible for this wasteful use of our precious decimal resources.

So I’m proposing the Decimal Tax. Every time you make inappropriate use of a decimal place in a graph or chart, you will have to pay a tax on that decimal place.

eMarketer, for example, would be charged $52 for the chart above. The guy who did the sales chart would need to pony up $100.

My inability to withstand the rigors of running for president preclude me from being able to implement this tax, however. Please help me make this a reality by electing a candidate who supports this tax.

New Metrics For The Social Media Bubble

In case you didn’t notice, social media is transforming life as we know it.  The old laws of business, supply and demand, and even gravity, no longer apply.

In the world of business, our longstanding adherence to something we call GAAP (Generally Accepted Accounting Principles) is giving way to SMAAP (Social Media Accepted Accounting Principles). A pioneer in this new world of accounting is Groupon. According to the New York Times, the firm has developed the ACSOI metric:

“Short for adjusted consolidated segment operating income, Acsoi is a yardstick that Groupon recommends investors use to determine how it is performing. It is essentially operating profit minus the company’s online marketing and acquisition expenses — a highly nonstandard approach that has many scratching their heads.”

My take: A brilliant idea.  And there’s no reason why Groupon — or any other start-up looking to capitalize on the social media bubble — should stop at that metric.

Here are my suggestions for new metrics for the social media bubble:

1. Temporarily Unconverted  Revenue from Fans (TURF)

During the Dot Com boom, many start-ups focused on “eyeballs” — i.e., how many site visitors they got during a reporting period. The problem, they discovered, was that eyeballs didn’t equal revenue, and this hurt their ability to maintain their initially high valuations.

SMubbles (social media bubble start-ups) need not let this happen to them. They should encourage investors to focus on a metric called TURF — temporarily unconverted revenue from fans. There’s simply no reason why a SMubble should have to rely on real and realized revenue when proving its value to the market.

The question, of course, is how much does that Facebook fan represent in unrealized revenue? Adweek says $3.60. Sound’s good to me. Let’s move on to the next metric.

2.  Cumulative Revenue to Periodic Expense Ratio (CRePE Ratio).

Under the ancient GAAP method of accounting, profitability is calculated by comparing revenue to expenses for a given reporting period.

How quaint.

For a SMubble, this form of accounting can be detrimental to its valuation if expenses are rising faster than revenue (e.g., in periods when TURF is rising, called TURFing).

Instead, a SMubble should report profitability by using the CRePE Ratio — its cumulative revenue over the course of the year divided by the current period’s expense.

Here’s how it works:

Let’s say a SMubble brings in $1 million a quarter and spends $2 million per quarter. Under GAAP (Grievously Archaic Accounting Principles), that SMubble would be operating unprofitably. But using the CRePE Ratio, in the 2rd quarter of the year it would break even, and show a profit in Q3! Hooray for the CRePE Ratio!

3. Earnings Before Interest, Taxes, and Expenses (EBITEX).

SMubbles who generate no revenue during a particular reporting period won’t like the CRePE Ratio if expenses increase from the last period to the current one.

Their measure of profitability should be EBITEX — Earnings before interest, taxes, and expenses.

In the age of social media, there’s simply no reason to let something like operating expenses bring down your profits, and get in the way of a high valuation.

(h/t to @AtomicTango for alerting me to the NYTimes article)

Gen Y Don't U Use That Cell Phone 2 Talk 2 Someone

I came across a blog post recently that contained the following:

“My boss Gordon told me an interesting story. His 22-year-old son was having an issue with his bank, and didn’t know how to solve the problem. Gordon said, “Well, if you’re not getting an answer online, why don’t you drive over to the bank branch and talk to someone in person?” His son didn’t know where his bank was located—and didn’t even realize the bank even had physical locations. This response is very representative of Gen Y.”

My take: God help us. If Gen Yers really don’t know that their bank has branches, let alone where those branches are located, we’re doomed as a society.

I also can’t help but wonder if Gordon’s son knew that he could use his smartphone — which is what he might have been using to access his bank account online — to actually CALL the bank and talk to someone. It’s a real shame that some Gen Yers are using so little of the capabilities that their smartphones offer.