CALLNFLX
Netflix: the price increase did not cost the subscribers
Willingness to pay was tested directly and the answer was better than the model assumed.
Evidence · 3 cards
The mechanism is churn elasticity. A price increase is accretive only if the revenue gain exceeds the churn cost, and the elasticity is only observable after the fact.
The churn disclosure supports it. The most recent price action produced a measured churn response well below the prior two, in the same markets.
The position: long on Netflix, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit.
Competitive content spending is the risk that is not hedged and would compress margins across the category.
Discussion · 3
Noa BergmanAUG 21
I came in sceptical. I had not appreciated how much of this is already in consensus. Curious whether you would still size it the same at a higher entry.
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Grace HollowayAuthorAUG 21
Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (962)
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Yael BrennerAUG 21
Been long since the last one. The lag between intake and revisions is the whole trade. How are you thinking about the timing risk here?
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