Let's spell out what happened:
- Three months ended Sept. 30, 2011: $159 million in cash.
- Three months ended Dec. 31, 2011: $508 million in cash.
- Three months ended Sept. 30: $370 million in cash.
That spike at the end of the 2011 wasn't a sign of growth or the business operating more efficiently; it was another indicator of the house of cards that is Netflix's business model. It signaled, yet again, a corporate incompetence that should lead to shareholder mutiny.
Chew on some more numbers.
On-balance sheet content liabilities continue to soar, from $685 million a year ago to $1.28 billion at the end of last quarter.
You have to bury yourself in Netflix's most recent 10Q, filed with the
to see that off-balance sheet content obligations due within five years hit nearly $5 billion last quarter. More than $2 billion of that is due in less than a year.
But don't just read the numbers, look at the fine print:
We have entered into certain streaming content license agreements that include an unspecified or a maximum number of titles that we may or may not receive in the future and/or that include pricing contingent upon certain variables, such as theatrical exhibition receipts for the title. As of the reporting date, it is unknown whether we will receive access to these titles or what the ultimate price per title will be. Accordingly such amounts are not reflected in the above contractual obligations table. However, such amounts are expected to be significant and the expected timing of payments for these commitments could range from less than one year to more than five years. (emphasis added)
Amidst all of this, subscriber growth has slowed to a relative crawl.
Even in our inconsistent environment, there's not a bank in its right mind that will lend Netflix money.
Netflix will do one of two things "very soon" (I am done pinpointing it down to a year!): Raise cash like it did at the end of 2011
sell off the DVD division as I have been consulting it to do for 18 months.
Hastings will have to swallow his pride to do either, but he will because he loves his company. Its fate hinges on another lifeline.
--Written by Rocco Pendola in Santa Monica, Calif.