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TheStreet Open House

Netflix News So Absurd I Couldn't Make It Up

Stocks in this article: NFLX

Greenfield sampled 400 people. There's his first problem. To make things worse he used quite possibly the most unreliable sampling method possible -- a convenience sample. I used to use those in graduate school. It's what you do when you don't have funding to draw a legitimate and reliable sample using a proper method.

When you publish research in academia with a "convenience sample," you must indicate that that's what it is and discuss how the limitations of the method impact your results. You basically have to say, my results are suspect because of my sampling method. Greenfield doesn't have to do that because he practices something closer to witchcraft than science.

And, of course, we have a serious case of sample and selection bias here. For Christmas sake, Greenfield drew a faulty sample to begin with, but there's absolutely no way it's representative of the population. He interviewed subjects at a gathering of diehard "Arrested Development" fans. Of course these people are fired up. And, typically, the most ardent rush to the surveyor to exhibit their unbridled enthusiasm for their passion.

So Greenfield generalizes to a much larger population (Netflix subscribers) noting that their "happiness" is "clearly increasing" because 368 of 427 people interviewed at a stop on a freaking "Arrested Development" viral marketing tour said so.

You really can't make this stuff up.

Whether he ends up being right or wrong on Netflix (he'll be wrong) is neither here nor there. It's a real issue when a guy who works on Wall Street can pass off absolute crap as research. And it's even worse when an otherwise respectable news organization such as Bloomberg reports it as research to people with money on the line, who also happen to drive the price of a stock that runs a serious risk of imploding. Again.


More food for thought. Another analyst, Richard Tullo at Albert Fried, explains why he remains bearish NFLX in a Wednesday afternoon note:

So why are we apparently doubling down on a bad call? We think management has overly dismissed real risk, as represented by the company's aggregate $5.7 billion content liability of which $1.3 billion or $21 per share is due in the next 12 months. We think NFLX will raise more debt as it did in 1Q13 and therefore rolling capital raises increase long-term costs and impair EPS as NFLX earned just $0.05 per share in 1Q13 due to a debt raise. Essentially current enterprise value and future FCF (free cash flow) gets transferred from the stock holder to the bond holder in our view when a company raises debt and as liabilities exist off balance sheet ...

Bingo.

-- Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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