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Tesla, Netflix Mark Unofficial Start To Big US ‘Tech’ Earnings
Wednesday marked the unofficial start of big "tech" earnings in the US, as Tesla and Netflix delivered results.
At Netflix, investors were curious as to the impact of the company's crackdown on password sharing and also progress generating revenue from ads -- that's ads with one "d," as opposed to paid net "adds," with two.
In Q1, Netflix launched paid sharing in a handful of countries. The company said it was "pleased with the results" and executed a broader rollout in Q2, including in the US
Go for volume isn’t working if means profits are down. Market value is not company performance, it’s only stock market performance. The money made in the stock market doesn’t go into the company, it only goes to the paper portfolios of the plungers. In the first week of Econ 101 everyone gets their first look at supply and demand. That’s where we learn that demand (volume) and price are inversely related. Later, in a week or two we get the chapter Musk didn’t read, the one about demand elasticity. Price goes up, demand goes down. Price goes down, demand goes up. Rarely do these things happen at the same rate. When prices are lowered to raise volume, the outcome is only good if volume goes up more than the price went down. Here that didn’t happen. Also, lowering prices to raise volume raises unit throughput. Since variable costs are fixed per unit, more volume means VCs go up at the same rate and combined with a falling price, squeezes gross profits which is what happened. A firm may raise volume with price cuts, but competitors can do the same, eventually negating the volume increase of others. No firm can create a sustainable competitive advantage base solely on the basis of selling price (not to be confused with manufacturing costs).
Musk is betting the farm on turning cars into razors and full self-driving into razor blades, thereby escaping the volume-margin-profit box that car companies live in.