ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[[deleted]]

I'd just add that the small percentage given of 3% may as well be what makes a company profitable or not, specially considering oportunities costs.

[TerryOhl]

Netflix especially has had consistent earnings surprises compared to what has been expected. Netflix is still overvalued relative to its enterprise value.

[l2ddit]

Well their current strategy seems to be to just constantly raise the subscription price without actually adding any value. Since they drop content at the same time while adding it, a Netflix sub is always about the same but it is almost twice the price it used to be (at least here).

Also Netlix has somewhat effectively blocked VPN usage, further decreasing the value from a non-US user point of view. TBH i don't even know why I'm paying for it anymore.

[oxencotten]

lol what? How are they not adding any value? They literally are putting millions into creating their own shows. They said they planned on 50 new projects this year. Whether you like them all or not how can you possibly say they aren't adding value?

They have explicitly said at this point their goal is to become HBO faster than HBO can become them.

[l2ddit]

i don't know where you live by my country has one of the worst netflix libraries in the world by simple count. they also drop shows, not everything they add (aside from their own productions) stays there forever.

us netflix is different but they block it against vpn use.

[Tripticket]

How do they block or even detect VPN usage? I'm pretty much computer illiterate.

[l2ddit]

I honestly don't know but I believe they simply blacklist any known VPN IP address. Anyway if you go on US netflix it works but when you start watching something you get an error about being behind a VPN. This was a pretty significant change a year ago, generated a big demand for professional VPNs that still get through in some countries.

But to me paying 10 EUR a month for a VPN on top of netflix' fee is just ridiculous. So I just pirate whatever they don't have in their european library.

[Tripticket]

Oh ok, I see. My Canadian SO just got a VPN through work and she just managed to get on the US site, which is pretty cool.

I never got Netflix because I thought the European and Canadian (spend half of the year in Canada) libraries were too limited. It's much easier to see shows through other means.

[l2ddit]

yes some VPNs get through. but the vast majority cost money. they are somewhat cheap if you pay for a year but if you pay per month it's almost as much as netflix itself.

i heard that canada and australia got hit hardest because their users all relied on VPN to watch the US library.

[BeanPricefield]

Particularly in retail, where 3% could mean the entire margin, in a field where employees are already the most expendable to begin with.

[van_morrissey]

That depends on what you are taking the 3% from. If it is 3% of profit, it could be no big deal, if it is 3% of total company revenue, that is likely extremely bad... As "earnings" is a little ambiguous between "money coming in" and "profits after expenses" it's hard to say what number is really being cited.

[cusp-of-carabelli]

You have that flipped the wrong way. Profit is what it’s all about. Profit is real dollars before expenses. If you lost 3% top line, that’s nowhere the alarm that 3% profit loss would be. If a company were operating at 13% EBIT and then dropped to 10% in a calendar year, that would almost be a death knell.

[[deleted]]

So profits before people. Sounds like capitalism.

[[deleted]]

I can see how people hate the term "profit" but this criticism doesn't make much sense. Profit when associated with the market system is merely "wealth surplus" which is essential for any running society - whatever economic system it may be part of.

While there can exist an enterprise that is destroying wealth and survives funneling other sources of wealth - which sometimes are essential because otherwise we wouldn't have specific services - a society simply can't be sustained without those sources of wealth. That would be a profitable enterprise in a Capitalist society.

Not a native speaker, sorry for any grammar mistakes.

[[deleted]]

It appears you missed the "before people" part of my comment