In all the gushing over Netflix, there's room for caution

The reaction is predicable. The share price is not.

With a certain depressing predictability, the newspapers today are gushing in their praise for Netflix. The US-headquartered service now streams video to US 29.17m subscribers, up just over 2m since the start of the year, enabling it to claim to be the most watched network in the US.

Netflix added another 1m streaming members outside the US in the first quarter, bringing total international subscribers to 7.1m. It currently offers its service in Canada, Latin America and since early 2012, the UK. Netflix’s first quarter results provided a further boost to a share price that has been skyrocketing of late: at the end of last September, the share price was $55.

Since then, the share price has risen almost four-fold to $213. According to Netflix, its future success will be boosted by producing original content. The sum total of its original content to date is the grand total of one programme; that requires a generous definition of original, namely a remake of House of Cards.

It currently charges £6.99 per month in the UK; by contrast, the BBC licence fee seems really quite a snip. Just before potential investors empty the piggy bank and rush to invest in Netflix shares, they might care to reflect on the nature of this market sector. Netflix’s main rivals, the Amazon-owned LoveFilm and HBO, are not going to go away any time soon and can be expected to fight back.

If and when Amazon bids more aggressively for the rights to film and TV shows, the acquisition costs for Netflix cannot but rise. Also, as a number of sharper analysts have spotted, Netflix may have cash flow challenges, with $3.3bn in off-balance sheet content liabilities and only around $1bn in cash. As for producing further fresh content: House of Cards cost around $100m to produce. At that sort of cost, do not expect too many headline grabbing productions of that calibre to follow any time soon.

One other thing jumps out from the first quarter Netflix results and that is how way out the performance of the firm is compared to the management predictions. If the firms own management finds it so hard to predict its performance, heaven knows how the analyst community will get on in their forecasts.

Investors may get lucky and Netflix could be an acquisition target for an Apple or a Microsoft in the coming months. On the other hand, the shares are wildly volatile; not shares one would suggest for savings put away for a rainy day.

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Garry Knight via Creative Commons
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Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.