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The Founder's Notes

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The template only earns its keep if you actually put two cases next to each other.

This is the reason every teardown answers the same questions in the same order. Put a luxury house beside a console platform and the differences stop being vibes — one is refusing sales to protect a price, the other is selling below cost to collect a toll, and both are defending a moat.

Media · NASDAQ: NFLX

Netflix

Sells a monthly subscription to a library of television and film it increasingly makes itself, to roughly 300 million households, and spends about $17 billion a year keeping them from cancelling.

Technology · NASDAQ: AMZN

Amazon

Runs a near-breakeven retail operation at enormous scale, and earns essentially all of its profit from renting out the two things that operation forced it to build — computing capacity and shelf placement.

The thesis in one line

Netflix killed its own best business twice before anyone else could, and that is the entire reason it is still here.
The store is not the business. The store is the customer acquisition cost for the businesses.

Verdict

Watch it
Own it

Moat

Wide

Scale economics · Brand · Process power

Wide

Scale economics · Network effects · Process power · Switching costs

Porter's five forces

Competitive rivalry
Threat of new entrants
Threat of substitutes
Buyer power
Supplier power
Competitive rivalry
Threat of new entrants
Threat of substitutes
Buyer power
Supplier power

Headline figures

Revenue
$39.0B
Paid memberships
301.6M
Operating margin
26.7%
Blockbuster's offer, declined
$50M
Net sales
$638B
AWS share of operating income
~58%
Retail operating margin
~5.4%
Third-party share of units
~60%

Unit economics

One paid membership, per month (FY2024 averages across all regions)

The member pays less than the price of one cinema ticket a month and Netflix keeps a bit over a quarter of it. The interesting number is the content line: it is a fixed cost divided by 300 million, and every new member divides it further. That is why growth and margin rose together in 2023 and 2024, which almost never happens.

One $50 third-party item sold through Amazon

Amazon captures roughly 38% of the sale price and carries none of the inventory risk. The seller took the risk, paid for the warehouse, and then paid again to be found in a search of Amazon's own catalogue.

What would change her mind

If advertising revenue is disclosed and is running above $3 billion a year with operating margin still expanding, the company has a second engine and the multiple is justified. Alternatively, if the Warner Bros. transaction collapses or closes on terms that keep net debt below two times operating profit, the discipline is intact and I would look again. What would move me to pass outright: two consecutive years of revenue growth below 8% while the content budget keeps rising, because that is the flywheel running backwards.
If AWS revenue growth falls below 15% for two consecutive quarters while segment operating margin also declines, the cloud business is being commoditised rather than merely contested, and the capex is being spent defending share rather than buying growth. That combination — decelerating growth and compressing margin at the same time — breaks the thesis outright. A single weak quarter on either measure alone does not.

1 mechanism in common

own the customer