That itself would also be an asset. Think of building a website as a project much like construction of a building. It could take many months or years to build with all sorts of different costs going in, development costs, consultants, coders etc. Once the project is complete all those costs get rolled into an asset on the balance sheet and depreciated on a fixed schedule. If you don't make improvements eventually that asset is worth $0 on your balance sheet.
I'm not communicating my point very well it seems. The value of the platform approaches $0 much more quickly than the lofty PE ratios seem to justify. Within a few years they become liabilities. Yet they spend hundreds of millions per years on salaries to build them. If they are only worth their media library licenses scaled to their audience then their PE ratios should be similar to the duration of these contracts (ie ~10 not ~30+). Same is true for software such as windows where there's a need for constant improvements/updates. It's this pattern that I see throughout tech sector.
Yeah I hear what you are trying to say it's just wrong. Assets never become a liability that's not how accounting works. An asset can have a liability tied to it via debt but once that is paid off you just have the asset and accumulated depreciation. Think also of the enormous amount of tangible physical infrastructure required to maintain these platforms all that stuff has very real value even if Netflix closed their business today. Netflix has an enormous balance sheet with very real and tangible assets that justify their equity position. Take a peek at their balance sheet https://finance.yahoo.com/quote/NFLX/balance-sheet/
If you look at the details under current assets they have $40 billion in assets, $27 billion of which are intangible assets i.e goodwill + the value of their platform
As to the lifespan of intangibles GAAP guidance is 3-5 years for depreciation not 10 or even 30 its much less.
If I have to pay more to maintain something than it's worth then what would you call that? As an investor, I'm not interested in that bo matter the ledger tricks employed
That itself would also be an asset. Think of building a website as a project much like construction of a building. It could take many months or years to build with all sorts of different costs going in, development costs, consultants, coders etc. Once the project is complete all those costs get rolled into an asset on the balance sheet and depreciated on a fixed schedule. If you don't make improvements eventually that asset is worth $0 on your balance sheet.
I'm not communicating my point very well it seems. The value of the platform approaches $0 much more quickly than the lofty PE ratios seem to justify. Within a few years they become liabilities. Yet they spend hundreds of millions per years on salaries to build them. If they are only worth their media library licenses scaled to their audience then their PE ratios should be similar to the duration of these contracts (ie ~10 not ~30+). Same is true for software such as windows where there's a need for constant improvements/updates. It's this pattern that I see throughout tech sector.
Yeah I hear what you are trying to say it's just wrong. Assets never become a liability that's not how accounting works. An asset can have a liability tied to it via debt but once that is paid off you just have the asset and accumulated depreciation. Think also of the enormous amount of tangible physical infrastructure required to maintain these platforms all that stuff has very real value even if Netflix closed their business today. Netflix has an enormous balance sheet with very real and tangible assets that justify their equity position. Take a peek at their balance sheet https://finance.yahoo.com/quote/NFLX/balance-sheet/ If you look at the details under current assets they have $40 billion in assets, $27 billion of which are intangible assets i.e goodwill + the value of their platform As to the lifespan of intangibles GAAP guidance is 3-5 years for depreciation not 10 or even 30 its much less.
If I have to pay more to maintain something than it's worth then what would you call that? As an investor, I'm not interested in that bo matter the ledger tricks employed