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Netflix, Apple and Amazon compete for sales, customers and attention. They’re also profoundly connected.

All three companies share the same partners, run apps on each others’ devices or host their services, and develop viable new business models that can scale to match their global ambitions.

Also, all three are throwing off numbers that can make your brain hurt.

Can you have more Netflix subscribers than you have households?

Netflix is the youngest and smallest of the three companies, and has the simplest business model. Netflix CEO Reed Hastings just tweaked a slideshow the company uses to explain its business to potential new hires.

The whole presentation offers a remarkable overview of the transforming landscape of digital media today, from streaming companies like Netflix to TV networks, device makers and telecoms. In the slideshow, Hastings also announces a stunningly ambitious goal for Netflix: 60 to 90 million domestic subscribers for its streaming video service.

That’s two to three times HBO’s subscribers, which Hastings pins at approximately 30 million. (A year ago, HBO had an estimated 28.2 million, according to SNL Kagan.)

In fact, that multiple is how Hastings generates his target number. He argues that Netflix, which currently boasts 21.67 million streaming and 24.4 million total subscribers in the U.S., has a higher upper limit for subscribers than HBO.

Like HBO, Netflix largely serves to “augment rather than replace the $80 video package” of cable or satellite, Hastings says. But unlike HBO, Netflix isn’t bundled with a cable service, and is less expensive ($8 for Netflix versus $10 or more for HBO). Hastings also argues that Netflix also offers a broader range of content choices, especially kids’ and family programming, and value-added digital-first services like recommendations and social media integration. “So Netflix USA should grow to 2-3x of HBO,” Hastings’ slide concludes.

Subscriber growth is definitely crucial to Netflix’s success. Its old model of mailing DVDs domestically has been high-margin but growth-capped. Its streaming service has low margins but high potential growth, especially internationally. What’s more, as Hastings points out, the company needs its domestic streaming business to generate profits to acquire more content and build up its international business. And Netflix typically licenses content with a lump sum payment rather than a per-user cost, so after administrative costs, every new subscriber is effectively pure profit.

The problem with Netflix’s goal isn’t the model, but the arithmetic. Netflix typically sells one $8 monthly subscription per household, which can then be used on a wide range of devices. That’s its value. But as of 2010, there were only about 115 million total households in the U.S. Roughly a third of those households don’t have broadband internet, and up to 10 percent have no access to broadband. So now we’re down to only 78 million households who could even use Netflix online.

Under those conditions, 60 million subscriptions is unlikely and 90 million virtually impossible. The only way Netflix could reach numbers like that is if one of three things happened:

The latter is possible, but only if Netflix became a significantly different and more complicated service from what it is today. Accounts could be tied to individuals rather than households, to individual devices, or to multiple tiers of content. Netflix has steadily resisted the last approach, and customers would loudly protest either of the others. Even capping the total number of devices a single account can share, as Apple does with iTunes’ content and Amazon with Kindle’s, could trigger another subscriber revolt.

But Netflix simply has nowhere else to go — no other revenue streams it can grow and no real way to sell anything beyond its base service to its most loyal customers.

Unless Netflix, against all odds, begins offering its own internet services. In the slideshow, Hastings talks longingly about ISPs’ low competition and high monthly rates, and fearfully about the possibility that they might throttle streaming video or charge customers by the gigabyte.

The cap on Netflix’s growth is almost entirely a function of bandwidth penetration by ISPs. Meanwhile, these ISPs and telecom companies are making huge profits based on demand for high-bandwidth connections needed to stream video.

For sheer survival, Netflix needs to get more aggressive in bringing unlimited bandwidth to more users in the U.S. “The best way to predict the future is to invent it,” Hastings writes, quoting computing pioneer Alan Kay.

That doesn’t necessarily mean Netflix-branded broadband, which could be hard to implement, run afoul of net neutrality concerns, and lose money anyway. But crazier things have happened. Remember Qwikster?

Prime Suspect: How many subscribers does Amazon have?

Amazon doesn’t need subscribers to its streaming video service as badly as Netflix does, because the company has plenty of other ways to make money from its customers, and Amazon Prime subscribers are some of its most loyal.

Still, nobody at Amazon could have been happy to read “Amazon Is Said to Have Fewer Prime Members Than Estimated” at Bloomberg on Thursday.

Continue reading “Add it Up: Crunching Numbers for Apple, Amazon, Netflix and Jeremy Lin…“