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Netflix's New Chapter

stratechery.com

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Re: Netflix's New Chapter

#3

Post by jedberg »

Netflix only lost to Blockbuster because Blockbuster didn't believe in online anything strongly enough to properly fund it. Blockbuster had the better network and better penetration, and even had equally good technology. But corporate didn't want to fund them to hire the next set of engineers they needed.

Blockbuster would have won if their board had been just slightly more forward looking. And Netflix knew it.

Re: Netflix's New Chapter

#5

Post by cjbgkagh »

jedberg wrote: post #3

Netflix only lost to Blockbuster because Blockbuster didn't believe in online anything strongly enough to properly fund it. Blockbuster had the better network and better penetration, and even had equally good technology. But corporate didn't want to fund them to hire the next set of engineers they needed. Blockbuster would have won if their board had been just slightly more forward looking. And Netflix knew it.

I wonder if it would have been possible to ‘bribe’ blockbuster executives into making such decisions. As much as Blockbuster was prepared to pay them to do their jobs I’m sure Netflix would have offered them more to not do their jobs. An indirect/legal way to do this would simply be to poach talent away with good offers, easy to do when you’re poised for substantial growth.

Re: Netflix's New Chapter

#6

Post by Waterluvian »

jedberg wrote: post #3

Netflix only lost to Blockbuster because Blockbuster didn't believe in online anything strongly enough to properly fund it. Blockbuster had the better network and better penetration, and even had equally good technology. But corporate didn't want to fund them to hire the next set of engineers they needed. Blockbuster would have won if their board had been just slightly more forward looking. And Netflix knew it.

Isn't this the Sears case again? They were the veteran incumbent with a mountain of experience in the industry, but turning a corporate ship on a dime seems to be impossible.

I guess that manifests as a form of "corporate didn't believe in..." or "didn't invest in the engineering" as you say.

Re: Netflix's New Chapter

#7

Post by no_wizard »

I'm gonna attempt to break this down:

- Netflix has 5-6 Billion USD free cash flow, and because they got what debt they do have under favorable terms, they are positioned to retain most of that free cash flow

- Disney, Comcast (Peacock), CBS/Viacom and other media corporations are saddled with debt, and are all losing money on their own independent streaming businesses. Likely untenable in their shareholder model

- Therefore, Netflix needs to do what it can to retain / attract subscribers, but essentially can wait until the other services have to give up due to cost

In a nutshell, Netflix is poised to play more long game, due to cost structures of their competitors.

so fair, sounds good, but it assumes the boards / leadership of these companies won't also play a long game, seeing some sort of profitability horizon is they cannibalize their existing businesses for sticky services (like streaming). I could see Disney doing this, to some extent, with their cable TV channels and movies. I'm less bullish on Comcast/NBC, CBS/Viacom or really any other media company being able to do this, simply because they don't have the "staying power" Disney does.

This also fails to account for the strength of HBO Max (very strong sub numbers)

Re: Netflix's New Chapter

#8

Post by macintux »

Waterluvian wrote: post #6
jedberg wrote: post #3

Netflix only lost to Blockbuster because Blockbuster didn't believe in online anything strongly enough to properly fund it. Blockbuster had the better network and better penetration, and even had equally good technology. But corporate didn't want to fund them to hire the next set of engineers they needed. Blockbuster would have won if their board had been just slightly more forward looking. And Netflix knew it.

Isn't this the Sears case again? They were the veteran incumbent with a mountain of experience in the industry, but turning a corporate ship on a dime seems to be impossible. I guess that manifests as a form of "corporate didn't believe in..." or "didn't invest in the engineering" as you say.

Aka https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma

Re: Netflix's New Chapter

#9

Post by xrd »

The first time I've seen a well written critique of activist investors like Carl Icahn. He certainly scuttled any chance that Blockbuster had of succeeding. He's often right about small details when it comes to traditional companies and where to cut costs (as are many activist investors), but this story reads like he sabotaged Blockbuster when it had an actual substantial and viable chance to compete. I had not heard this story before, I always assumed Blockbuster was just too dumb to compete, but it wasn't the case at all. And, interesting if people like Hastings knew the forces at play in his competitors, and as Strategery points out, can play the long game when they know their competitors can't. Terrific article, as usual.

Re: Netflix's New Chapter

#10

Post by b112 »

no_wizard wrote: post #7

I'm gonna attempt to break this down: - Netflix has 5-6 Billion USD free cash flow, and because they got what debt they do have under favorable terms, they are positioned to retain most of that free cash flow - Disney, Comcast (Peacock), CBS/Viacom and other media corporations are saddled with debt, and are all losing money on their own independent streaming businesses. Likely untenable in their shareholder model - T…

HBO / Netflix merger FTW?
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