Netflix Is A Blockbuster

This Barron’s cover two months ago about Netflix going the way of blockbuster stuck with me as a very strong visual for how fast things are moving. I showed it to my company’s entire salesforce at a recent event to make the point about how we analyze and agonize to make the right technology decisions, but when a tech-driven entertainment company with 50 million paying U.S. customers can so easily be at risk of extinction, it says a lot about how hard these decisions are in this lighting-fast era. And now I’m posting it here for posterity.

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As for what prompted this Barron’s cover: Netflix will spend $6b on content this year, $7b next year, and they need to make more money.

So this week they raised prices $1/mo on basic tier and $2/mo on premium tier, which will add $600m in revenue. Investors liked it and the stock rose. And I’m sure I’m in the majority saying that $1-2 per month won’t impact my decision at all given all of the joy my family gets from Netflix.

Still, while I think Netflix is a blockbuster entertainment company, things move fast, and they could go the way of Blockbuster at any moment with a content spend that large. That would be a shame for them, but the consumer will always win in the end because competitors will swoop in to fill the void. On that note, Amazon Prime gives most of us a Netflix-like TV experience built in—but they have a long way to go to win the hearts and minds of true creative talent in Hollywood. Here’s a great quote on the topic, and more links below that:

“I’m a huge fan of the company overall, but their entertainment division is a bit of a gong show,” said David E. Kelley, creator of ‘Goliath’ and hit shows including ‘Big Little Lies,’ ‘The Practice’ and ‘Ally McBeal.’ “They are in way over their heads.”

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Reference:
– Netflix hiked fees, and at the perfect time (Marketwatch)

– Netflix smartens up about money (Bloomberg)

– Where Amazon failing to dominate: Hollywood (WSJ)

–The Trouble With Netflix (Barron’s)