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Netflix is such an interesting business. They have far and away the broadest streaming distribution (75% of it!) in the USA (1) which is a market that already

Netflix is such an interesting business. They have far and away the broadest streaming distribution (75% of it!) in the USA (1) which is a market that already 53% saturated. And the bull case guys point to international subscription growth - which is still in its infancy - as the reason to hold Netflix forever. (2) They have much lower infrastructure costs then the previous cable providers without having to build the pipes. But they also don't benefit from the built in government / monopoly protections that came with that investment in the distribution platform. So in terms of long game how do they protect themselves? Own the content. Disney pulling their rug out earlier this week underscores how fucked Netflix is as just a distributor. So if, in the end, distribution becomes the new "dumb pipes" at what point do the content providers pull the judo flip and control the distribution and the margin? Disney again, case in point. So do we underwrite Netflix's future - aka their current 227 PE! - in their ability to execute on the content side? (1) https://techcrunch.com/2017/04/10/netflix-reaches-75-of-u-s-streaming-service-viewers-but-youtube-is-catching-up/ https://techcrunch.com/2017/04/10/netflix-reaches-75-of-u-s-... (2) https://www.cnbc.com/2017/08/08/buy-netflix-because-its-international-subs-will-nearly-double-piper.html https://www.cnbc.com/2017/08/08/buy-netflix-because-its-inte...

11thEarlOfMar 9y ago
Yes. They've evolved and executed repeatedly in the 20 years since they started. DVDs by mail->Streaming Online->Original Content->Global Market. One misstep was to try to separate the legacy DVD business as a stand alone brand and charge separately for streaming. That failed pretty spectacularly, so they quickly bailed on the idea[0], said their mea culpas and went on to triple revenues over the 5 years since. We can expect Netflix to grow into the Earth's TV station, hyperbole and all... [0] http://business.time.com/2011/09/19/netflix-admits-it-messed-up-will-split-dvd-and-streaming-into-two-businesses/ http://business.time.com/2011/09/19/netflix-admits-it-messed...
- ethbro 9y ago
  I think Netflix looks like a less pie-in-sky, but still incredibly innovative and responsive, Amazon. You're not paying for their current business, you're paying for their ability to execute now and in the future.
danso 9y ago
I remember me and others, on HN years ago, complaining about how Netflix was investing too much money into TV and original TV while skimping on its streaming movie catalog (this was around the time its STARZ deal was ending). Turns out their strategy was exactly right. I like watching movies, but nothing gets my return visits like serial TV, such as "Breaking Bad" and "Walking Dead". Investing so much money into "House of Cards" seemed bizarre 5 years ago but now that Netflix has so much exclusive content, it's hard as a longtime subscriber to just quit it. even as someone who now subscribes to Amazon Prime and HBO. I actually like Amazon Prime's library, which can be augmented with content I buy from Amazon separately, enough to quit Netflix. But my parents really like the Netflix shows (and I'll admit to binge watching HoC, as shallow as it is), which is something Prime or HBO will never have. edit: besides the Netflix-conceived shows, e.g. HoC and "Narcos", there are the Netflix-bought shows, such as Arrested Development and Black Mirror, and what seems like countless comedy specials, such as Louis CK 2017. Back when I thought HoC was a poor investment, I was thinking that one really great show a year wouldn't be enough to keep me subscribing year after year. But Netflix seems to be introducing exclusive content several times a month.
- icebraining 9y ago
  Sorry for the OT, but in trying to find out more about the origins of Narcos, I found out it's directed by José Padilha. No wonder it's good. His Bus 174 was one of the films that most shook me.
  - danso 9y ago
    Never watched Bus 174, but my first experience with Padilha's work was "Elite Squad" [0], which coincidentally, I watched via Netflix's DVD rental service. And less coincidentally, had the same lead (Wagner Moura) as "Narcos". [0] http://www.imdb.com/title/tt0861739/ http://www.imdb.com/title/tt0861739/
    - icebraining 9y ago
      Oh, I didn't remember the lead. I liked Elite Squad, but it emphasized more the "action movie" and less the "harrowing portrayal of a real social quagmire". Then again, Bus 174 is a documentary, even if it has plenty of tension, so that's to be expected.
zeep 9y ago
Save it locally while you can because Netflix's catalog has shrunk by 50% in the last few years (from 2012 to 2016) and they just lost Disney... I think that in the end, they will basically only serve what they produce. http://www.businessinsider.com/netflix-catalog-size-shrinks-2016-9 http://www.businessinsider.com/netflix-catalog-size-shrinks-...
- Aron 9y ago
  Netflix's catalog shrunk when they stopped buying fewer large bundles of dross and focused more on exclusivity, both of those efforts cost more per title and thus fewer titles for the same budget.
Aron 9y ago
Netflix doesn't have to own the content so much as protect against being too reliant on a single provider. The more diverse content production, the more powerful the monopolistic distributor. However, the lead they have now they have escaped Earth's gravity. Before we worry about how they might hold up in the long term we should see at least one competitor showing some kind of traction, which we don't. Not one.
alexashka 9y ago
I think Netflix is quite successfully moving away from trying to hold on to old content, to being the platform for accessing the up and coming, with some hits along the way. If you remember Blockbuster - there were tons of old movies, and yet the real business model was in providing the new. Netflix started off with providing the old, and has quickly shifted towards providing the new, including creating a bunch of it themselves. I think the real longterm move for Netflix is to incorporate RottenTomatoes and IMBD into their business. There is simply too much stuff, and if you can't compete on providing content that's been advertised somewhere else as 'good' (what Disney/Hollywood blockbusters do), then you need to do that yourself. The way to do that is through the people, the only real cost will be in moderating it. I shouldn't have to randomly watch 20 minutes of random series to see if I like it - Netflix is going to need to be in the business of providing intelligent suggestions, while educating the casual viewer on who's up and coming etc. You know, internet forums reinvented. My 2 cents :)
- pcmaffey 9y ago
  This is the only reason I can fathom why their suggestion algorithm and search UX are so terrible. I always end up using instantwatcher.com instead.
- aphexbr 9y ago
  "I think the real longterm move for Netflix is to incorporate RottenTomatoes and IMBD into their business." I understand the sentiment, but I can foresee problems with them getting a major studio brand and an Amazon property into their business ;)
  - jlebrech 9y ago
    they should have their own movie reviews show, and possibly make it free.
Ntrails 9y ago
> So if, in the end, distribution becomes the new "dumb pipes" at what point do the content providers pull the judo flip and control the distribution and the margin? The disney thing is really interesting to me. They don't have enough content to pull me in. Not even close. Netflix does. Sure Disney has a niche, and it's not me. Realistically though - if each content provider wishes to fragment and stream their own content I'm going to end up not finding any single offering compelling. I'll go back to watching a lot less and paying for nothing.

11thEarlOfMar 9y ago

Yes. They've evolved and executed repeatedly in the 20 years since they started. DVDs by mail->Streaming Online->Original Content->Global Market. One misstep was to try to separate the legacy DVD business as a stand alone brand and charge separately for streaming. That failed pretty spectacularly, so they quickly bailed on the idea[0], said their mea culpas and went on to triple revenues over the 5 years since. We can expect Netflix to grow into the Earth's TV station, hyperbole and all... [0] http://business.time.com/2011/09/19/netflix-admits-it-messed-up-will-split-dvd-and-streaming-into-two-businesses/ http://business.time.com/2011/09/19/netflix-admits-it-messed...

ethbro 9y ago
I think Netflix looks like a less pie-in-sky, but still incredibly innovative and responsive, Amazon. You're not paying for their current business, you're paying for their ability to execute now and in the future.

danso 9y ago

I remember me and others, on HN years ago, complaining about how Netflix was investing too much money into TV and original TV while skimping on its streaming movie catalog (this was around the time its STARZ deal was ending). Turns out their strategy was exactly right. I like watching movies, but nothing gets my return visits like serial TV, such as "Breaking Bad" and "Walking Dead". Investing so much money into "House of Cards" seemed bizarre 5 years ago but now that Netflix has so much exclusive content, it's hard as a longtime subscriber to just quit it. even as someone who now subscribes to Amazon Prime and HBO. I actually like Amazon Prime's library, which can be augmented with content I buy from Amazon separately, enough to quit Netflix. But my parents really like the Netflix shows (and I'll admit to binge watching HoC, as shallow as it is), which is something Prime or HBO will never have. edit: besides the Netflix-conceived shows, e.g. HoC and "Narcos", there are the Netflix-bought shows, such as Arrested Development and Black Mirror, and what seems like countless comedy specials, such as Louis CK 2017. Back when I thought HoC was a poor investment, I was thinking that one really great show a year wouldn't be enough to keep me subscribing year after year. But Netflix seems to be introducing exclusive content several times a month.

icebraining 9y ago
Sorry for the OT, but in trying to find out more about the origins of Narcos, I found out it's directed by José Padilha. No wonder it's good. His Bus 174 was one of the films that most shook me.
- danso 9y ago
  Never watched Bus 174, but my first experience with Padilha's work was "Elite Squad" [0], which coincidentally, I watched via Netflix's DVD rental service. And less coincidentally, had the same lead (Wagner Moura) as "Narcos". [0] http://www.imdb.com/title/tt0861739/ http://www.imdb.com/title/tt0861739/
  - icebraining 9y ago
    Oh, I didn't remember the lead. I liked Elite Squad, but it emphasized more the "action movie" and less the "harrowing portrayal of a real social quagmire". Then again, Bus 174 is a documentary, even if it has plenty of tension, so that's to be expected.

zeep 9y ago

Save it locally while you can because Netflix's catalog has shrunk by 50% in the last few years (from 2012 to 2016) and they just lost Disney... I think that in the end, they will basically only serve what they produce. http://www.businessinsider.com/netflix-catalog-size-shrinks-2016-9 http://www.businessinsider.com/netflix-catalog-size-shrinks-...

Aron 9y ago
Netflix's catalog shrunk when they stopped buying fewer large bundles of dross and focused more on exclusivity, both of those efforts cost more per title and thus fewer titles for the same budget.

Aron 9y ago

Netflix doesn't have to own the content so much as protect against being too reliant on a single provider. The more diverse content production, the more powerful the monopolistic distributor. However, the lead they have now they have escaped Earth's gravity. Before we worry about how they might hold up in the long term we should see at least one competitor showing some kind of traction, which we don't. Not one.

alexashka 9y ago

I think Netflix is quite successfully moving away from trying to hold on to old content, to being the platform for accessing the up and coming, with some hits along the way. If you remember Blockbuster - there were tons of old movies, and yet the real business model was in providing the new. Netflix started off with providing the old, and has quickly shifted towards providing the new, including creating a bunch of it themselves. I think the real longterm move for Netflix is to incorporate RottenTomatoes and IMBD into their business. There is simply too much stuff, and if you can't compete on providing content that's been advertised somewhere else as 'good' (what Disney/Hollywood blockbusters do), then you need to do that yourself. The way to do that is through the people, the only real cost will be in moderating it. I shouldn't have to randomly watch 20 minutes of random series to see if I like it - Netflix is going to need to be in the business of providing intelligent suggestions, while educating the casual viewer on who's up and coming etc. You know, internet forums reinvented. My 2 cents :)

pcmaffey 9y ago
This is the only reason I can fathom why their suggestion algorithm and search UX are so terrible. I always end up using instantwatcher.com instead.
aphexbr 9y ago
"I think the real longterm move for Netflix is to incorporate RottenTomatoes and IMBD into their business." I understand the sentiment, but I can foresee problems with them getting a major studio brand and an Amazon property into their business ;)
- jlebrech 9y ago
  they should have their own movie reviews show, and possibly make it free.

Ntrails 9y ago

> So if, in the end, distribution becomes the new "dumb pipes" at what point do the content providers pull the judo flip and control the distribution and the margin? The disney thing is really interesting to me. They don't have enough content to pull me in. Not even close. Netflix does. Sure Disney has a niche, and it's not me. Realistically though - if each content provider wishes to fragment and stream their own content I'm going to end up not finding any single offering compelling. I'll go back to watching a lot less and paying for nothing.