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I agree. Google is the canonical example of one of these horizontally integrated companies, but they're a very unique case. They use their reach to intake massi

by 013a 9y ago

I agree. Google is the canonical example of one of these horizontally integrated companies, but they're a very unique case. They use their reach to intake massive amounts of data which increases the value of their advertising. It isn't just about having more ads on more screens; its about those screens providing data which allows you to charge more for your ads. Netflix capitalizes on this a little bit as well, with using viewing trend data to determine what shows to fund next. But I was bearish on Netflix for a long time; to acquire content they have to pay recurring fees to the original producers, which means annual expenses increase as content increases, but ARR only increases when customers increase. Eventually... everyone has Netflix. How do they increase their content library then? One way is contract value depreciation of the content over time, which happens. Another is selling addon packages; the "cable industry" route. But the real answer is: Original content. In other words, growing the vertical integration of their platform. And now we see Google really quadrupling-down on efforts which sound more vertical than horizontal; cloud platform and g-suite. I think there's something here.

zanny 9y ago
> Eventually... everyone has Netflix. Or even more critically, everyone has seen everything they want to see on Netflix, and Netflix itself cannot produce enough original content fast enough to justify the sub. Especially when they are competing with what is often free and immediately accessible. I don't have a Netflix sub right now because nothing they make is compelling enough to pay the $10. Sometimes they release a show I want to see, so I sub for a month, watch that, and unsub again. For like a year. But we are only getting more content online over time, not less, and I'm finding way less need to seek out something to waste time watching, especially if I have to pay up front for it.
- alexashka 9y ago
  I think there's enough good stuff on Netflix to last at least a year of watching - you just haven't discovered it. The issue is discovery - not the amount of stuff. People lean towards looking for well known stuff on Netflix - that's a mistake. It's actually much more interesting to discover the gems you wouldn't normally discover, by watching a little bit of what seems like it may be interesting. The Hollywood model had me in their shackles where I did the exact same thing you described - I'd subscribe for a show/movie I knew I'd want to watch, search for a few well known movies to re-watch and then give up when they weren't there. The really good stuff is discovering stuff that doesn't have A list celebrities - it's more original (in the good sense of the word) and now that I've put in the little bit of work of trying out shows I have no idea about, it's paid off. The really good stuff on Netflix that I've really liked: Flaked, Peaky Blinders, Hell on wheels Hell on wheels gets no credit anywhere and it's an incredible show, there are many others like it.
- rdtsc 9y ago
  Just cancelled as well. I had queue but it was a bunch of "meh, maybe later". I'd sit there for a while searching for stuff to and often just ended up rewatching "The Office" episodes instead.
- brianpan 9y ago
  Am I taking crazy pills? Are we really wondering how Netflix is going to survive because EVERYONE has subscribed? Isn't that the problem everyone wishes they had? Also, sub/unsub is not new. Everyone did the same with HBO and they did just fine.
  - tomrod 9y ago
    Netflix has focused on global markets in recent years. Hence their massive growth. I believe they are focusing on foreign content at this point
  - 013a 9y ago
    Not necessarily everyone, but saturating their addressable market. Imagine this simplistic model of Netflix's finances: they pay ABC $1M/year for ShowA. They have 100k customers in year 1 @ $10/mo, so (ignoring operational overhead) they can afford the show. Year 2, Netflix wants to continue paying for ShowA because they want to grow their catalogue. Let's say the price has dropped to $800k because many shows lose value over time. Netflix adds ShowB for $1M, meaning they are paying ABC $1.8M. They now have to add 80k customers to be able to afford the new show + the old show. Point being: This is highly simplified, but the rate at which they can add content is bounded, in one way, by the rate at which they add customers. In other words, if they aren't growing their subscriber base, the existing subscribers are just paying for a catalogue of content they've already watched, or Netflix has to start expiring old content in favor of using that revenue on new content. The second path is obviously the better one. This is a fundamental thing in services like this, which is why no single service will ever be a "complete repository" of every piece of content in the world. Individual services can only be complete repositories of content that the company which manages it owns. Which is exactly why I'm bullish on Disney's new service; Disney has the most powerful content library out there, between all of their properties. This service will do extremely well, likely better than Netflix.
    - adamlett 9y ago
      I think you are vastly overrating how much Netflix must pay to have old shows. To many content owners the choice is between not monetizing their IP, or licensing it to Netflix. That's a pretty weak position from which to negotiate price. Also, content is usually licensed in bundles, which is win-win for content owners and Netflix: The content owners get to monetize their low value content (which Netflix would have otherwise declined to pay for), and Netflix gets a lot of content by paying only a little bit more.
- dalore 9y ago
  Also $10 isn't a lot to most people. So I just keep my subscription if I don't use it.
  - ghaff 9y ago
    Effectively a lot of these monthly subscription fees are a form of price discrimination. Some will optimize their HBO spend carefully around how little they can pay to watch GoT. Others will just pay their $15/month and watch a handful of shows now and then when they feel like it.
- coldtea 9y ago
  >Or even more critically, everyone has seen everything they want to see on Netflix, and Netflix itself cannot produce enough original content fast enough to justify the sub. Especially when they are competing with what is often free and immediately accessible. What difficulty exactly would they have to produce "original content fast enough"? Content is produced by independent teams. It's not like one show is holding others back.
  - jerf 9y ago
    I believe the question is posed in the world in which all the premium producers of content decide to run their own services rather than let Netflix aggregate it. Personally I expect that after a period of everyone trying to run their own service, quite a lot of them are going to fail and discover that letting Netflix have its competitive advantage in streaming while you focus on content production may not be such a bad idea. Or there may be several aggregators and an industry-standardized way of shipping their older content out to them all at once. (This has the advantage of keeping any one of them from getting too powerful.) Perhaps some of that competition will come from specific companies realizing they can improve their own offering by letting other companies on board and then... oh... you've built a Netflix competitor, rather than a Disney platform. Go$h, how $hall we deal with failing with such $ucce$$? I'd still like to peer in on a parallel universe where Netflix had a subscription model but also sells/rents additional premium content. Not because it would necessarily solve all problems, I'd just like to see the differences when the dominant player makes such a fundamental change. Eventually they'd still try to use their position to extract more rent than the content producers would tolerate, but the resulting changes in timing and value proposition would still have interesting effects.

by 013a 9y ago

zanny 9y ago

> Eventually... everyone has Netflix. Or even more critically, everyone has seen everything they want to see on Netflix, and Netflix itself cannot produce enough original content fast enough to justify the sub. Especially when they are competing with what is often free and immediately accessible. I don't have a Netflix sub right now because nothing they make is compelling enough to pay the $10. Sometimes they release a show I want to see, so I sub for a month, watch that, and unsub again. For like a year. But we are only getting more content online over time, not less, and I'm finding way less need to seek out something to waste time watching, especially if I have to pay up front for it.

alexashka 9y ago
I think there's enough good stuff on Netflix to last at least a year of watching - you just haven't discovered it. The issue is discovery - not the amount of stuff. People lean towards looking for well known stuff on Netflix - that's a mistake. It's actually much more interesting to discover the gems you wouldn't normally discover, by watching a little bit of what seems like it may be interesting. The Hollywood model had me in their shackles where I did the exact same thing you described - I'd subscribe for a show/movie I knew I'd want to watch, search for a few well known movies to re-watch and then give up when they weren't there. The really good stuff is discovering stuff that doesn't have A list celebrities - it's more original (in the good sense of the word) and now that I've put in the little bit of work of trying out shows I have no idea about, it's paid off. The really good stuff on Netflix that I've really liked: Flaked, Peaky Blinders, Hell on wheels Hell on wheels gets no credit anywhere and it's an incredible show, there are many others like it.
rdtsc 9y ago
Just cancelled as well. I had queue but it was a bunch of "meh, maybe later". I'd sit there for a while searching for stuff to and often just ended up rewatching "The Office" episodes instead.
brianpan 9y ago
Am I taking crazy pills? Are we really wondering how Netflix is going to survive because EVERYONE has subscribed? Isn't that the problem everyone wishes they had? Also, sub/unsub is not new. Everyone did the same with HBO and they did just fine.
- tomrod 9y ago
  Netflix has focused on global markets in recent years. Hence their massive growth. I believe they are focusing on foreign content at this point
- 013a 9y ago
  Not necessarily everyone, but saturating their addressable market. Imagine this simplistic model of Netflix's finances: they pay ABC $1M/year for ShowA. They have 100k customers in year 1 @ $10/mo, so (ignoring operational overhead) they can afford the show. Year 2, Netflix wants to continue paying for ShowA because they want to grow their catalogue. Let's say the price has dropped to $800k because many shows lose value over time. Netflix adds ShowB for $1M, meaning they are paying ABC $1.8M. They now have to add 80k customers to be able to afford the new show + the old show. Point being: This is highly simplified, but the rate at which they can add content is bounded, in one way, by the rate at which they add customers. In other words, if they aren't growing their subscriber base, the existing subscribers are just paying for a catalogue of content they've already watched, or Netflix has to start expiring old content in favor of using that revenue on new content. The second path is obviously the better one. This is a fundamental thing in services like this, which is why no single service will ever be a "complete repository" of every piece of content in the world. Individual services can only be complete repositories of content that the company which manages it owns. Which is exactly why I'm bullish on Disney's new service; Disney has the most powerful content library out there, between all of their properties. This service will do extremely well, likely better than Netflix.
  - adamlett 9y ago
    I think you are vastly overrating how much Netflix must pay to have old shows. To many content owners the choice is between not monetizing their IP, or licensing it to Netflix. That's a pretty weak position from which to negotiate price. Also, content is usually licensed in bundles, which is win-win for content owners and Netflix: The content owners get to monetize their low value content (which Netflix would have otherwise declined to pay for), and Netflix gets a lot of content by paying only a little bit more.
dalore 9y ago
Also $10 isn't a lot to most people. So I just keep my subscription if I don't use it.
- ghaff 9y ago
  Effectively a lot of these monthly subscription fees are a form of price discrimination. Some will optimize their HBO spend carefully around how little they can pay to watch GoT. Others will just pay their $15/month and watch a handful of shows now and then when they feel like it.
coldtea 9y ago
>Or even more critically, everyone has seen everything they want to see on Netflix, and Netflix itself cannot produce enough original content fast enough to justify the sub. Especially when they are competing with what is often free and immediately accessible. What difficulty exactly would they have to produce "original content fast enough"? Content is produced by independent teams. It's not like one show is holding others back.
- jerf 9y ago
  I believe the question is posed in the world in which all the premium producers of content decide to run their own services rather than let Netflix aggregate it. Personally I expect that after a period of everyone trying to run their own service, quite a lot of them are going to fail and discover that letting Netflix have its competitive advantage in streaming while you focus on content production may not be such a bad idea. Or there may be several aggregators and an industry-standardized way of shipping their older content out to them all at once. (This has the advantage of keeping any one of them from getting too powerful.) Perhaps some of that competition will come from specific companies realizing they can improve their own offering by letting other companies on board and then... oh... you've built a Netflix competitor, rather than a Disney platform. Go$h, how $hall we deal with failing with such $ucce$$? I'd still like to peer in on a parallel universe where Netflix had a subscription model but also sells/rents additional premium content. Not because it would necessarily solve all problems, I'd just like to see the differences when the dominant player makes such a fundamental change. Eventually they'd still try to use their position to extract more rent than the content producers would tolerate, but the resulting changes in timing and value proposition would still have interesting effects.