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How Netflix became a billion-dollar titan

167 points by abhiminator 8y ago

RcouF1uZ4gsC 8y ago
I think the two top CEO's at this time are Jeff Bezos and Reed Hastings. Both jumped in to fill a need and then boldly pivoted into new areas. Amazon went from online bookstore, to online everything store to cloud provider. Netflix went from mail order DVD to online streaming to content producer. This is somewhat reminiscent of Bill Gates and the transition of Microsoft from Basic to DOS to Windows to Office. This illustrates just how much a Founder CEO who has the right mix of smarts and boldness can be absolutely vital for a company. I cannot imagine a generic MBA CEO doing such bold and aggressive moves with Netflix, that the founder CEO has been able to do.
- deleted 8y ago
  [deleted]
- icebraining 8y ago
  Isn't "generic MBA" vs "founder" a false dichotomy? If you want a company that really pivoted, Nokia is a better example[1], yet many of those changes only happened long after its founders were dead. [1] https://en.wikipedia.org/wiki/History_of_Nokia https://en.wikipedia.org/wiki/History_of_Nokia
  - alt_f4 8y ago
    It usually is not, most MBAs have any creativity or original thought beaten out of them at business school.
    - mathattack 8y ago
      It’s usually gone long before then!
  - uncletaco 8y ago
    Another company that really pivoted is Nintendo. The company is almost 130 years old and went from playing cards, to toys, to videogames. Though it can be argued that they expanded considering that they also produce playing cards and toys for their franchise characters.
- bkovacev 8y ago
  I do feel the advisers deserve a bit of credit, as well. I dont think that any good CEO would make such a bold decision on his own.
  - mpg33 8y ago
    I'm pretty sure I heard Reed Hastings say it was one of his advisers that had to convince him that producing original content was the way to go.
- Cthulhu_ 8y ago
  You say "to x", but e.g. Amazon is still doing all of the above - Amazon also owns imdb, audible, zappos, goodreads, twitch, Curse, Whole Foods, over 70 own brand products [0], Cloud9, pets.com, and probably a heap more. They didn't pivot, they expanded. Likewise, Netflix still does DVDs too. [0] https://www.recode.net/2018/4/7/17208804/amazon-private-label-brands-list https://www.recode.net/2018/4/7/17208804/amazon-private-labe...
  - dingaling 8y ago
    Netflix only does DVDs in the USA now. They have withdrawn in other markets in favour of streaming-only. They have about 4 million DVD customers versus 115 million streaming.
    - greggarious 8y ago
      > Netflix only does DVDs in the USA now. They have withdrawn in other markets in favour of streaming-only. This may be partly due to the USA's unique combination of a well functioning postal service, large population, and lack of broadband penetration in rural areas. If you venture out to Alaska, the Dakotas, West Viriginia etc there's tons of places where there's a post office but no or shitty broadband. Being able to drive into town and pick up a stack of blu-rays at your PO box, and send back the old is extremely useful in such areas.
- ethbro 8y ago
  A comment I read about Amazon, and which I'd never really thought about before, noted how books were actually the perfect entry point for Amazon becoming Amazon. The existing model was open to disruption, but more importantly the intrinsic attributes of a book itself made it perfect. Huge market, non-perishable, substitutable, easily shipped, similarly sized, with an incredibly long tail of varieties How many other goods fit those criteria?
  - newfocogi 8y ago
    Coincidentally, in most ways DVDs fit your requirements.
ariehkovler 8y ago
Back in the day, when Netflix was the most successful DVD rental company, people used to point out that Netflix sent more Gigabytes of data every day as DVDs in the mail than the whole Internet transmitted in a day. Netflix was given as an example of how the Internet couldn't compete with physical delivery. Ironic. Interestingly, the old Netflix DVD business is still alive and still profitable, though it's been rebranded as DVD.com - there's a piece about it here: http://fortune.com/2018/05/21/netflix-dvd-business/ http://fortune.com/2018/05/21/netflix-dvd-business/
- petters 8y ago
  I don't live in the US, so I Don't know, but as far as I understand, DVD.com can legally offer essentially every title that exists. This is because in the US, if you own a disc, you can rent it to someone. If true, this is awesome and so much better (for me) than any streaming service.
  - Cthulhu_ 8y ago
    Legal grey area; iirc MP3.com operated on a similar premise and got burned to the ground. I believe there was also a company that had racks of video or dvd players and would stream the movie over the internet, claiming similar protections. Of course, in a nutshell Netflix is doing the same, only legally. Those companies were too early and too dodgy.
    - chewmieser 8y ago
      Zediva. $1.8M in fines. There's a few others that skirted around similar laws as well, like Aereo which was shut down for rebroadcasting OTA signals using customer rented antennas.
    - icebraining 8y ago
      It's only gray because they were copying the content. Shipping out the physical disc is fine, AFAIK.
      - 8y ago
deepakkarki 8y ago
For anyone interested in company histories I strongly recommend the "Business wars" podcast by wondery. https://wondery.com/shows/business-wars/ https://wondery.com/shows/business-wars/ "Netflix vs. HBO. Nike vs. Adidas. Business is war. Sometimes the prize is your wallet, or your attention. Sometimes, it’s just the fun of beating the other guy. The outcome of these battles shapes what we buy and how we live. Business Wars gives you the unauthorized, real story of what drives these companies and their leaders, inventors, investors and executives to new heights -- or to ruin. Hosted by David Brown, former anchor of Marketplace. From Wondery, the network behind Dirty John and American History Tellers."
dstick 8y ago
Here's the direct link to the full article: https://www.economist.com/briefing/2018/06/30/netflix-is-moving-television-beyond-time-slots-and-national-markets https://www.economist.com/briefing/2018/06/30/netflix-is-mov... The linked to one is a paragraph or 2 with the above link at the bottom.
gourou 8y ago
< Amazon, Apple, Facebook, YouTube and Instagram are all developing programming efforts of their own. If this competition is about catalogue, I don't understand why they didn't try to purchase Time Warner or 21st Century Fox like Disney or AT&T did. Are they betting they'll get a better chance by producing their own content or teaming up with Disney?
- foota 8y ago
  You can make a lot of content for the price of a large media company.
  - shanghaiaway 8y ago
    They're probably underestimating how difficult it is. I predict both Amazon and Apple will fail at building content libraries.
    - quakenul 8y ago
      Interestingly, Reed Hastings (Netflix CEO) disagrees with you. At Recode 2017 he said looking forward they are "never going to be as good at what [Amazon] are trying to be [regarding the media sector]" (spectrum, library size), but instead "can be the emotional connection brand like HBO [that is] super focused on one thing that people are very passionate about" What a refreshingly sober perspective (probably why I kept it in mind). https://www.youtube.com/watch?v=tCn4hdTI2jc&feature=youtu.be&t=994 https://www.youtube.com/watch?v=tCn4hdTI2jc&feature=youtu.be...
      - lakechfoma 8y ago
        How does he square that with the inundation of Netfix originals on the home page? HBO has a handful of quality shows. Neflix has a plethora of random titles, many of which (especially those created at Netflix and not acquired) are really not that good.
        8y ago
gourou 8y ago
< In September 2017 Netflix streams were taking up 20% of the world’s downstream bandwidth, according to Sandvine, a network-equipment firm I doubt this is real, at best it's US only.
- Cthulhu_ 8y ago
  You're underestimating how big Netflix is internationally, I think.
  - AznHisoka 8y ago
    Netflix is pretty much exploding in popularity in Brazil and Latin America right now. They are slowly becoming popular in India and Japan as well. So their US growth might be slowing down but definitely not international.
- jazoom 8y ago
  Yes. I find that hard to believe as well. With YouTube, PornHub, Netflix, Facebook/Instagram that probably only leaves 10% of bandwidth for everything else in the world.
- virtuallynathan 8y ago
  It’s possible, a few years ago they were 40% of peak North American downstream traffic.
- pavs 8y ago
  Most Netflix content is delivered through local Netflix Open Connect box through their ISP, not through the internet as a whole. I am not sure how they measure this bandwidth. Peering cost is too high for someone sitting in Asia to enjoy quality streaming from Netflix from NA datacenters. Youtube does the same thing, only they are many many times bigger (in terms of GGC penetration all over the world). This is why most people rarely get buffered youtube even at 4k, unless your ISP is shitty. https://openconnect.netflix.com/en/ https://openconnect.netflix.com/en/
krapsna 8y ago
Netflix approached the Hollywood studios to license their content for streaming, and Hollywood snickered and took the easy money. They expected it to be a total failure on Netflix's end. Then, when Netflix started growing like crazy and the studios panicked. If Netflix was the only streaming service around, it would enable them to dictate licensing contracts. Suddenly, streaming was a real thing and they wanted to extract every cent possible from their content. In order to slow Netflix down the studios pulled the majority of the "good" content from Netflix, and kept licensing them their b-movies and documentaries. To this day, you still don't see a whole lot of blockbusters or theatrical releases available on Netflix. Netflix knew that they couldn't remain at the mercy of the content owners. So they leveraged their head start on content delivery by producing their OWN content only available through themselves. It was a brilliant strategy, and I'm sure it took a lot of cajones to go down that path.
- greggarious 8y ago
  >Netflix knew that they couldn't remain at the mercy of the content owners. So they leveraged their head start on content delivery by producing their OWN content only available through themselves. My only concern is they don't seem capable of letting things die. House of Card and Orange is the New Black both went from very good to terrible. If every hit series they make turns into the final season of "Dexter", it will cause issues.
  - rainbowmverse 8y ago
    They inverted the typical network TV situation. Instead of shows taking three seasons to warm up, they fall apart within three.
    - icebraining 8y ago
      What shows took three seasons to warm up?
      - kevin_thibedeau 8y ago
macspoofing 8y ago
Haven't read the article, but I'll take a guess: They built a service that people wanted, a pure internet-based streaming service that didn't need a cable subscription.
- dgritsko 8y ago
  You should read the article before commenting, it's almost entirely about the original content that Netflix produces.
deleted 8y ago
[deleted]
Reedx 8y ago
It's going to be very interesting when Disney rolls out their service. They could really do some damage to Netflix (and Amazon Video). For those with kids, it's a no brainer. Millions of subscriptions right off the bat. Then imagine if Disney puts Star Wars exclusively on their service, same day or even before theaters. Millions more subscriptions. They could do this with all things Pixar, Marvel and other big Disney IP... Now add on the merchandise. They'll have better data on exactly what people are watching, how many times they're watching it and can create offers based on that. The merchandising side is a huge advantage.
- opportune 8y ago
  I highly doubt Disney is going to release one of their most flagship titles online before or same day as theaters. That would just be cutting into their own bottom line, makes no sense. I'm starting to get a little worried about all of this vertical integration in the streaming industry. It would be nice if there were just 2 or 3 streaming-only services, preferably with heavily overlapping libraries, that licensed content from content producers. The way it's going, it looks like you're going to have start paying $50-60/month (Disney, Amazon, Netflix, Hulu, HBO) just to have access to all your favorite shows... which is pretty much the reason people ditched cable. At least it's on demand now, I guess
  - scarface74 8y ago
    But you can wait until the season is over, subscribe for one month and binge. 10-13 episodes for $10.
  - mywittyname 8y ago
    The irony is that pirating is getting way better now because of this fragmentation (it was going downhill for a while). Plex is damn amazing. The fact that you can share with your friends means that even a person with a modest social network will have access to gobs of content, and it will likely be the most popular stuff.
  - trocadero 8y ago
    That's how it was always going to end up. You can't reduce the money going into TV from ~$60 a customer to $10 a customer and expect the same content quality. Netflix had a relatively brief moment in the sun where they could buy lots of content cheap because streaming was add on revenue to the production companies. That's not going to keep happening for much longer. IMHO, I think we will end up back to a cable like situation. It doesn't make sense to pay two middlemen for access to content. In other words, I don't want to pay Comcast and Netflix to deliver Disney's content. Eventually, we will end up with ISPs providing access to a handful of streaming services each with their own exclusive content. Packages will also come back because they make economic sense. Ultimately, the NBA, NFL, MLB, NCAA, et al will get more money from a streaming sports package than trying to sell individual streaming services.
dalbasal 8y ago
Netflix is a business success and a product success. They played a difficult game and won. I don't have anything disparaging to say about them as a company, but as a type of company.... We (as consumers & residents of an economy) need to pay attention to what Peter Thiel called "monopoly" when he (playing provocateur) said that "competition is for losers." The reason Netflix became so successful, and managed to play with the entertainment oligopolies is that they built and control a bottleneck. They are the biggest streaming company, one of a handful in any given market. Terrestrial TV came with frequency band issues. Broadcasting had to be licensed so everyone wouldn't step all over eachothers' signals. This resulted in a structural oligopoly, where only a handful of licencees could broadcast. Then cable came. This came with physical infrastructure, and structural tendencies to local monopoly. They also developed an oligopolistic industry structure, where licensing and content acquisition is only really possible if you are fairly big. Now internet. Online, Netflix and other streaming companies have built their companies specifically around the goal of owning a bottleneck. This time, there is no tangible reason for it. It's just a tendency of digital services that one service "wins" a race to monopolize a sector. There are a ton of inefficiencies in an oligopolistic market. I pay for house of cards by subscribing to Netflix. You pay for American gods by subscribing to Amazon. Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers. The reason Amazon and Netflix want this situation to exist, is because it maintains their respective "moats." There is no string underlying economic (pertaining to resource allocation and scarcity) reason for it. Basically, we need to watch out for these intermediaries. They are very innovative and consumer friendly in their first decade or two. That's how they succeed at first. Later, they succeed by maintaining their monopolies any way they can.
- cptskippy 8y ago
  > Makers would prefer that and so would consumers Unfortunately makers aren't the ones controlling the content. You forgot about the Studio Oligarchy that wishes to control exactly how and when you consume their content. They can negotiate higher royalties out of the likes of Netflix and Amazon through exclusivity. Another tactic employed by studios is artificial scarcity. Disney is a pioneer in this technique and routinely locks movies in the vault until demand peaks then releases them at $25 a pop which is a premium over all but new releases. When was the last time you saw Alice In Wonderland for $9 at Best Buy? Never. The studios are even starting to roll their own streaming services to compete with Netflix and Amazon. This is why Netflix, Amazon, Hulu, and now even Apple are becoming their own studios. Because the streaming business itself is dying and you either need to be the content provider or the service provider to survive. Eventually studios and ISPs are going to start merging into one proprietary pipe.
vinayms 8y ago
I wonder if the technology is sustainable. I mean, as they grow, can they continue to use the tcp/ip network that is used for everything else by everyone, or would they create their own private network. Would they become their own service providers displacing the traditional ISP's? (I couldn't read the full article as I didn't have access, so not sure if this is touched upon there.)
kelukelugames 8y ago
I have a job offer with HBO about three years ago. They told me they wanted to become Netflix faster than Netflix became HBO.
msurekci 8y ago
Lately, they have been compromising on quality and focusing on quantity. I don't think the fact that they are producing more movies than the other Hollywood production companies should be seen as a good sign. This is all subjective but, I do believe that the 10 movies that Disney produce will be far superior than any of the 73 movies that come from Netflix.
alexbeloi 8y ago
It seems to me that Netflix used to have better recommendations. It's unclear why/how/when it went bad, my suspicion is that they changed their metric and it's having bad side effects, or their old models didn't scale as their user base grew quickly. I've built deep learning recommendation systems in production for clients with millions of users and it's sometimes surprisingly difficult to beat the "most trending <products>" baseline if all you care about is views/purchases. It will in the short term to meet business goals, but it hurts the user experience over time and will inevitably increase churn.
- giarc 8y ago
  I wonder if it coincides with their change to a simple thumbs up/thumbs down rating system. I never rate titles anymore unless it's really good, or really bad. The in between I just can't pick.
utopcell 8y ago
Netflix is nowadays more of an original content creator rather than a distributor. In this context, I don't know how big of a company they truly are. Their 2017 profit was $245 million. Compare this to, say, the $1 billion Warner Bros makes a year just from syndication for 'Friends' (a show that's been off the air for close to 20 years.)
duxup 8y ago
I remember the early days of Netflix a lot of folks were predicting that Netflix was super cool and the future.... but they also predicted that the first guy in sometimes gets run over by someone who comes later. They often were referencing the content owners..... but content owners just didn't want to / didn't get it / didn't get their act together... amazing how that worked.
radoslawc 8y ago
In my opinion, besides own shows, Netflix's success is also due to mobile devices availability and no commercials. I don't know if it's only me, but I find watching anything on tv, when shows/movies are interrupted by commercials really annoying, not to mention waste of time. On one of polish commercial tv stations TVN (on government owned ones there are commercials only between, not during shows) God Father II which is 3h22m with commercials was little above 5 hours. Come on!

167 points by abhiminator 8y ago

I think the two top CEO's at this time are Jeff Bezos and Reed Hastings. Both jumped in to fill a need and then boldly pivoted into new areas. Amazon went from online bookstore, to online everything store to cloud provider. Netflix went from mail order DVD to online streaming to content producer. This is somewhat reminiscent of Bill Gates and the transition of Microsoft from Basic to DOS to Windows to Office. This illustrates just how much a Founder CEO who has the right mix of smarts and boldness can be absolutely vital for a company. I cannot imagine a generic MBA CEO doing such bold and aggressive moves with Netflix, that the founder CEO has been able to do.

deleted 8y ago
[deleted]
icebraining 8y ago
Isn't "generic MBA" vs "founder" a false dichotomy? If you want a company that really pivoted, Nokia is a better example[1], yet many of those changes only happened long after its founders were dead. [1] https://en.wikipedia.org/wiki/History_of_Nokia https://en.wikipedia.org/wiki/History_of_Nokia
- alt_f4 8y ago
  It usually is not, most MBAs have any creativity or original thought beaten out of them at business school.
  - mathattack 8y ago
    It’s usually gone long before then!
- uncletaco 8y ago
  Another company that really pivoted is Nintendo. The company is almost 130 years old and went from playing cards, to toys, to videogames. Though it can be argued that they expanded considering that they also produce playing cards and toys for their franchise characters.
bkovacev 8y ago
I do feel the advisers deserve a bit of credit, as well. I dont think that any good CEO would make such a bold decision on his own.
- mpg33 8y ago
  I'm pretty sure I heard Reed Hastings say it was one of his advisers that had to convince him that producing original content was the way to go.
Cthulhu_ 8y ago
You say "to x", but e.g. Amazon is still doing all of the above - Amazon also owns imdb, audible, zappos, goodreads, twitch, Curse, Whole Foods, over 70 own brand products [0], Cloud9, pets.com, and probably a heap more. They didn't pivot, they expanded. Likewise, Netflix still does DVDs too. [0] https://www.recode.net/2018/4/7/17208804/amazon-private-label-brands-list https://www.recode.net/2018/4/7/17208804/amazon-private-labe...
- dingaling 8y ago
  Netflix only does DVDs in the USA now. They have withdrawn in other markets in favour of streaming-only. They have about 4 million DVD customers versus 115 million streaming.
  - greggarious 8y ago
    > Netflix only does DVDs in the USA now. They have withdrawn in other markets in favour of streaming-only. This may be partly due to the USA's unique combination of a well functioning postal service, large population, and lack of broadband penetration in rural areas. If you venture out to Alaska, the Dakotas, West Viriginia etc there's tons of places where there's a post office but no or shitty broadband. Being able to drive into town and pick up a stack of blu-rays at your PO box, and send back the old is extremely useful in such areas.
ethbro 8y ago
A comment I read about Amazon, and which I'd never really thought about before, noted how books were actually the perfect entry point for Amazon becoming Amazon. The existing model was open to disruption, but more importantly the intrinsic attributes of a book itself made it perfect. Huge market, non-perishable, substitutable, easily shipped, similarly sized, with an incredibly long tail of varieties How many other goods fit those criteria?
- newfocogi 8y ago
  Coincidentally, in most ways DVDs fit your requirements.

ariehkovler 8y ago

Back in the day, when Netflix was the most successful DVD rental company, people used to point out that Netflix sent more Gigabytes of data every day as DVDs in the mail than the whole Internet transmitted in a day. Netflix was given as an example of how the Internet couldn't compete with physical delivery. Ironic. Interestingly, the old Netflix DVD business is still alive and still profitable, though it's been rebranded as DVD.com - there's a piece about it here: http://fortune.com/2018/05/21/netflix-dvd-business/ http://fortune.com/2018/05/21/netflix-dvd-business/

petters 8y ago
I don't live in the US, so I Don't know, but as far as I understand, DVD.com can legally offer essentially every title that exists. This is because in the US, if you own a disc, you can rent it to someone. If true, this is awesome and so much better (for me) than any streaming service.
- Cthulhu_ 8y ago
  Legal grey area; iirc MP3.com operated on a similar premise and got burned to the ground. I believe there was also a company that had racks of video or dvd players and would stream the movie over the internet, claiming similar protections. Of course, in a nutshell Netflix is doing the same, only legally. Those companies were too early and too dodgy.
  - chewmieser 8y ago
    Zediva. $1.8M in fines. There's a few others that skirted around similar laws as well, like Aereo which was shut down for rebroadcasting OTA signals using customer rented antennas.
  - icebraining 8y ago
    It's only gray because they were copying the content. Shipping out the physical disc is fine, AFAIK.
    - 8y ago

deepakkarki 8y ago

For anyone interested in company histories I strongly recommend the "Business wars" podcast by wondery. https://wondery.com/shows/business-wars/ https://wondery.com/shows/business-wars/ "Netflix vs. HBO. Nike vs. Adidas. Business is war. Sometimes the prize is your wallet, or your attention. Sometimes, it’s just the fun of beating the other guy. The outcome of these battles shapes what we buy and how we live. Business Wars gives you the unauthorized, real story of what drives these companies and their leaders, inventors, investors and executives to new heights -- or to ruin. Hosted by David Brown, former anchor of Marketplace. From Wondery, the network behind Dirty John and American History Tellers."

dstick 8y ago

Here's the direct link to the full article: https://www.economist.com/briefing/2018/06/30/netflix-is-moving-television-beyond-time-slots-and-national-markets https://www.economist.com/briefing/2018/06/30/netflix-is-mov... The linked to one is a paragraph or 2 with the above link at the bottom.

gourou 8y ago

< Amazon, Apple, Facebook, YouTube and Instagram are all developing programming efforts of their own. If this competition is about catalogue, I don't understand why they didn't try to purchase Time Warner or 21st Century Fox like Disney or AT&T did. Are they betting they'll get a better chance by producing their own content or teaming up with Disney?

foota 8y ago
You can make a lot of content for the price of a large media company.
- shanghaiaway 8y ago
  They're probably underestimating how difficult it is. I predict both Amazon and Apple will fail at building content libraries.
  - quakenul 8y ago
    Interestingly, Reed Hastings (Netflix CEO) disagrees with you. At Recode 2017 he said looking forward they are "never going to be as good at what [Amazon] are trying to be [regarding the media sector]" (spectrum, library size), but instead "can be the emotional connection brand like HBO [that is] super focused on one thing that people are very passionate about" What a refreshingly sober perspective (probably why I kept it in mind). https://www.youtube.com/watch?v=tCn4hdTI2jc&feature=youtu.be&t=994 https://www.youtube.com/watch?v=tCn4hdTI2jc&feature=youtu.be...
    - lakechfoma 8y ago
      How does he square that with the inundation of Netfix originals on the home page? HBO has a handful of quality shows. Neflix has a plethora of random titles, many of which (especially those created at Netflix and not acquired) are really not that good.
      - 8y ago

gourou 8y ago

< In September 2017 Netflix streams were taking up 20% of the world’s downstream bandwidth, according to Sandvine, a network-equipment firm I doubt this is real, at best it's US only.

Cthulhu_ 8y ago
You're underestimating how big Netflix is internationally, I think.
- AznHisoka 8y ago
  Netflix is pretty much exploding in popularity in Brazil and Latin America right now. They are slowly becoming popular in India and Japan as well. So their US growth might be slowing down but definitely not international.
jazoom 8y ago
Yes. I find that hard to believe as well. With YouTube, PornHub, Netflix, Facebook/Instagram that probably only leaves 10% of bandwidth for everything else in the world.
virtuallynathan 8y ago
It’s possible, a few years ago they were 40% of peak North American downstream traffic.
pavs 8y ago
Most Netflix content is delivered through local Netflix Open Connect box through their ISP, not through the internet as a whole. I am not sure how they measure this bandwidth. Peering cost is too high for someone sitting in Asia to enjoy quality streaming from Netflix from NA datacenters. Youtube does the same thing, only they are many many times bigger (in terms of GGC penetration all over the world). This is why most people rarely get buffered youtube even at 4k, unless your ISP is shitty. https://openconnect.netflix.com/en/ https://openconnect.netflix.com/en/

krapsna 8y ago

Netflix approached the Hollywood studios to license their content for streaming, and Hollywood snickered and took the easy money. They expected it to be a total failure on Netflix's end. Then, when Netflix started growing like crazy and the studios panicked. If Netflix was the only streaming service around, it would enable them to dictate licensing contracts. Suddenly, streaming was a real thing and they wanted to extract every cent possible from their content. In order to slow Netflix down the studios pulled the majority of the "good" content from Netflix, and kept licensing them their b-movies and documentaries. To this day, you still don't see a whole lot of blockbusters or theatrical releases available on Netflix. Netflix knew that they couldn't remain at the mercy of the content owners. So they leveraged their head start on content delivery by producing their OWN content only available through themselves. It was a brilliant strategy, and I'm sure it took a lot of cajones to go down that path.

greggarious 8y ago
>Netflix knew that they couldn't remain at the mercy of the content owners. So they leveraged their head start on content delivery by producing their OWN content only available through themselves. My only concern is they don't seem capable of letting things die. House of Card and Orange is the New Black both went from very good to terrible. If every hit series they make turns into the final season of "Dexter", it will cause issues.
- rainbowmverse 8y ago
  They inverted the typical network TV situation. Instead of shows taking three seasons to warm up, they fall apart within three.
  - icebraining 8y ago
    What shows took three seasons to warm up?
    - kevin_thibedeau 8y ago

macspoofing 8y ago

Haven't read the article, but I'll take a guess: They built a service that people wanted, a pure internet-based streaming service that didn't need a cable subscription.

dgritsko 8y ago
You should read the article before commenting, it's almost entirely about the original content that Netflix produces.

deleted 8y ago

[deleted]

Reedx 8y ago

It's going to be very interesting when Disney rolls out their service. They could really do some damage to Netflix (and Amazon Video). For those with kids, it's a no brainer. Millions of subscriptions right off the bat. Then imagine if Disney puts Star Wars exclusively on their service, same day or even before theaters. Millions more subscriptions. They could do this with all things Pixar, Marvel and other big Disney IP... Now add on the merchandise. They'll have better data on exactly what people are watching, how many times they're watching it and can create offers based on that. The merchandising side is a huge advantage.

opportune 8y ago
I highly doubt Disney is going to release one of their most flagship titles online before or same day as theaters. That would just be cutting into their own bottom line, makes no sense. I'm starting to get a little worried about all of this vertical integration in the streaming industry. It would be nice if there were just 2 or 3 streaming-only services, preferably with heavily overlapping libraries, that licensed content from content producers. The way it's going, it looks like you're going to have start paying $50-60/month (Disney, Amazon, Netflix, Hulu, HBO) just to have access to all your favorite shows... which is pretty much the reason people ditched cable. At least it's on demand now, I guess
- scarface74 8y ago
  But you can wait until the season is over, subscribe for one month and binge. 10-13 episodes for $10.
- mywittyname 8y ago
  The irony is that pirating is getting way better now because of this fragmentation (it was going downhill for a while). Plex is damn amazing. The fact that you can share with your friends means that even a person with a modest social network will have access to gobs of content, and it will likely be the most popular stuff.
- trocadero 8y ago
  That's how it was always going to end up. You can't reduce the money going into TV from ~$60 a customer to $10 a customer and expect the same content quality. Netflix had a relatively brief moment in the sun where they could buy lots of content cheap because streaming was add on revenue to the production companies. That's not going to keep happening for much longer. IMHO, I think we will end up back to a cable like situation. It doesn't make sense to pay two middlemen for access to content. In other words, I don't want to pay Comcast and Netflix to deliver Disney's content. Eventually, we will end up with ISPs providing access to a handful of streaming services each with their own exclusive content. Packages will also come back because they make economic sense. Ultimately, the NBA, NFL, MLB, NCAA, et al will get more money from a streaming sports package than trying to sell individual streaming services.

dalbasal 8y ago

Netflix is a business success and a product success. They played a difficult game and won. I don't have anything disparaging to say about them as a company, but as a type of company.... We (as consumers & residents of an economy) need to pay attention to what Peter Thiel called "monopoly" when he (playing provocateur) said that "competition is for losers." The reason Netflix became so successful, and managed to play with the entertainment oligopolies is that they built and control a bottleneck. They are the biggest streaming company, one of a handful in any given market. Terrestrial TV came with frequency band issues. Broadcasting had to be licensed so everyone wouldn't step all over eachothers' signals. This resulted in a structural oligopoly, where only a handful of licencees could broadcast. Then cable came. This came with physical infrastructure, and structural tendencies to local monopoly. They also developed an oligopolistic industry structure, where licensing and content acquisition is only really possible if you are fairly big. Now internet. Online, Netflix and other streaming companies have built their companies specifically around the goal of owning a bottleneck. This time, there is no tangible reason for it. It's just a tendency of digital services that one service "wins" a race to monopolize a sector. There are a ton of inefficiencies in an oligopolistic market. I pay for house of cards by subscribing to Netflix. You pay for American gods by subscribing to Amazon. Why can't we both watch both shows? It wouldn't defund the shows, since we both keep paying the same. It wouldn't be skin off either of our noses either. Show creators would prefer universal availability and so would consumers. The reason Amazon and Netflix want this situation to exist, is because it maintains their respective "moats." There is no string underlying economic (pertaining to resource allocation and scarcity) reason for it. Basically, we need to watch out for these intermediaries. They are very innovative and consumer friendly in their first decade or two. That's how they succeed at first. Later, they succeed by maintaining their monopolies any way they can.

cptskippy 8y ago
> Makers would prefer that and so would consumers Unfortunately makers aren't the ones controlling the content. You forgot about the Studio Oligarchy that wishes to control exactly how and when you consume their content. They can negotiate higher royalties out of the likes of Netflix and Amazon through exclusivity. Another tactic employed by studios is artificial scarcity. Disney is a pioneer in this technique and routinely locks movies in the vault until demand peaks then releases them at $25 a pop which is a premium over all but new releases. When was the last time you saw Alice In Wonderland for $9 at Best Buy? Never. The studios are even starting to roll their own streaming services to compete with Netflix and Amazon. This is why Netflix, Amazon, Hulu, and now even Apple are becoming their own studios. Because the streaming business itself is dying and you either need to be the content provider or the service provider to survive. Eventually studios and ISPs are going to start merging into one proprietary pipe.

vinayms 8y ago

I wonder if the technology is sustainable. I mean, as they grow, can they continue to use the tcp/ip network that is used for everything else by everyone, or would they create their own private network. Would they become their own service providers displacing the traditional ISP's? (I couldn't read the full article as I didn't have access, so not sure if this is touched upon there.)

kelukelugames 8y ago

I have a job offer with HBO about three years ago. They told me they wanted to become Netflix faster than Netflix became HBO.

msurekci 8y ago

Lately, they have been compromising on quality and focusing on quantity. I don't think the fact that they are producing more movies than the other Hollywood production companies should be seen as a good sign. This is all subjective but, I do believe that the 10 movies that Disney produce will be far superior than any of the 73 movies that come from Netflix.

alexbeloi 8y ago

It seems to me that Netflix used to have better recommendations. It's unclear why/how/when it went bad, my suspicion is that they changed their metric and it's having bad side effects, or their old models didn't scale as their user base grew quickly. I've built deep learning recommendation systems in production for clients with millions of users and it's sometimes surprisingly difficult to beat the "most trending <products>" baseline if all you care about is views/purchases. It will in the short term to meet business goals, but it hurts the user experience over time and will inevitably increase churn.

giarc 8y ago
I wonder if it coincides with their change to a simple thumbs up/thumbs down rating system. I never rate titles anymore unless it's really good, or really bad. The in between I just can't pick.

utopcell 8y ago

Netflix is nowadays more of an original content creator rather than a distributor. In this context, I don't know how big of a company they truly are. Their 2017 profit was $245 million. Compare this to, say, the $1 billion Warner Bros makes a year just from syndication for 'Friends' (a show that's been off the air for close to 20 years.)

duxup 8y ago

I remember the early days of Netflix a lot of folks were predicting that Netflix was super cool and the future.... but they also predicted that the first guy in sometimes gets run over by someone who comes later. They often were referencing the content owners..... but content owners just didn't want to / didn't get it / didn't get their act together... amazing how that worked.

radoslawc 8y ago

In my opinion, besides own shows, Netflix's success is also due to mobile devices availability and no commercials. I don't know if it's only me, but I find watching anything on tv, when shows/movies are interrupted by commercials really annoying, not to mention waste of time. On one of polish commercial tv stations TVN (on government owned ones there are commercials only between, not during shows) God Father II which is 3h22m with commercials was little above 5 hours. Come on!