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> It's similar to how Netflix would never exist had it started out today, because no studio would surrender their back-catalogs to them for pennies. I personal

> It's similar to how Netflix would never exist had it started out today, because no studio would surrender their back-catalogs to them for pennies. I personally doubt the longevity of Netflix. On it's own it's not much more than a cable channel, like say AMC. Its success depends on producing very good content... it has not mastered this at all. Over time most studios will back out of their deals with it.

exelius 8y ago
It’s more like HBO, but yes, I agree. In fact, Netflix has largely become HBO while HBO was becoming Netflix, so they’re largely the same at this point. VOD services are here to stay, and the catalog shifting will continue in order to maximize value. Netflix is doing it at least as well as anyone else.
kumarvvr 8y ago
> on producing very good content This is not necessarily true. Even moderately good content, catering to a specific audience will suffice. IIRC, NF has loads of user data and behavioural data to help it guide in production. Assuming an average, not fully satisfied consumer subscribes to NF for 1 year, that's 120 $ per consumer. Assume a show that takes 100 million to produce, say 3 seasons. To make the production break-even, NF will need around 840000 paying subscribers (currently it has around 125 million subscribers, so about 0.672% of its total subscriber base) , who don't even have to watch it in the first place. Now that's a very small number compared to the amount of paying subscribers currently on it's platform. To me it seems to be a very profitable model, at least for 10 - 15 years from now. Edit : Updated the math. Edit 2 : An average episode costs between 3 - 5 million. Lets take 5 million as the cost per episode. With 125 million subscribers paying 120 $ per year, Netflix can produce 3000 episodes. That's just for 1 year. Also, in India, many shows cost way less than 5 million USD. But I have seen NF splurge of shows (it is hiring top notch actors in India for it's shows, where traditionally and culturally, a movie star playing in a "TV" series usually means an end-of-career move, so it's a big thing to work on a NF show here in India)
- fred256 8y ago
  $10/month = $120/year, not $1200/year.
  - kumarvvr 8y ago
    My Bad. Updated the numbers.
    - YokoZar 8y ago
      840k is also not 22% of 125 million
      - kumarvvr 8y ago
        Again sorry. Reversed my division and messed it up. And I am an engineer for god's sake. It's 0.672 %. Updated my answer.
- hn_throwaway_99 8y ago
  Your "Edit 2" math doesn't take into consideration any of the costs for Netflix's infrastructure or employees not related to content production, which is substantial.
  - kumarvvr 8y ago
    Yes. With other operational expenses taken into account, maybe NF can produce 1000 episodes a year. That is a huge figure by any margin.
    - shanghaiaway 8y ago
      Divide by markets and genres and its not so much.
mynameisvlad 8y ago
> it has not mastered this at all This is incredibly subjective. They've definitely shown they can produce such content. They had more nominations than any other provider, including HBO for this year's Emmy Awards.
scarface74 8y ago
HBO and all of the pay channels survive off of $10 a month subscriptions. It doesn’t have to be very good content. It just has to be good enough. The real issue with Netflix is that it has to fund all of its content via subscription revenue. The upcoming Disney service doesn’t. By the time it’s content hits the service, it’s slready made money from theatrical releases, pay tv services(?), video on demand, DVD sales, cable TV etc.
- ryanwaggoner 8y ago
  Having Disney content available on all those other distribution channels makes their streaming service less compelling though. Whereas if you want to watch a Netflix series, you sign up for Netflix. Also, Netflix is building a huge content catalog that has value outside their streaming ecosystem if they decide to leverage it that way. They could do theatrical releases and let cable do reruns of their shows. Maybe they will some day. But for now I think they see the greater CLTV in keeping that content exclusive to drive (and retain) monthly subscriptions.
  - scarface74 8y ago
    Disney's streaming can afford to be less valuable. It's just additional revenue. Netflix's total revenue for 2017 was 11.69 Billion. Disney's revenue was $45 billion. Estimated are that once they combine with Fox, it will have revenue of close to $75 billion. Another thing that makes Disney's content more compelling is that it's "evergreen" kids can watch the same shows over and over again. They will watch the first Toy Story movie just as excitedly as the last Pixar movie.
paxys 8y ago
Netflix has been losing third-party content very rapidly for a while now, but users seem to be sticking regardless. Scrolling through their front page right now I'd say a good 80-90% of shows I see are Netflix-produced, and it isn't going to be hard for anyone to find something that is good enough to watch.
- phobosdeimos 8y ago
  Globally Netflix doesn't have much competition. HBO, Amazon, Hulu etc are America focused while Netflix has done a lot to cater to local markets.
  - Mindwipe 8y ago
    Netflix has stacks of local market competition in every local market. They're just not companies Americans know of.
    - jscholes 8y ago
      > Netflix has stacks of local market competition in every local market. They're just not companies Americans know of. I'm in the UK and I can't really think of any serious competition they have here. Maybe Amazon, but I don't know anybody who's talking about Amazon Prime originals.

exelius 8y ago

It’s more like HBO, but yes, I agree. In fact, Netflix has largely become HBO while HBO was becoming Netflix, so they’re largely the same at this point. VOD services are here to stay, and the catalog shifting will continue in order to maximize value. Netflix is doing it at least as well as anyone else.

kumarvvr 8y ago

> on producing very good content This is not necessarily true. Even moderately good content, catering to a specific audience will suffice. IIRC, NF has loads of user data and behavioural data to help it guide in production. Assuming an average, not fully satisfied consumer subscribes to NF for 1 year, that's 120 $ per consumer. Assume a show that takes 100 million to produce, say 3 seasons. To make the production break-even, NF will need around 840000 paying subscribers (currently it has around 125 million subscribers, so about 0.672% of its total subscriber base) , who don't even have to watch it in the first place. Now that's a very small number compared to the amount of paying subscribers currently on it's platform. To me it seems to be a very profitable model, at least for 10 - 15 years from now. Edit : Updated the math. Edit 2 : An average episode costs between 3 - 5 million. Lets take 5 million as the cost per episode. With 125 million subscribers paying 120 $ per year, Netflix can produce 3000 episodes. That's just for 1 year. Also, in India, many shows cost way less than 5 million USD. But I have seen NF splurge of shows (it is hiring top notch actors in India for it's shows, where traditionally and culturally, a movie star playing in a "TV" series usually means an end-of-career move, so it's a big thing to work on a NF show here in India)

fred256 8y ago
$10/month = $120/year, not $1200/year.
- kumarvvr 8y ago
  My Bad. Updated the numbers.
  - YokoZar 8y ago
    840k is also not 22% of 125 million
    - kumarvvr 8y ago
      Again sorry. Reversed my division and messed it up. And I am an engineer for god's sake. It's 0.672 %. Updated my answer.
hn_throwaway_99 8y ago
Your "Edit 2" math doesn't take into consideration any of the costs for Netflix's infrastructure or employees not related to content production, which is substantial.
- kumarvvr 8y ago
  Yes. With other operational expenses taken into account, maybe NF can produce 1000 episodes a year. That is a huge figure by any margin.
  - shanghaiaway 8y ago
    Divide by markets and genres and its not so much.

mynameisvlad 8y ago

> it has not mastered this at all This is incredibly subjective. They've definitely shown they can produce such content. They had more nominations than any other provider, including HBO for this year's Emmy Awards.

scarface74 8y ago

HBO and all of the pay channels survive off of $10 a month subscriptions. It doesn’t have to be very good content. It just has to be good enough. The real issue with Netflix is that it has to fund all of its content via subscription revenue. The upcoming Disney service doesn’t. By the time it’s content hits the service, it’s slready made money from theatrical releases, pay tv services(?), video on demand, DVD sales, cable TV etc.

ryanwaggoner 8y ago
Having Disney content available on all those other distribution channels makes their streaming service less compelling though. Whereas if you want to watch a Netflix series, you sign up for Netflix. Also, Netflix is building a huge content catalog that has value outside their streaming ecosystem if they decide to leverage it that way. They could do theatrical releases and let cable do reruns of their shows. Maybe they will some day. But for now I think they see the greater CLTV in keeping that content exclusive to drive (and retain) monthly subscriptions.
- scarface74 8y ago
  Disney's streaming can afford to be less valuable. It's just additional revenue. Netflix's total revenue for 2017 was 11.69 Billion. Disney's revenue was $45 billion. Estimated are that once they combine with Fox, it will have revenue of close to $75 billion. Another thing that makes Disney's content more compelling is that it's "evergreen" kids can watch the same shows over and over again. They will watch the first Toy Story movie just as excitedly as the last Pixar movie.

paxys 8y ago

Netflix has been losing third-party content very rapidly for a while now, but users seem to be sticking regardless. Scrolling through their front page right now I'd say a good 80-90% of shows I see are Netflix-produced, and it isn't going to be hard for anyone to find something that is good enough to watch.

phobosdeimos 8y ago
Globally Netflix doesn't have much competition. HBO, Amazon, Hulu etc are America focused while Netflix has done a lot to cater to local markets.
- Mindwipe 8y ago
  Netflix has stacks of local market competition in every local market. They're just not companies Americans know of.
  - jscholes 8y ago
    > Netflix has stacks of local market competition in every local market. They're just not companies Americans know of. I'm in the UK and I can't really think of any serious competition they have here. Maybe Amazon, but I don't know anybody who's talking about Amazon Prime originals.