4 ms·

I think the "outsmarted" part is absolutely correct to an extent. They definitely saw an opportunity that an entire industry didn't. They have absolutely change

I think the "outsmarted" part is absolutely correct to an extent. They definitely saw an opportunity that an entire industry didn't. They have absolutely changed the direction of television in pretty much all respects, from release cycle, to delivery to even marketing. However, I think the issues that Netflix has largely encountered now that others are catching on are a result of them not pushing hard enough. It's readily apparent that Hastings and his team saw this opportunity, and were in perfect position to capitalize on it but they didn't show enough faith in the model to make the sorts of long term bets that could have built them an unassailable moat. You get all these shows for whatever crazy amount that no one else would pay but you do relatively short term deals? Certainly Netlfix was ready when the deals started to expire to go all in on original content to replace the stuff they lost, but knowing that the major networks were going to come at you hard once they realized the opportunity they had signed away why wouldn't you push for longer deals? I recognize the sheer economics of the issue but outside of the originals Netflix is losing all the things that originally brought people to the service. If they did 10-15 years it would have been impossible for anyone to catch them as they are doing now.

lotsofpulp 8y ago
I don't see why one would assume that Netflix had enough funds at the time to secure rights for longer periods of time. Obviously it is Netflix's interest to have as much content for as long as possible, so the only explanation for why they secured rights for as long as they did was because they didn't have sufficient resources.
- dcole2929 8y ago
  I'm sure economics played a role but I don't overall find that to be a compelling reason to not shoot for longer deals. They are any number of ways to generate the money necessary and contractually they could have structured things such that there were automatic extensions built in based on arbitrary criteria. I think Netflix took a huge bet, and knew they were doing so and thus hedged their bets. They either hoped they could re-negotiate better deals later on or were scared the service would fail leaving them with huge liabilities.
  - lotsofpulp 8y ago
    I would bet the media owners had some inkling that the internet would change the nature of the game and the elimination of a middle man was on its way (assuming net neutrality, but that of course has changed). Anyone in their position would have been wise to let Netflix have the rights while they tested the business model and/or the media owners themselves built their product, but definitely not let them have it for any longer than necessary.
    - dcole2929 8y ago
      The problem is from all the evidence we have (granted it's all anecdotal) that wasn't the case. Every interview, every story from this period times reinforces the fact that Network execs thought they were getting a great deal from a company that would never work. Every bit of data we have says that the networks fundamentally believed there was nothing that was going to change the status quo. They had every incentive given that belief to get as much money from Netlfix as possible because what did they care. They already assumed Netflix would fold anyway, so why not license things for 10 years or 15 or however long netflix wanted if it got you x million dollars more. When netflix went under they would have got back the content and kept the money.
      - lotsofpulp 8y ago
        I hadn't heard of that, and if that's true, then I see your point. But I'm sure there were also hard decisions being made at Netflix about how much of their limited resources to devote to developing their own media versus how much to license.
jedberg 8y ago
Perhaps the people selling didn't want to sell for long contracts because they knew that once what Netflix was doing caught on, the value of their own properties would skyrocket. Why lock in for a 10 year contract at $X when you can get $(.1)X for 2 years and then $(10)X for the next 8?
trocadero 8y ago
>They have absolutely changed the direction of television in pretty much all respects, from release cycle, to delivery to even marketing. A lot of this is the classic play of using investor money to buy users. Netflix has been burning billions because they don't charge enough for the content they provide. That problem is getting worse as the streaming market becomes more of a primary distribution channel driving the cost of streaming rights up. We've already seen that happen as Netflix catalog shrinks despite all of their original programming. Basically, Netflix's product is getting steadily worse while their costs are going through the roof.

lotsofpulp 8y ago

I don't see why one would assume that Netflix had enough funds at the time to secure rights for longer periods of time. Obviously it is Netflix's interest to have as much content for as long as possible, so the only explanation for why they secured rights for as long as they did was because they didn't have sufficient resources.

dcole2929 8y ago
I'm sure economics played a role but I don't overall find that to be a compelling reason to not shoot for longer deals. They are any number of ways to generate the money necessary and contractually they could have structured things such that there were automatic extensions built in based on arbitrary criteria. I think Netflix took a huge bet, and knew they were doing so and thus hedged their bets. They either hoped they could re-negotiate better deals later on or were scared the service would fail leaving them with huge liabilities.
- lotsofpulp 8y ago
  I would bet the media owners had some inkling that the internet would change the nature of the game and the elimination of a middle man was on its way (assuming net neutrality, but that of course has changed). Anyone in their position would have been wise to let Netflix have the rights while they tested the business model and/or the media owners themselves built their product, but definitely not let them have it for any longer than necessary.
  - dcole2929 8y ago
    The problem is from all the evidence we have (granted it's all anecdotal) that wasn't the case. Every interview, every story from this period times reinforces the fact that Network execs thought they were getting a great deal from a company that would never work. Every bit of data we have says that the networks fundamentally believed there was nothing that was going to change the status quo. They had every incentive given that belief to get as much money from Netlfix as possible because what did they care. They already assumed Netflix would fold anyway, so why not license things for 10 years or 15 or however long netflix wanted if it got you x million dollars more. When netflix went under they would have got back the content and kept the money.
    - lotsofpulp 8y ago
      I hadn't heard of that, and if that's true, then I see your point. But I'm sure there were also hard decisions being made at Netflix about how much of their limited resources to devote to developing their own media versus how much to license.

jedberg 8y ago

Perhaps the people selling didn't want to sell for long contracts because they knew that once what Netflix was doing caught on, the value of their own properties would skyrocket. Why lock in for a 10 year contract at $X when you can get $(.1)X for 2 years and then $(10)X for the next 8?

trocadero 8y ago

>They have absolutely changed the direction of television in pretty much all respects, from release cycle, to delivery to even marketing. A lot of this is the classic play of using investor money to buy users. Netflix has been burning billions because they don't charge enough for the content they provide. That problem is getting worse as the streaming market becomes more of a primary distribution channel driving the cost of streaming rights up. We've already seen that happen as Netflix catalog shrinks despite all of their original programming. Basically, Netflix's product is getting steadily worse while their costs are going through the roof.