Netflix will falter

This honestly makes me wonder "ok, why should I listen to you, then?"

It doesn't help that they then go ahead and give an, at best, oversimplified explanation of why VHS won against Beta.[1] Not a single mention of one of VHS's killer features versus Beta: Tape length. (And calling Windows, of all OSes, an "open operating system"... oh dear, I get the point you are trying to make, but "open" and 90's anti-trust Microsoft in the same sentence is pretty bold.)

Maybe the conclusions are still valid, I can't tell. I remember that what made Netflix so immensely attractive to me, a "binge watcher" of many many TV shows and with many friends who were at least to some extent binge watchers, was that Netflix was the platform that had all the movies and especially TV shows that I wanted to binge watch.

[1] Here's a very good video going into details: https://www.youtube.com/watch?v=FyKRubB5N60

The author does not understand media distribution and has this exactly backwards. Netflix did want to be the single monthly subscription, but the content rightsholders would never allow it because it cedes all the distribution control to Netflix. The last good deal Netflix got was the Starz deal in 2008 when the studios still underestimated the future of streaming. After that it was a steady downward trend, and Netflix realized that as a middle man they had no future, so they entered a race to become HBO (by producing their own content) faster than HBO (and all the other major content rightsholders) could build their own distribution.

The idea that Netflix is somehow "proprietary", and the other examples from other industries are "open standards" is specious gobbledygook. You have to look at specifics. For instance, Netflix doesn't make devices, they integrate with smart TVs and OTT boxes which absolutely are open standards as much as any of the other examples. And even within the Netflix bubble they do license others content, so it's not all "proprietary", but on the other hand it's an app, not a platform, so you can't really compare it to a payments network or an operating system like Microsoft Windows—that is what Roku, Samsung and Apple provide, not Netflix.

The whole article is just another in a long tail of naive consumer complaints, decrying how things "should" be from their perspective, but in total ignorance of the incentives and systems that lead to things to being the way they actually are.

(full disclosure: I co-founded and led a streaming company from 2007-2016)

I think Spotify, Deezer, Netflix, HBO, etc. are all doomed to fail. They're doomed to fail because the competition is Amazon, Apple, Google, etc. which all have virtually infinite money to inject in those services, while the others only have a single income source.

Nobody cares if PrimeVideo runs at a loss for years or even decades, and the stock price of Amazon won't move an inch if PrimeVideo looses watchers. But at some point investors will stop lending money to one-trick monkeys like Spotify and Netflix.

Is he for real? Black Mirror alone explores more themes in a more creative way than the entire output of Hollywood over the past 10 years combined.

Add in Squid Game, The Queen's Gambit, The Good Place and more original content, and I think Netflix is honestly the king of quality content right now. They seem to be in the sweet spot, budget-wise, where they can afford to actually bring the director's vision to life, without the production values being so high that they can't afford to take risks.

Its existence relies on the delicate balance where it's providing what's perceived as a superior deal for both viewers and producers. Not a comfortable position!

What the author fails to understand is that everyone has different tastes and that is what makes Netflix so formidable. It doesn't need the big showcase shows that Disney has.

The most popular shows on Netflix for 2021: Bridgerton, Lupin, The Witcher, Sex/Life, Stranger Things, Money Heist, Tiger King, Queens Gambit, Sweet Tooth and Emily In Paris. That is quite a diverse set of demographics that would be watching those shows.

And then you have the recent popularity of Korean shows e.g. Squid Game, All of Us Are Dead, Kingdom etc which Netflix is pioneering by bringing to Western audiences.

Netflix is far more multi-faceted and nuanced than it gets credit for.

I am very tolerant of mediocre shows. I used only prime until a few months ago and I am honestly aghast and in awe of the amount of content on netflix. I feel like I could never run out of random things I can put on I haven't seen already. I think a lot of people do the same to the point where they have a "just play something" feature. Amazon prime had good content but slim pickings! And half the stuff you have to pay for, ran out of free stuff fast. Hulu likes ads too much, low value content too.

My point is, Netflix is "tv" everything else is some site charging for video content. You turn your cable tv on to some channel and just watch what is on, so long as you haven't seen it already. Netflix lets you do that, everyone else, maybe they have good shows but not enough of them. The Netflix UX is amazing as well, it rivals apple UX in my opinion. It just works, even autoplay preview works well somehow! Their app also syncs well and lets you download content for long trips and such.

I have to disagree with OP. Netflix is here to stay. Don't tell anyone but I would gladly pay up to $99/mo for it as-is because similar quality on cable does not exist but I would be paying much more for premium cable.

"Netflix+chill" is only a thing because of their UX, can't do that on Hulu because ads ruin things for example.

So I'm not sure Netflix is at too much risk of every studio colluding them out of these auctions. Especially when they are legitimately one of the richest 'producers' in LA.

Honestly, of all the services we've used Netflix is the one giving us more ROI and the one I'd never cancel.

We don't use Prime Video because there's barely any interesting content. We only have it because it comes included in Prime, but I'd never pay for it.

Disney is great in terms of tech, but I'm seriously considering canceling it because the ROI is so low.

Netflix keeps us interested. There's tons of Atmos 4K HDR content and their app/tech is great. At least once a month or so we binge a show at home. My wife also watches Netflix every day while exercising or when eating alone. I watch true crime documentaries, Nordic noir stuff, and even some Netflix movies from time to time.

We've also tried HBOMax but the app/streaming tech was just terrible. The streaming quality jumped constantly between 720p to 4K. Also, it's quite ridiculous they don't stream content in Atmos 4K HDR that is available in that format like Game of Thrones.

We also had Apple+ for a few months. The app/tech is great but ended up cancelling it because we didn't enjoy any of the stuff there.

Streaming services are different. You don't choose one. You buy all the ones that offer something you want and leave the rest. Sometimes if one feels stale you switch it out for a different one. Some people only have one at a time. Some people have several. There is no compelling reason for services to share or collaborate so long as they are able to profitably hold enough market share at any given time. Bundling is highly unlikely to ever happen. It's far more likely that we'll see product diversification like Netflix's alleged gaming platform. These services will need to show growth somehow, but it won't be by sharing content.

I don't thing Paramount+ or Peacock/NBC will penetrate enough, I think Disney+ will. HBO is kinda like Netflix, I think those two should merge: Netflix provides the tech/platform and a huge eyeball base, and HBO has better production. HBO could strengthen its cable offerings with Netflix programming, seems very win-win.

No idea what Cabletown's plans are for NBC/Peacock, but I think they should consider merging with Netflix too.

Who knows about Paramount+. CBS owns older viewers and network TV, so I think they are too stubborn to merge or capitulate. CBS cranks out a lot of "good for TV" programming, but is it appointment viewing? More like they've mastered the older viewer that plops down and surfs the main networks. They won't claim the younger viewer, won't get a good enough subscriber base, and they won't have a valuable enough catalog to demand good merger or licensing terms.

What is FOX doing? Do they have a big streaming platform?

One thing that is for sure, cable is on a deathmarch. The next round of NFL negotiations should be interesting, because ESPN (and by extension cable TV itself) is already stretched to the limit for the NFL contract, and the next one might break them if the cable economics continue to degrade in viewership (and portion of the cable bill ESPN gets to claim)

But aside from all of that, I find it irksome when columnists self-identify as "honest brokers," straight-shooters, true patriots, etc. Don't tell me you're trustworthy. Truth-tellers and liars make the exact same assertion. (Hasn't this man ever visited any two-tribe islands?) Just make your points, and respect your readers to determine that you can be trusted.

I do like all the non-English series content, although HBO does a lot of that, too. Maybe Netflix will ultimately just be a brand that co-produces and distributes a ton of the world's TV series, and a few prestige films every year.

Another very similar medium to TV streaming is the podcasting space, and it has seen a lot of consolidation with Spotify gobbling up Gimlet and Anchor among others and Apple+ going on their own buying sprees. New original studios seem to get absorbed very quickly.

The observation about people getting sick of a fractured subscription market seems also true. Not sure if Netflix will completely falter but if there's ever some kind of ganging up between Netflix competitors it's hard to not think that Netflix would have a tough time.

New entrants who wish to take on credit card offerings cannot flourish due to Visa and Mastercard's monopolistic practices.

He totally ignored the business fundamentals of the entertainment industry. Content is king and content is an extremely capital-intensive business. No existing entertainment business is willing to cooperate on content distribution because that would severely reduce their margins.

Netflix's strategy is indeed the right strategy because they can create long-lasting IP and horizontally expand their business into other entertainment verticals.

Aggregation is by far the worst strategy in content distribution because you don't have bargaining power. As you start adding users to your platform, you will proportionally lose power to renegotiate licenses because IP owners will attribute your growth to their content. It's a zero-sum game.

this is a terrible analysis. Netflix recognized early on that they need to start yesterday (years ago) before other streaming services came online. it's why they're still relevant today.

Otherwise I must confess: I was bearish on netflix, and still am overall. But their investments are thoughtful and strategic, squid game being a recent example. I don't love them, but they're the only service I'm paying for.

their weakness is the monthly cost for unlimited streaming. Once you're basically in every home, the only way you can extract more money is to raise the rates. When a hit show comes out, people may signup for a month to watch and then cancel, and they certainly honor that behavior. But they're also mindful of ads and the expectations of their current user base, and will have to get creative on generating new revenue. I give them 50/50 they find a way.

Another is that there is nothing special about Netflix other than being an early mover. It might not be for you but Disney has a meaningful brand and the future belongs to meaningful brands.

We're quickly getting to the point where I'm paying almost as much for VOD subscriptions as I was for cable.

In the past, they have faced two existential crises:

1) DVDs by mail was becoming a buggy-whip style business. They pivoted to streaming.

2) Streaming content licensed from other companies effectively gave them a “maximum profit”. Every efficiency they gained that led to higher profit was quickly negotiated away by rights holders who threatened to take away Netflix’s life blood (content). So they started their own production company and created their own content.

Now they’re being attacked from every direction by a host of competitors. History shows Netflix will not lie down. As an impartial observer with no dog in the fight, I’m interested to see what they come up with next.

Maybe if they had “channels” that I could add-on like in Prime then many would pay for Paramount, HBO, etc and bundle it into their Netflix. If they opened it up then other networks could build on it as a platform (e.g. Masterclass could build an channel integration and it gets approved by Netflix much like an App Store). Netflix’s childrens content is weak, so this approach would allow me as a parent to bundle in PBS Kids or Nick Jr.

If Netflix took 10-20% from channel subscriptions then they could easily get to $20/mo revenue for many users. No need to raise rates like they are currently doing.

The others -- Hulu, Apple, HBO, Paramount, Noggin, Showtime -- are 'extra' channels that we'll probably cancel & re-subscribe on occasion, depending on whether there are shows we want to watch. (HBO's in the middle. We've been subscribers for years, but the content has been lacking lately and I've seriously considered cancelling it.)

I wonder, how common is our framework among consumers, of having a few permanent channels and then a broader set of rotating ones?

I find that Netflix generally makes people's list, on a list of N--even if N == 1.

We'll have to see if that's still true after the price hikes.

My fear is that eventually we'll get back to a cable model where some aggregator with enough power will combine all these offerings and sell that as a subscription.

The author goes on to list examples in credit cards, computer OS's, ATM's etc, but all those things are cherry-picked. They conveniently ignore Apple's iPhone/iPad/App Store combination being wildly successful. And the mis-use of terms like 'open' and 'proprietary' lead me to conclude the author doesn't actually understand what those terms mean.

The comparison of Windows to Mac OS X is just laughable; calling Windows an 'open' and 'shared' operating system? Mac OS is 'closed' and 'proprietary'? Well actually they're both proprietary and neither are open. Also being ignored by the author is video game consoles. For more than 2 decades, Sony, Nintendo and Microsoft have co-existed with their own proprietary hardware/software systems. According to the author, I suppose Google search must be 'open' and 'shared' just because it has 90% market share.

> There are hundreds of possible participants out there with valuable film, TV, or other intellectual properties, and they aren’t large enough to take on Netflix on their own. But if they combine their efforts, they will be formidable... > ...Can you imagine the power of a single monthly subscription that gave you immediate access to films, TV shows, music, video games, streamed live events, etc.?

The author hypothesizes about a product that DOES NOT EXIST and comes to the conclusion Netflix is doomed? Also what is the likelihood that all the players in the media industry are just going to decide to come together and hold hands? Even if they all decided to conduct a super-merger, that would never get legal/anti-competitive clearance. How does that not seem a bit outlandish? And yet the author writes about it as if it's some inevitability.

Also: the supply of new users is much faster to replenish for streaming services than it was for all of the cited analogies.

Perhaps all of the "also-ran" services Paramount, Hulu, Peacock will band together, but I wonder how successful that will be vs. just leasing their material to Amazon or Netflix.

Streaming is also interesting because of the less-fungible nature of flagship content. The Witcher is not precisely a substitute for Game of Thrones and Wheel of Time is certainly not a substitute for either. The main reason to not switch from "Bank of my local village" to a Bank of America is friction, and "Bank of your local village" doesn't directly compete with "Bank of my local village" but both compete with B of A, so there is a natural alliance there.

[edit]

Also, VCRs; Betamax was more expensive and had a shorter runtime, while quality of self-recorded material was less important to consumers. VHS won by being cheaper and better matching customer use-cases; maybe that was because it was open, but it was not directly because it was open.

[edit2]

> [Netflix] has pursued the wrong strategy, and doubled down at every opportunity. The company has spent billions of dollars on proprietary films and TV shows in order to create a position of market dominance with a totally closed system. But that was only phase one. We are already in phase two, with Disney, Paramount, and others removing their offerings from the Netflix platform, and trying to create their own powerful fiefdoms.

Netflix would be out of the streaming business today if it hadn't pursued this strategy; the writing was already on the wall for content-owners doing their own streaming before Netflix produced original content. Streaming platforms are being commodified, but streaming content is not.

[edit3]

> Do you think Netflix can match that with its proprietary approach? The company will be forced to open up its own system, or face inevitable decline, perhaps even obsolescence

Again, Netflix isn't pursuing a "proprietary approach" by choice; if you want to sell Netflix any license for your content (exclusive or otherwise), they are more than happy to do so if the price is right. Look at everything available that isn't "Netflix Original" (and note that even some of that is not exclusive to Netflix, as they may have only partial ownership).

[edit4]

> Here’s the bottom line: Netflix might be one of the largest companies in the world, but it’s far more vulnerable than it looks at first glance. And it doesn’t have the brand franchises it can milk like Disney—which can churn out Marvel and Stars Wars movies with reasonable assurances of market success.

This is the only paragraph related to Netflix in the entire article that I agree with. I don't know how the author can hold this truth in their head while blasting them for spending money like water trying to generate such a franchise through massive spends on content. If the author's thesis is that Netflix is doomed to fail, then Netflix should just shut down streaming operations right now.

[edit5]

Isn't Roku already a bit of what the author wants? You can search across multiple streaming services and have them all in one place. Sure you have to actually pay for those services, but most of them can be signed up for in the Roku app, and nobody's giving their content away for free...

They make contents others will not make. They will be the number one destination for entertainments for a very long time because they are willing to bring Hollywood production value to every corner of the globe. I have no doubts.

I think a lot of people suffer from myopic pov when they’re looking at these global enterprises. The game has dramatically changed in the last five years.