Why not take the revenue they have and provide a good, sustainable service for that income? Why does it always have to be growth or bust?
But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up. So at this point you do what Netflix is doing - start exploring other markets that you can use your existing skills to dominate. Now most likely that will fail, because by nature, you're taking the money from the home run you hit and betting on hitting another even bigger home run. For every 1 Netflix there were 10 failed competitors. But Netflix now has to try and be another Netflix, but will most likely spend their money creating 1 of those 10 failed competitors.
Netflix is just a movie service. And it is a movie service that hasn't gotten any better for a very long time. The fact that I have to spend a lot of time finding content to watch and Netflix mostly showing me the surface layer of content over and over again is extremely frustrating. It just isn't a good experience. They are about as frustrating as every other service on the market because they deliver an experience that isn't anything special: it is just as bad as every other competitor.
If they have no ambition to deliver a better service than everyone else, then why would they attract more users, and more importantly, have more users pay more for their service?
Right now Netflix is an acceptable service, but nothing more. They still have some way to go on quality. And if they started becoming the company that dares to do things a bit differently, and to do things better, this could be a platform to launch into other areas.
But is that even the right thing to be doing? I'd argue Netflix would be doing a hell of a lot more for it's share holders to take the profits from the successful business they've built and hand it back to shareholders, rather than start gambling that money on building new businesses that are unlikely to succeed. This is what's happening right now with Facebook. It's a social media company gambling share holder cash on becoming a completely different business with almost 0% chance of success.
Google has a dominant search engine, a browser and massively intrusive ad placement system threaded through everything they offer. Gmail was a Hotmail clone. Android, Fitbit, Maps, Nest, and Google Earth were acquired. YouTube was bought after it out competed Google's offering. Even the advertising tech was acquired, with AdMob, DoubleClick invented outside Google.
They are dominant mostly because they have not been bothered by antitrust actions. That, at least, looks like it might happen sometime relatively soon.
Perhaps you picked up two bad examples. Google search is worst than ever (for their users ofc, not for the ones who get money out of it). My experience as a customer in Amazon is equally bad: bad quality products (I have to spent hours filtering and double checking in order to say "yes, that's the item I want"), reviews over 4.0 that nowadays mean nothing, intrusive ads everywhere (e.g., I searched for boots in Google image search, and suddenly all the ads in other websites are about boots sold at Amazon).
I used to trust Google (I bought domains from them, used Gmail, I even bought their Nexus 5!), but not anymore precisely because how big they have became: almost-zero human customer support, they can ban you anytime they want and give you zero reasonable excuses.
> My experience as a customer in Amazon is equally bad
But is that generally the case? From what I hear, non-tech people still love google (the vast, vast majority of people) and my personal experience with Amazon is pretty decent as well (though I’m not in the US, so maybe it’s not as much of an issue here) despite their search being bad.
Considering the endless dark pattern manipulation to get people signed up for Prime etc, the intolerably bad search, the hard to manage/judge "sellers", the god awful semi storefronts within a storefront from actual brands etc etc.
It is just not low hassle anymore, at every stage I'm paying extra attention lest I'm getting screwed. Turns out I'd rather go to a bookstore or a hardware store or whatever at this point. Even accounting for travel time it's lower stress.
If anything, one of the best forms of competitive market capitalism is when a company that's successful in one sector, invests in entering a new one, thereby adding competition to whatever that new sector is. Shareholders get more growth out of the company, consumers in that sector get more competition for their $, win-win.
They are also working on growing into at least one new area, video games.
I'm sure it could have been handled better, but elegantly transitioning out of hypergrowth is a surprisingly hard problem, even when you recognize it as such.
> But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up.
This might be why so many (not all) great software services and products eventually turn into crap. They start out focused and well made, caring about their users and workers. Then the owners and decision makers try to squeeze everything out of it and carelessly add bloat, while "optimizing" internal processes into oblivion. And all that because some people simply cannot get enough stuff, is a business' goal always to extract value and power for the few despite already having massive market share, a good name and happy customers?
There is another path: invest in the long term by putting workers and customers first. Give back, invest in R&D, education, open source, social stability, the _quality_ of their product, growth of their workers and relationship with their customers.
If this was the common path of successful companies, we would live in a different, fairer, more sustainable advanced society.
I see the value in your point--it reflects our current reality--but we should never lose sight of the fact that we can replace systems that don't serve our best interests. Yes, it takes hard work, but maintaining the status quo is not the only way forward.
Also, don't hire executives who have a demonstrated history of making bad decisions for a business' long term stability in the name of "shareholder value".
My comment above isn't nearly as nuanced as it could be - I'm pressuring a pain point that I think needs more attention. But I'm optimistic, It seems like sustainability awareness and long term, holistic / system thinking is growing.
I was under the impression that Netflix generally doesn't offer stock to engineers, but instead pays above market salaries.
I’m not sure if you’re aware, but humans are of the biological class mammalia. We are nature.
If we’re nature, then everything we do is natural.
Unless you want to enshrine Netflix’s market position in law, Companies, like species, will always compete with each other.
Companies in our civilizations, like species in our forests, will expand until the limits of TAM or outcompetition by a predator company.
If you replace the word "natural" with "artificial" in GP's comment, it doesn't change anything about what he/she was saying.
It's greed. Investors want to make more money, they don't care about the product, or the experience in using the product. They just want more money. That's how the whole system is set up. It's sadly just how it is.
During those years the founders and much of the talent are very likely to leave the company. Partly because working for an enterprise wasn’t what they signed up for, but mainly because the rapid growth has likely stagnated, which means that you can get so much more out of your time building something new.
Your time is limited and how you get to spend it is directly tied to your wealth. Why would you waste either on something that doesn’t grow when you could be growing your wealth 40% a month on something else?
Maybe it’s greed, but it’s also how you play our system.
The only weird part about it all is why we aren’t teaching children financial impact and how to maximise it in schools. I mean, I had no idea how rigged the world is until we had our first million (in Danish KR, so around $150k). Simply being able of putting down 30% on the loan for our house ourselves means that we have around 10k DKK ($1500) more to ourselves, every month, compared our friends who are similar places in life minus the start capital and thus are paying those $1500 directly into the banks pockets.
Or do you just not want to see it?
That being said, I don’t agree with the sentiment that a company needs to “growth hack” to go from startup to successful IPO. It obviously happens, but a lot of companies succeed by selling something that is actually useful. It may not be as glamorous as working for a FAANG company, but you can make a pretty decent career out of helping non-tech companies scale beyond excel sheets.
Not only that, but perhaps the world would be a lot less.
No its a byproduct of human beings.
> Disincentivise the pursuit of constant growth, and the world would be a lot less evil.
Or actually it would be much worse.
Plenty of good managers and engineers just want more money too. Once the hyper-growth stalls, many early employees cash out their lottery ticket and leave to take higher-paying jobs elsewhere. They don't care as much about maintaining the product and experience that they built as they do about making more money.
(And this is exacerbated by the fact that many people prefer building new things than to maintain the existing things they built.)
If they do not do so, odds are big - but no given - that a competitor with a enormous bag of VC money might enter the scene and subsidise the losses like any other platform gameplayer does these days, that might undercut the incumbent in quality and slowly but surely garner enough market share to start flipping the coin, and the process either resets itself or doesn’t.
One must be constantly on top of the game to remain at the top, being handicapped by fickle things like principal values and the like.
I wish there was a combination of ngo and corp that focussed on solving the problem with the aim to dissolve oneself when the problem is gone, instead of becoming the problem.
For context, here's the p/s of the S&P 500 https://www.multpl.com/s-p-500-price-to-sales
DocuSign's management chose to lose money in pursuit of growth. Then the growth stopped and they were just losing money.
The only thing that sometimes prevents it is when holders are emotionally attached (old family stock or brand fandom) or when holders have a strategic need to prevent certain control scenarios (often nationally flavored).
So why not provide a sustainable service? Because it's not valued in the market.
> Sustainable service is valued, at the rate of inflation.
Hence my comment being that the market “values” businesses with sustainable services by offering to pay a premium for a piece of the business commensurate with the rate of inflation. Which is why Facebook’s stock price stalled, since their market cap had priced in much higher growth, and prospective buyers now do not expect that growth, and are willing to pay much less for a piece of Facebook.
If you want revenue growth above inflation, you will need to either acquire more users, charge them more for the same product, or both. Building up the value of the product you're offering can help with both. Of course in the case of facebook these points get a bit muddled, since the users get the product for free anyway and they have such a giant customer base that finding new users is becoming an issue.
But of course its valued far less then a growing company.
This seems to be fairly basic and totally logical. Stock market is forward looking. If your future it the same as present that fine but it means over time you shrink relatively and you are likely not robust against paradigm changes.
I think I even remember hearing him say in an interview that he would be happy to just keep the current number of subscribers and make it a more focused product.
That matters because there was a time when it seemed to be turning into just another social network. At that time the major new feature seemed to be "inspirational blog posts". That's not for me.
For about a year I cancelled my subscription but returned when the focus when back on providing useful features like route planning.
I wish that Netflix would just concentrate on providing a better experience and better content instead of degrading the existing experience even more.
The closest one was Crunchy Roll I think, and that was only possible since they were essentially pirating their content if I remember correctly. In the end, even with piracy it wasn’t sustainable until investor money came into play.
If you buy Google, Amazon or Facebook, sure. But there are also lower-risk stocks. You can invest in P&G or J&J which are all about selling the same products again and again and again to the same customers and slowly expand by acquiring smaller companies with a similar business model.
Like it or not, that is reality. Ie if people want lower yields, they invest in different industries, companies, or financial instruments.
Shareholder Value.
Assume for the sake of contradiction that we the humankind decide not to incentivize companies to chase growth. This would mean the humankind is enabling a company to sustain its current position with existing assets and operations and nothing new. Since the company has no incentive to grow (introduce something new), the rational company will not create new additional value. Since the company is in a market dominant position, no new entrants will be able to create new additional value.
Curious to see if others see any ways to protect the interests of the humankind while taking away the incentives for market dominant companies to continue to make progress.
Netflix is the only big streaming service that relies on streaming as the only source of revenue. Netflix has to spend huge sums every year on new programming to keep subscribers. Disney/Hulu/ESPN/Hotstar, Amazon, Disney, Apple, Peacock, HBO Max, and YouTube plan to make deep cuts into Netflix revenue in the future.
Relative growth is the ultimate leverage of power.
And while you think that might be some line or something it isn't. In the early 2000s banks basically did that, if you played it easy one that geared up more simply bought you up and they all went big into MBSs
There are limited humans on this earth and if you consider, that you cannot reach them all and there is also competition, which realistically also takes some of the market, why not be fine with reality and a saturated market you cater for well?
That is in theory. I think most businesses lose the original vision at some point though and their products worsen, instead of improving. I would guess, that it is not in Netflix' genes to keep one core product and vision of the product.
The idea to show ads on Netflix is like the nail in the coffin. Users would jump to the first capable alternative, that does not show ads. Netflix would inflict itself a weak point, at which competitors could jump in and start eating their market share. It would be a big worsening of their product. Users might think: "I am paying for this, yet I am seeing ads?!"
There would be nothing wrong in Netflix say: We're no longer able to buy the shows and movies we'd like, because the studios are setting up their own streaming services. We now going to shift towards creating less content, but higher quality.
As I see it, one of Netflix major problems is the quality of content. They can't buy quality content anymore, so they're attempting to just make as much content as possible, hoping something will stick. Writing have been a major problem for Netflix for years. They're able to create an initial good season one of a show, but are never able to deliver in the following seasons.
Personally I don't see the problem in Netflix becoming a niche player with their own high quality content, that could allow them to lower prices as well. It's only a problem because their shareholders overpaid and insist that Netflix remain a major streaming platform in order to recover their investment.
You are aware that shareholders the owners of the company right?
Sure you might not care if Netflix becomes niche, but you have like 15$ a month of skin in the game. Not million or billions.
because they borrowed too much money that they need to pay back.