Netflix Has Peaked
daringfireball.net
daringfireball.net
I think we’re going to start seeing this happen more broadly across the industry. AI will get to a point where it becomes easy to clone any app or service. At that point software is no longer your moat. Your moat is going to be content, community and branding. This kind of makes me wonder if open source get even more popular. If software is no longer a moat, then you may as well release it for free and cash in on the goodwill and community.
A team of highly skilled engineers at netflix are gonna beat you massively at their own game.
Acting like all code is flat and you just have to catchup to their level is false thinking. Netflix will be running 100x more AI than you with much better talent than you.
If 8k TVs or VR suddenly take off, they might be able to take advantage of it, but right now it's only a minor advantage (in cost savings primarily). Customers choose based on content, not based on who's better at video streaming.
Video streaming is amoung the hardest technologies you can possibly make beyond a single cluster scale.
Youtube is my favorite engineering system to read about. And man... chatgpt has a LOOOONG way to be able to make that from scratch.
There is an argument though of "good enough" I don't think it logically holds since our entire ecobomy is built on that literally not being true but who knows.
There are hundreds if not thousands of companies that successfully run streaming services and I doubt that any of them are more worried about the technology than they are about the content.
Obviously a big company can push a big project I thought you were in the camp of a vibe coder going up against netflix and winning.
Even before AI competition always caught up that really hasn't changed and basically is my point. AI doesn't change your competitive advantage against another company doing the same thing it's all down to operation excellence.
AI isn't gonna help you magic a CDN into existence
All that matters is that the CDN is good enough to serve viewer traffic. If your CDN isn't up to snuff, the outcome is that the viewer can't play the video they want. AFAIK, no Netflix competitor is suffering from insufficient CDN resources.
Sure, some choices make the cost of CDN higher or lower, but it's not material enough of an impact on competitors to matter.
The actual moat for streamers has been, and always will be, the breadth and popularity of their exclusive content. Netflix will die if they don't continue to produce exclusive content that audiences will subscribe for.
> All that matters is that the CDN is good enough to serve viewer traffic. If your CDN isn't up to snuff, the outcome is that the viewer can't play the video they want. AFAIK, no Netflix competitor is suffering from insufficient CDN resources
My personal experience is that e.g. if your cdn can serve ads, but not video, then you lose subscribers.
Extrapolating from that, if you lose money on every video a subscriber plays because of DTO costs, then you can't stay in business. Netflix and Amazon can afford their cdn. Maybe Disney can stay in business because they have the scale to get to the right COGS to meet their forecast, but for sure in the past they are accused of misleading investors as to their costs and revenue and their future revenue forecasts[1]. Since that's still underway, we may even know what part of their break-even calculations CDN costs are in the future.
1. https://www.ktmc.com/new-cases/the-walt-disney-company/?hl=e...
Of course. But none of the major providers is suffering from that problem on a regular basis.
> if you lose money on every video a subscriber plays because of DTO costs, then you can't stay in business
These are public companies, and they have to report material risks (as CDN costs would be, if your claim is accurate) on their SEC filings by law. They're not reporting these as a material risk. They could be lying, I guess, but that seems rather unlikely as they'd be at risk of shareholder lawsuits and government prosecution.
Speaking of which, the Disney suit you referenced doesn't mention CDN costs at all. It mentions the "staggering" cost of content creation, which makes sense to me; content production easily dwarfs CDN costs. (https://storage.courtlistener.com/recap/gov.uscourts.cacd.88...)
(Also, as a side note, no large customer like these is paying retail DTO costs. Large or strategic customers get significant discounts on public pricing.)
Also you are saying that the lawsuit speaks to context cost, which is the headline, but that is unlikely to be the full story at the end of the day since it is a fishing expedition at the moment.
This suit, assuming it's like most shareholder derivative "failure to disclose material information which led to a stock price drop" suits, was filed to wet lawyers' beaks and get the company to settle by compensating shareholders. It's not really intended to get at the whole story, and neither party has any interest in disclosing CDN costs to the public.
That's unlikely to come out publicly as a result of this suit. Courts routinely grant motions to seal records that contain trade secrets.
Years ago, if you asked a programmer why the Netflix UI worked the way it did, the answer was that it was designed to hide how small their catalog actually was. Then, Netflix became quite successful and their UI became an industry standard, with Amazon, Youtube, etc. all copying it or aspects of it. So why mess with success?
But now Netflix is in a situation where they have a dearth of new good content, but now they also have a fairly substantial catalog which has been built up over more than a decade. And they are still sticking with a UI designed to hide the size of their catalog. I often talk with friends and family who have Netflix and they are not aware of shows which they might like, simply because the Netflix algorithm hasn't shown it to them.
I suspect that making one simple UI change could have as much effect on their fortunes as adding $hundreds of millions of new content. Simply only display the icon for a given show once in any given session. In other words, if say "Rebel Moon" is shown under Sci-Fi movies, only show it there, not also under Action movies or some other row. They've already seen it once and clicked past, so showing it again is wasting a space for some other show they might like.
People are leaving Netflix because they click around for too long trying to find something they want to watch. The problem is perceived as lack of good new content, but the real problem might just be the clicking around.
Now? Now the search bar is at the top. If you've scrolled down through categories while looking for something, then decided to just use search, or to just look in movies or shows, you now gotta scroll up & up & up.
Sounds like a buy signal?