Netflix isn’t in trouble, Wall Street is.
Now let me get this straight, you’ve got “professional” investors and analysts, focusing on money, not art, not the service Netflix provides, who consistently get it wrong in their own field telling us what is going to happen in another field? Hogwash. They’re barely worth listening to. They can’t predict what is going to happen in their own world, how can they predict what is going to happen with Netflix?
Netflix is the market leader with first-mover advantage, it’s got the most customers with the most product and in one quarter it doesn’t blow the doors off and not only do we hear streaming must be questioned, but that ads must be inserted…that’s like asking Apple to put every port in existence on the Mac, when Steve Jobs famously excised legacy ports and pushed the customer into a better future.
Like Reed Hastings.
Let’s go back here. Hastings said he was making Netflix a streaming company as opposed to a DVD by mail company and the public freaked out. Turned out Hastings knew more than the public. When was the last time you played a DVD? Do you even have a DVD player in the house? Hastings blinked, backed away from his statement, re-emphasized DVDs for a minute and then went full speed ahead in streaming and revolutionized TV in the process.
Let’s see… Cable subscriptions dropped. Other legacy companies eventually jumped in. And bingeing became a worldwide pastime. But somehow Netflix is in the dumper. Give me a break.
America is addicted to story. It’s a human desire. TikTok, YouTube, they fulfill a different need, except when they try to follow the same paradigm, have you heard about Snapchat Stories???
So Netflix is bedrock. It’s never going to go to zero. It’s like saying food is on the way down. Or air or water.
Well, as long as it doesn’t cost too much.
Yes, Netflix broke the price barrier. To the point where customers started thinking about what they were paying. It used to be cheap, but once it exceeded fifteen dollars…
This is psychology, this is why everything you buy ends up shy of a round number, with some dollar amount and ninety nine cents. This is why music subscription prices should not be raised. You don’t think about $9.99, but once you go a penny over that, you do. And you might cancel.
Investors have no idea what is going on with the hoi polloi. Did you see that online ad guy slated to make $835 million? And David Solomon, head of Goldman Sachs, rejiggered payments on investments so he will make more. Turns out he’s angry that he’s not making as much as the tech titans. So he’s giving himself a bigger cut, screw the investors.
Life is hard at the bottom. Which accounts for password sharing… Can I say that I share a password for Hulu? I’m sick and tired of being pecked to death by ducks. I’m paying for Netflix, Amazon, HBO…it’s an insult to pay for one more.
We solved this problem in the music business, we deliver all the music for one low price. But in visual entertainment? They took the cable model, imported it to streaming and charged just as much. This is progress? What we need is a streaming bundle, give me all the services for a lower price. But no, these nincompoops don’t want to live in the future, they want to import the past!
Bottom line… Inflation is raging. And despite the great employment numbers, look at how much most Americans are making…bupkes! When you have a nonessential service (and I know this sounds like a contradiction to what I said above, but when you’re broke only food and shelter are necessary) you don’t insult the customer by raising the price, which Netflix did. As for HBO…most people get it with their cable package. It’s just one element in the overall price. As for Disney… It’s cheaper and not only does it have children’s fare, it’s got “Star Wars.” Which is like the New York Yankees of visual content, at least the Yankees of yore. You can raise the price of gasoline and food and get away with it, but entertainment has a ceiling. And oftentimes what looks like a victory is actually a loss. Overpriced CDs with one good track paved the way for Napster. People felt so ripped-off they didn’t give a hoot about file-trading, they had no guilt. And then the RIAA started suing customers. That’s right, instead of looking to the future they tried to reassert the past. How does that look today, from a streaming world where revenues are going up and up? It’s a worldwide business now. Latin is flourishing. Whereas in the past physical world music was to a great degree Balkanized, but streaming, an advance in distribution, opened the floodgates.
Just like in visual entertainment. “Squid Game”? “Money Heist”? Those international hits are on Netflix, not the competitors. The competitors are way behind, they have a de minimis amount of product, especially Apple, tell me why people are going to pay for that service again? Most people are still getting it for free, at least it’s cheap.
And then Jason Kilar comes along and puts theatrical movies on streaming and Hollywood flips out. Hollywood is like Wall Street, they don’t even know there is cheese, never mind having it moved. Come on you investors and analysts, when was the last time you went to a movie theatre? That’s for kids!
As for ads… Don’t tarnish the service. That’s like asking Tesla to make a $20,000 car. SiriusXM doesn’t have a free tier and it does quite well, subscription separates it from the vast wasteland of terrestrial radio. It’s a psychological benefit. As for Hulu…it’s a fading service, with providers pulling their content, and to use it as an example is like listening to the wankers with no audience complaining they’re making no money from Spotify.
And one thing we’ve been taught over the last twenty years, over and over and over again, is you give the public what it wants or you pay the price. The public does not want to be spoon-fed content. What is here today is gone tomorrow in news, in every walk of life. But not in entertainment? If you don’t deliver it all now, chances are it will fade away with almost no one seeing it. Waiting week to week for product is an old model, instituted at the advent of television, waiting week to week for a show these days is like delaying orgasm for months, and no one likes that. Immediate is everything these days, but not in streaming TV? Come on!
As for week to week… Yes, it might work for big hit shows, anointed as great, but those are very few in number. Sure, we have “Ted Lasso,” but have you forgotten “The Morning Show”? Which still hasn’t recovered from being released week by week? Everyone who saw the entire first season raved, but most people didn’t get past the first episode or two, which were substandard. Don’t take the outlier and make it the paradigm for everything. Netflix was built on bingeing, you don’t want to remove that aspect. As for me, I pay for HBO but I don’t watch their hit shows, always geared to adults, I can’t bother to watch an episode at a time, never mind forgetting what happened previously. And when the series is done the buzz is over and I don’t even bother, I’m behind the curve. Whereas when the episodes are all released at once a series is a time bomb, a cult item that can be discovered any time in the future. I binged “The Americans” and loved it, I didn’t bother when it was on TV. I binged “Prisoners of War” on Hulu (which is why I borrowed the password), it was rated the best foreign series of the decade by the “New York Times,” but I didn’t bother watching the English remake “Homeland,” even though I pay for Showtime (as part of the mysterious cable bundle). Now if every season had been released at once, I would have.
I could go further, proving my point, but the truth is the business people have no idea what the youngsters do, they’re out of touch. All those week by week “hits” are adult shows, the youngsters don’t bother (except for “Star Wars”/”The Mandalorian”). This is just like music and CDs and Napster, Hollywood and Wall Street are out of touch with the customer.
Netflix must stay the course. People are still adjusting to looking for new product on the service as opposed to cable. And it could figure out how to address password sharing. Come on all you oldster analysts, don’t you remember when everybody stole HBO and other services? You just took the filter off your cable, or paid your installer to do it. Then cable went digital and that was over. If people want it bad enough they’ll pay for it. But don’t make the price too high and… Come on, college students don’t watch cable, and they’re going to forgo Netflix? Don’t be ridiculous. And maybe have a lower price for students, as long as you can prove that people are students. Young people are not too concerned about privacy, they’ll enter their digits for a deal.
And there is a ceiling to how many people will subscribe to streaming TV outlets. Eventually everybody had a smartphone, it became a mature business. But still, there is headroom for Netflix. As for the company losing 35% of its value… God, imagine if these stockpickers and analysts were publicly traded and if they didn’t make as much as they did the previous quarter their net worth would drop a concomitant amount, i.e. 35%.
And why is it no one can stumble or make a mistake at a publicly traded company? Why do profits have to keep going up and up and up?
You know who did this best? Jack Welch, at GE. He essentially cooked the books to satisfy Wall Street. And then what happened? GE cratered, it couldn’t continue. I could delineate chapter and verse but this is one story Wall Street knows. And GE Capital? Looked brilliant before the market crashed. Talk about foresight…THERE WAS NONE!
As for what to watch on Netflix…
I point you to my list from over a year ago:
There, that’ll keep you going for months, if not an entire year. And they’re all blue chips!
And how many hours can someone watch television anyway? So we were all home during lockdown and…
The country may be in trouble, but not Netflix… Netflix is forever!
~~~
Visit the archive: http://lefsetz.com/wordpress/
