“Netflix named many culprits for its lousy first quarter: a war in Ukraine, the world’s recovery from stay-at-home Covid, competition from new streamers, password sharing—nearly one-third of Netflix viewers apparently are stealing the service.”
“The nagging question remains: Is pure-play, lowest-common-denominator streaming a business model that’s built to last?” When the marginal cost of another “widget” equals $0, competition tends to push price towards $0.
“‘There is no question that deep-pocketed technology companies, Apple being a great example, Amazon being another. . . . I don’t want to suggest their [streaming affiliates] are loss-leader businesses, but they are in those businesses for other reasons.’” The optimal price for streaming is lower when a firm sells complements than when it does not.
“management overspent on content in hopes of creating a steady stream of irresistible hits.” Integrating backwards may not have been wise.
“Mr. Hastings’ surrender on ads is likely to be the first of many surrenders of things that made Netflix a shining brand and consumer favorite.” Here are three ways to monetize content when marginal cost and price = $0.
Make the consumer the product by selling ads and/or information about the consumers
Sell complements
Sell upgrades
“It means becoming just another impure, conflicted brand that users snark about even if they feel compelled to consume it. Is Netflix ready for that?” Strategy and brand evolve as conditions change.
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