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$NFLX let's go
Obviously, no hard data on viewership on Netflix but there are indications that originals make about 35% of the time spend and it's rapidly increasing.
I argue it is already at critical mass and Netflix is not vulnerable to rising content costs from external suppliers
I argue it is already at critical mass and Netflix is not vulnerable to rising content costs from external suppliers
The average sub uses it because it offers a mind boggling amount of content at a silly price. the value offering is unparalleled. Subs don't differentiate between originals and licensed content. for most people, everything on Netflix counts as original content.
regular people don't care about this stuff like we do. if it's on Netflix, the perception is that it's a Netflix original. that's what happened recently with Lifetime's You.
Netflix's growth is not dependent on hit shows, that's a fallacy. in the US it is basically already at full penetration(remaining growth will come from demographics and crack down on password sharing). US in now at 60M subs, will probably settle at 80M-100M subs.
Internationally it is still early innings, but growth is not dependent on hit shows, it only depends on time. Netflix has got such a massive lead internationally on: 1. brand 2. content 3. technology 4. distribution, that it is really only a matter of time
Netflix will conquer almost every country it operates in, and by conquering I mean reaching peak pay tv penetration. just look at the graph, International is only at the beginning, lot of runaway is left
re: content spend.
Netflix's dominance is a byproduct of the content spend, that's the flywheel. Netflix can spend more because of its overwhelming scale(fixed costs are distributed between more subs), and subs gets amazing value because there is so much content
Netflix's dominance is a byproduct of the content spend, that's the flywheel. Netflix can spend more because of its overwhelming scale(fixed costs are distributed between more subs), and subs gets amazing value because there is so much content
the quality criticism on Netflix is a complete utter bulshit. quality is a function of budget. yeah, sometimes a network might hit on a few shows while not spending much (like AMC), but it's mostly luck, it's not sustainable. money wins in the end.
it's similar to professional sports actually(outside the US because its sports leagues are quasi communistic). Think about Euro soccer. sure, a poor franchise might get lucky and win in a given year(like leicester) but over times the rich clubs dominate. it's the same in content
re: Amortization.
I think Netflix's policy makes sense, but it isn't really important so I don't want to dwell on it
I think Netflix's policy makes sense, but it isn't really important so I don't want to dwell on it
re: the attractiveness of the Netflix "bundle".
That's simple. because Netflix is the only globally scaled player it has a significant economic advantage on everybody else. the marginal content cost per sub is much lower for Netflix
That's simple. because Netflix is the only globally scaled player it has a significant economic advantage on everybody else. the marginal content cost per sub is much lower for Netflix
that enables Netflix to offer more content for less price, you can't beat that offer. let's run a simple model to illustrate it:
Company A has 10,000 subs and spends $1M on content, it needs to charge each sub $100 to breakeven.
Company A has 10,000 subs and spends $1M on content, it needs to charge each sub $100 to breakeven.
Company B has 1M subs and spends $10M on content, it needs to charge each sub only $10 to breakeven.
from the consumer perspective he has to choose between paying company A $100 and get $1M of content or paying $10 to company B and get 10x the amount of content.
from the consumer perspective he has to choose between paying company A $100 and get $1M of content or paying $10 to company B and get 10x the amount of content.
the choice is pretty simple isn't it? well, that's the competitive dynamic in video streaming in a nutshell. scale is everything, it creates a lot of economic surplus because the content spend is a fixed cost and the marginal cost to serve a new sub is close to zero.
re: reliance on external providers.
Netflix is not dependent on content providers for licensed content, it's the other way around. I already touched on it in the linked Friends thread
Netflix is not dependent on content providers for licensed content, it's the other way around. I already touched on it in the linked Friends thread
re: winner take all dynamic.
because video is differentiated and the experience is not very personal, the market will probably be able to support multiple players at maturity. the ability to raise prices will depend on the value offering
because video is differentiated and the experience is not very personal, the market will probably be able to support multiple players at maturity. the ability to raise prices will depend on the value offering
Because Netflix will structurally be able to offer more value than anybody else thanks to its global scale, it will have more pricing power and will be able to exert it to a greater degree.
