modest proposal Profile picture
Jul 27, 2019 14 tweets 5 min read Read on X
Just finished rereading Netflixed. Good quick tale of the founding through Qwickster. Renewed appreciation for how farsighted and bold Netflix was. At almost every decision point, they went for broke. I want to focus on one of those, because it’s pretty wild. Total Access.
Blockbuster couldn’t find a way to overcome Netflix head to head. But market research showed ability to combine rental by mail with in store was a game changer. Amazingly Blockbuster stores were not wired (2007!) so they had to rig a system to connect online and in store rentals.
Netflix immediately realized the threat. “Had to find a way to make Total Access disappear, because ... no good way to counterprogram”
Total Access grabbed 1M subs in two months and was taking over 100% share. Netflix modeled that it was bankrupting Blockbuster, So Hastings invited Antioco to a meeting in Sundance.
Hastings told Antioco he was spending the company into ruin and offered to buy Blockbuster Online subs. He later followed up with $200/sub offer. Antioco demurred, realizing he had Netflix on the ropes.
Now the fun starts. At Blockbusters Board meeting. Antioco suggested they turn down the offer. The Board agreed. Then turned to his comp. He had hit the targets set by the Comp Committee so expected perfunctory approval. Icahn exploded. Icahn was on the Comp Committee!
Antioco sues the Board. Late one Friday night, after midnight and apparently a few martinis, Icahn called him at home. Antioco‘s wife ran and got him a bottle of tequila, which wow absolute hero of the story, and they proceeded to go bonkers at each other.
TL,DR: Antioco quits, and against all logic instead of hiring the COO, Icahn hires an ex 7-11 retail guy whose plan is to do everything that Blockbuster already tried and failed at. After he laid out his plan, the entire exec team sold most or all of their stock next open window!
Meanwhile at Netflix, they cut guidance and announced subscriber losses.
The architect of Blockbuster Online quickly left after the new CEO came in. He ended up at a dinner with Hastings. “You had us in checkmate” Hastings told him.
There are always what if stories on the road to domination - Yahoo buying Google etc - and Netflix is no different, except they may have more than most. But what if Icahn hadn’t gone full Icahn is one of my favorites, because of course he’s Carl freaking Icahn /end
Early on Hastings had proposed Blockbuster buy Netflix for $50M
One guy who ran the numbers and figured Blockbuster wouldn’t have the stomach for mutually assured destruction was @mariocibelli. He is the OG Netflix 🐂.
I ran out of space, but this was savage. Not only did the Blockbuster execs sell all their stock, they bought Netflix stock! Not sure I know of any other example like this

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More from @modestproposal1

Jun 28, 2023
Something that was noticeable, on each of MSFT peer review slides for Apple, Amazon and Google, they highlighted progress on proprietary chips



And then the Azure and Windows slides both have develop custom silicon chips as long term drivers. We knew that this was the case, but just interesting to see them highlight other co's successes and set goals for it.

"base of our stack, our custom silicon efforts will help us remain competitive.. Our efforts will be a mix of internal and partnership... ultimately, we will need to become a first-class provider of chipset designs, especially the most critical chips given our scale in the cloud"
Read 4 tweets
Jun 28, 2023
the TL,DR on the MSFT Board deck

Snowflake? Point player.
Twilio? Here we come.

(also interesting to note the play for open source devs and cloud natives)
Read 6 tweets
Jun 27, 2023
FTC request for comments on hyperscalers interesting. Can tell a lot by each participants responses.

ORCL/NET: whining about egress fees
GOOG: whining about MSFT/ORCL leveraging on prem biz to win cloud
MSFT: "very competitive market, even IBM"
AWS: history and tutorial on cloud
this is arguably more descriptive from AWS then anything they've said to investors about AI

Google complaining about MSFT and ORCL and then pitching Workspaces right in the doc. ABC guys, ABC.

Read 6 tweets
Jun 3, 2023
New collection of Messi vs Ronaldo charts. It’s pretty amazing how statistically similar they are. Ronaldo slightly more goals, but because of penalties. Messi more run of play goals. Messi far more assists, mostly after Ronaldo worried about injuries and stopped moving as much. ImageImage
Great chart contextualizing Messi and Ronaldo’s goal scoring Image
I would not have guessed Haaland is merely tracking Mbappe so far, given how prolific he seems. And Ronaldo was absolutely scorching early on. Shame he liked to eat. Image
Read 6 tweets
Jun 2, 2023
Look forward to someone doing the math but re AMZN wireless, are they gonna subsidize phones? Looking at Prime subs spend vs Non-prime, churn, and offering $0-10 lines, phone subsidy dramatically impacts net economics. If no subsidy, effective cost to consumers is much higher.
Other calcs

- likely at risk to churn Prime HHs have lower spend than avg Prime HHs

- need to model ratio of at risk Prime HHs retained vs not at risk choosing wireless/reducing NPV

- as acq tool for non Prime HHs, almost certainly have lower spend/LTVs than existing Prime HHs
Assuming monthly cost to carrier is around what cable co's seem to be paying VZ (even tho that was sweetheart deal), depending on ratio of at risk retained to non at risk who take wireless, can see the math working. But phone subsidies would really impact that calc.
Read 5 tweets
May 16, 2023
After a convo with smart friend, I wanted to test hypothesis that shift from Cable Nets to DTC meant more capital employed, smaller profit pool, and lower returns.

Very rough cut, but I took the media biz (Cable Nets/Studios, no Parks or O&Os except NBCU).

Results seem clear. ImageImage
To start, I disaggregated 2016 media co's into Cable Nets and Studio to the extent possible. What you can see is that the Cable Nets earned extraordinary returns on tangible assets. These were amazing biz. Studios ex DIS were not nearly as good. On the right are the consolidated. Image
When you compare 2016 to 2026, you can see Tangible Assets employed by the media co's will have nearly doubled. But EBIAT is actually down by 30%. Yes, some of that is intangible amortization, but the point holds, a huge increase in assets employed yielded no incremental profits. Image
Read 6 tweets

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