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Netflix, studios and Latin America

IP — Tue, 10 May 2011 13:55:58 +0000

Netflix is pushing into Latin America, say both the Financial Times and Bloomberg, and the strategy is interesting: it’s trying to acquire content such as the popular soap operas to stream them into customers’ homes. It’s interesting to imagine the trade-off playing in the Media companies’ strategy sessions: on the one hand, studios are scared by the not-so-slow death of DVD sales and are perhaps starting to see Netflix as an inevitable ally. On the other hand, it’s also easy to imagine their reluctance to potentially cannibalize the Pay TV channel (pun not intended). We’re happy not to be in their shoes, but even happier that we don’t have to act when we don’t have conviction… More links on Netflix inside, including an interesting piece saying that part of Netflix’s success is due to its aggressive pay scheme.

The New York Times had this piece on May 8th highlighting Netflix’s monthly stock option award schemes. Another bullish part in the same article is worth highlighting: “A new adversary sounds intimidated. Charlie Ergen, whose Dish Network bought Blockbuster out of bankruptcy, says he does not plan to challenge Netflix on streaming because of its ‘insurmountable lead’.”

We’ve posted before on Netflix:

Recommendation software in Brazil – Dec. 10th, 2010

Two tidbits on Cisco – November 4th, 2010 – An article titled “Will Netflix destroy the Internet” has us thinking about the implications for Cisco, but it’s a nice reminder of the data-intensive aspect of Netflix.

Two small updates – Aug. 13th, 2010 – The second update is about “creative destruction” at Netflix.

Netflix doing the right things at the right time – Oct. 5th, 2009 – However, as we’d post on March 15th 2010, not always…

Netflix’s smart crowdsourcing initiative – Sept. 22nd, 2009 – The Netflix challenge was a pioneer crowdsourcing initiative that yielded success and quite a lot of “brand/business clout”.

Recommendation software in Brazil

IP — Fri, 10 Dec 2010 09:00:42 +0000

We’ve discussed the Netflix challenge in detail at Buysiders.com, as in this Sept. 2009 post. The “analytics”/ “data capturing and processing” theme is very important in our research. But we hadn’t posted about examples in Brazil! This Exame magazine article (in portuguese) solves this and mentions a few companies, including Saraiva. As people may guess even before reading the article, yes, the people behind this Brazilian “recommendation software” company did participate in the original Netflix contest.

Two tidbits on Cisco

IP — Thu, 04 Nov 2010 19:42:27 +0000

One: An article on Slate provocatively called “Will Netflix destroy the Internet?” highlighted a report on “Global Internet Phenomena” (which can be downloaded after a quick, free sign-up). In it, this excerpt highlights part of what makes Cisco so interesting as a “picks and shovels” play in the increased bandwidth usage trend: “Netflix is swallowing America’s bandwidth and it probably won’t be long before it comes for the rest of the world. That’s one of the headlines from Sandvine’s Fall 2010 Global Internet Phenomena Report , an exhaustive look at what people around the world are doing with their Internet lines. According to Sandvine, Netflix accounts for 20 percent of downstream Internet traffic during peak home Internet usage hours in North America. That’s an amazing share — it beats that of YouTube, iTunes, Hulu, and, perhaps most tellingly, the peer-to-peer file-sharing protocol BitTorrent.”

Two: This Financial Times story uses Cisco as an example of tech companies paying dividends and not getting “recognized” for it. In this case, we like the part that says “Behind all of this lies an uncomfortable truth for successful tech companies. Ultimately, the transition from being a growth stock to what the market would consider a value play is a painful one, usually taking years to complete. The decision to pay a dividend is often made early on in this transition. That explains why many tech entrepreneurs instinctively balk at the idea: it is like confessing to their own mortality.”

The next level

IP — Mon, 11 Oct 2010 21:12:56 +0000

We were positively surprised by James Surowiecki in the New Yorker magazine (cover date October 18th 2010) with an article called “The Next Level”. Without giving too much away, here’s one sentence: “Blockbuster treated its thousands of stores as if they were a protective moat, when in fact they were the business equivalent of the Maginot Line. The familiar sunk-cost fallacy made things worse. Myriad studies have shown that, once decision-makers invest in a project, they’re likely to keep doing so, because of the money already at stake. Rather than dramatically shrinking both the size and the number of its stores, Blockbuster just kept throwing good money after bad.”

Two small updates

IP — Fri, 13 Aug 2010 15:23:42 +0000

The first one regards AB-InBev and the fact that it’s still hard for “foreigners” to fully grasp it. Yesterday’s LEX column on the company has flattering but less than enlightened comments and puts way too much weight on the P/E ratio. Here’s a quick way to find ABI-related posts on Buysiders.

The second one is about Netflix. A quick search on Buysiders will yield a lot of material on the company, and this story in the NY Times sheds some (more) light on the company. It’s about creative destruction stimulated by the company itself. It doesn’t guarantee Netflix will win as the technology shifts continually challenge its business model, but it gives the company a fighting chance. Again, such a shifting business model is probably not the best playground for investors, but Netflix is still worth tracking for all the other reasons.

Quick update on Netflix

IP — Mon, 15 Mar 2010 18:09:52 +0000

We’ve discussed crowdsourcing and Netflix more than once. That it works for some uses better than for others is pretty clear… But Netflix has apparently messed up the database used in the original contest and that allowed some contestants to identify the actual people behind the movie choices, despite the promise of privacy. Needless to say, the FCC wasn’t too happy about it and lawsuits ensued – and Netflix had to cancel its “Contest 2.0″, at least for now.

Doesn’t mean that the tool doesn’t work, it just means that you have to be careful using it. Talk about hitting your finger with a hammer!

Netflix doing the right things at the right time

Gustavo Ballvé — Mon, 05 Oct 2009 21:26:54 +0000

Netflix is one of the most admirable cases around on corporate strategy AND execution. Their products are not exactly cutting edge, but their strategy, execution and specifically data use is out of this world. It shows how you can make billions out of simple things. That said, other than the data culture (a huge missed opportunity by Blockbuster in terms of the head start it could have had), they have to kill a lion a year to stay ahead. Investment-wise, we never got to the point where we felt we knew enough to invest in them – and don’t regret not doing it.

Netflix’s smart crowdsourcing initiative

IP — Tue, 22 Sep 2009 15:31:38 +0000

Two years ago, Netflix wanted to improve its movie recommendation system and decided on an experiment: let people have a go at it. The rules and official proposal are here, but the main idea was that if you could improve Netflix’s recommendations by 10%, you’d get a cool US$ 1mm. That contest ended on July 27th, 2009 with huge success – not just for the winners, but for other contestants as well who claim that the internal payoff of the learning efforts involved was already over the US$ 10mm figure. It’s a great example of crowdsourcing, and there are other examples of so-called “Open” business models (Innocentive jumps to mind).

But that’s not all that matters: is crowdsourcing then a substitute for companies’ R&D demands? Does it always work? How open do you really want to be? Some people are looking at it and saying “hold your horses”. That’s always a good advice in our book.

As for Netflix, they’re happy enough to have a Netflix Prize 2 on the works. Very smart: it keeps the ball rolling and takes advantage of the community they built. The press coverage doesn’t hurt, either.

But there’s more. We’d argue that the benefits of the Netflix Prize in terms of research in statistics/ data mining/ etc. in large data sets may be felt for years. It’s interesting to consider this in terms of efficiency gains for many different types of companies. It’s something companies all around the world should be paying attention to.

Here’s a video interview with Reed Hastings, Netflix’s CEO, at the time of the award.

Links:

Crowdsourcing page on Wikipedia

Jeff Howe’s classic article on Wired, his book and his blog

The teaser for Netflix Prize 2

Winning the Netflix Prize – NY Times, October 2008 (huge article with a video that apparently can’t be embedded here).