NFLX
Two quick notes: we like reading and book lists, but this post by Farnam Street Blog is taking it into the obsession realm – unless one is really trying to build up his or hers anti-library. On Netflix: CEO Reed Hastings has some people confused with his comparisons of NFLX to Bank of America and the Oakland A’s.
Netflix is pushing into Latin America and the strategy is interesting: it’s trying to acquire content such as soap operas to stream them into customers’ homes. It’s good to imagine the trade-off playing in the Media companies’ strategy sessions – between the fear of cannibalizing sales and the need to partner with this strange ally now, while they’re still offering decent terms. We’re glad to sit on the sidelines.
While this is just part of the overall digital/ online content evolution, our subject today is TV. One story is a behind-the-scenes account of how Google TV came to be – and what’s at stake if and when they get it right (or when somebody else does it). The other story shows the experiments that “old-media” TV companies are running to benefit from – or to try not to get overrun by – the effects of social media as it regards TV watching. There’s a lot happening, and business models just aren’t defined yet. As we’ve said in our Q4 2010 report, “Experimenting has a cost. Failing to experiment, ditto.”
Our Q3 report is almost ready to go, and in it we will publish the first part of a text called “Castles of Sand, Walls of Concrete” – we’ve been working with this text’s theme for a while. We were positively surprised by James Surowiecki in the New Yorker magazine (cover date October 18th 2010) with an article called “The Next Level” that has a lot to do with what we wrote.
The 1st 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. The 2nd one is about Netflix, and this NYT story 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.
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 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.
Netflix is one of the most admirable cases around on corporate strategy AND execution. It shows how you can make billions out of simple things. That said, 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.
Read more about Netflix doing the right things at the right time
The Netflix Prize has been awarded and it’s a great example of crowdsourcing. But is such “open collaboration” a tool for every situation? How open do you really want to be? Some are looking at his and saying “hold your horses”. That’s always good advice in our book.
