Comment Re:In other news (Score 1) 78
I think the problem NetFlix is facing isn't obvious to everyone. With the expiry of their Starz license and the general consensus that the licensing deal they gave NetFlix was ridiculously cheap ($25 million a year for access to Sony and Disney movies) and will never happen again, with Starz or any other company.
This article claims that Netflix's (sic?) licensing fees are going to go from $180 million in 2010 to $2 billion in 2012. It was in the face of this impending tidal-wave that Netflix hiked its prices. Customers may have been shocked, but in hindsight it seems inevitable: this famous article from December of last year cites Time Warner's CEO saying exactly the same thing - that NetFlix was only competitive because of its unbelievable deal with Starz and once that deal expired NetFlix was screwed. And he said them becoming a major player in broadcasting was the equivalent of the Albanian army taking over the world - a quote that people immediately jumped on like it was the equivalent of Michael Dell saying Apple should be broken up in 1997. Except that right now it would seem the guy was onto something.
I think NetFlix are/were an innovative and exciting company and I wish them all the best. But I don't know if they're going to be around in 5 or 10 years, for the simple fact that the competition has caught up and can throw much more weight around when it comes to licensing content. At the end of the day, it might turn out that licensing made NetFlix, and will ultimately break it. Maybe I'm wrong - maybe they will be able to continue to out-innovate the competition, or sign some sweet-heart content deal that saves them. But I don't think I'll be investing in NetFlix at the moment.
This article claims that Netflix's (sic?) licensing fees are going to go from $180 million in 2010 to $2 billion in 2012. It was in the face of this impending tidal-wave that Netflix hiked its prices. Customers may have been shocked, but in hindsight it seems inevitable: this famous article from December of last year cites Time Warner's CEO saying exactly the same thing - that NetFlix was only competitive because of its unbelievable deal with Starz and once that deal expired NetFlix was screwed. And he said them becoming a major player in broadcasting was the equivalent of the Albanian army taking over the world - a quote that people immediately jumped on like it was the equivalent of Michael Dell saying Apple should be broken up in 1997. Except that right now it would seem the guy was onto something.
I think NetFlix are/were an innovative and exciting company and I wish them all the best. But I don't know if they're going to be around in 5 or 10 years, for the simple fact that the competition has caught up and can throw much more weight around when it comes to licensing content. At the end of the day, it might turn out that licensing made NetFlix, and will ultimately break it. Maybe I'm wrong - maybe they will be able to continue to out-innovate the competition, or sign some sweet-heart content deal that saves them. But I don't think I'll be investing in NetFlix at the moment.