
Netflix CEO: 'We got overconfident' - jkuria
http://money.cnn.com/2011/12/06/technology/netflix/index.htm?hpt=hp_t2
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gxs
I feel bad for netflix - but at the same time this loss of customers was a
long time coming.

I had friends that had been paying for netflix for years, barely checking out
a movie or two a year. What netflix did was stir the pot - their price hikes
kind of jolted these people and reminded them of their subscriptions. Had
netflix done things slowly, these same people would never have noticed and
everything would be ok. The reason I am so harsh on netflix, is because surely
they were aware that a large segment of their users were almost dorment - did
it really not occur to anyone what would happen if they rocked the boat?

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ebbv
That comes pretty close to describing me. I had instant streaming + 2 discs +
blu ray and I would usually only send back 1-2 discs per month, if that. One
time I went 6 months without sending a disc back.

Then they hiked the price of my plan by over 25% without any consolation at
all. I cancelled my entire plan. Loss of $23/mo from me alone.

I won't be signing back up, either. There's other options and Netflix has done
nothing to win me back at all. They expect me as a loyal US customer to fund
their expansion into Europe (which was the cause of the major content fee
hikes that everyone was using to excuse the price hikes.) Uhh, no. I'm not an
investor, I'm a customer.

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redthrowaway
Everything I've seen from Netflix tells me they get it. They fucked up on a
couple tactical moves, but they know where the future is and are positioning
themselves to be there. Even the second stock offering makes sense in the long
run: better to maintain market share and grow the market than to tighten the
belt and focus on high-margin offerings at the cost of the platform,
especially when competitors are making big investments.

Had I a few dollars to invest, Netflix at a 74% discount seems like a pretty
sweet long-term deal. If they pull it out I make out like a thief, and if the
stock drops much lower they become a very tempting acquisition target for
Amazon/Apple, or possibly even Google.

~~~
wheels
> _Netflix at a 74% discount_

The missing piece of data is that Netflix was massively _overvalued_ before,
and that now they've just jumped down to a very _normal_ price to earnings
ratio. Just for comparison:

    
    
      NFLX P/E: 15.49
      AAPL P/E: 14.12
      MSFT P/E: 9.33
      GOOG P/E: 21.26
      AMZN P/E: 101.21
    

Amazon and Netflix were the two before which completely stratospheric prices,
and now Netflix has come back down to earth. From what I've read, lots of
hedge funds were shorting Netflix since they figured this had to happen
eventually.

~~~
sneak
Visualized:
[http://ycharts.com/companies/NFLX/pe_ratio#compCos=AAPL,MSFT...](http://ycharts.com/companies/NFLX/pe_ratio#compCos=AAPL,MSFT,AMZN,GOOG)

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sakai
While nonetheless a total fiasco, it's worth observing that the recent Netflix
debacle is a rare example of a major failure that stems from being too
strategic and conscious of long-term trends (hyperopic vs. myopic).

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marvin
I think the current situation can resolve in one of two ways. I don't see
Netflix, which is a tech company, being able to compete with the movie studios
on the production side.

Either Netflix gives in to the movie studios' demands and enters
licensing/pricing agreements on the studios' terms, or the movie studios will
use a separate provider of streaming services and cut Netflix out entirely.
The studios have been fighting web technology tooth and claw (usually in
stupid ways), but the underlying motivation is that they want control of the
price model. There is no technological reason why they won't be able to
achieve this, even if their products will in the end be distributed through
the web.

There are already startups working on portable and efficient streaming
software which is specialized for licensing to content _producers_. If one of
these companies can create a unified brand and payment portal while giving
control to each individual studio, Netflix will be a second-class citizen in
the media distribution world. I guess Netflix could take this role on its own,
but it would go against its vested interests (ironically, exactly the same
situation Blockbuster was in before it got crushed by Netflix).

There are probably some antitrust issues that will come into the light if this
scenario plays out, which might mitigate things a bit. But to me this seems
like a very large threat to Netflix's success. I am going to say the unpopular
thing here: Netflix's best option for long-term survival is to allow each
studio to set its own pricing/licensing terms.

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coffeemug
_I don't see Netflix, which is a tech company, being able to compete with the
movie studios on the production side._

Could you extrapolate as to why? I don't know anything about the industry, but
it seems like the only reason the movie studios control production is because
they own distribution. With Netflix controlling a massive distribution channel
and having access to large amounts of capital, it seems that they could easily
compete with the movie studios on production (and probably win because they're
not encumbered by old business models and can offer better deals to top
talent).

~~~
marvin
My point is that movies are the movie studios' core business. It's what
they've specialized in for decades. The article specifically mentions HBO as a
key competitor, and HBO is known for incredibly high-quality shows. I have a
very hard time believing that Netflix will be able to make anything remotely
as good and popular as Hollywood's movies and shows, unless Hollywood
collectively does something very stupid to piss off its existing actors,
writers and producers.

Netflix are great at distribution, but they need to have something to
distribute. There is no use in distributing a product that no one wants. The
movie studios' key product isn't distribution, it's the movies themselves.
Things are different in the music industry, where many of the labels are
simply an intermediary between the musicians and the customers. But the
product and distribution are much more connected in the movie industry.

~~~
sardonicbryan
I don't think it's an insurmountable challenge. It seems like over the past
decade, a number of cable channels have started producing more HBO-like
content with decent success. FX with Nip/Tuck, Justified, etc., AMC with Mad
Men, Breaking Bad and The Walking Dead, and even Starz with Boss.

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johnnyjustice
Overconfidence teaches you your limits, live and learn

