At what point is Netflix no longer considered a technology company? Streaming the amount of video that they do is definitely a monumental technical challenge, but if content is the key to their future, it seems like they are an entertainment company.
This trope of establishing businesses as either "a tech company" or $INDUSTRY needs to end. You either provide a product or service in a particular $INDUSTRY and are technology lead, enabled or not. Netflix, Facebook, etc are "technology lead" businesses. Tech is not an industry, it's a medium in which a value proposition is delivered.
This came up in a thread about banks. Some finance institutions, or at least their employees, nowadays explicitly talk about themselves as technology companies that do finance. I had an interviewer at Morgan Stanley say this to me just last year. I used to work on the Quartz platform at Bank of America. It's a fantastic technology stack including dev and release tooling, authentication and security layers, configuration defined infrastructure, custom GUI and web front end libraries and tons of other really cool state of the art tech. All the big banks employ many thousands of developers.
A lot of companies are realising that for technology to be a competitive advantage it has to be more than just off the shelf. Banks are pushed this way partly due to regulatory pressure - they can't simply outsource their legal obligations or therefore the technology that implements them. But that's just an additional pressure pushing them that way. It's certainly not the only one. Nowadays lots of service companies are going this way.
There also companies (like the one I moved to recently) that are old, established SME (small/medium enterprises - more medium in my case) who are in niches that just aren't large enough for off the shelf to work but not small enough to do without.
I was talking to my boss the other day and he said that I was pretty modest compared to some of the programmers he'd dealt with at out sourcing firms over the years (they tried that first, it didn't end well), I think my response tickled him "I'm just a negative plumber with a keyboard, if I do my job right at this end shit doesn't come out the other".
I think the hubris of "We must do world changing things/disrupt everything" to provide tangible value is a by-product of the hype around the startup scene and 'entrepreneurs' (that is people who set out to be an entrepreneur first and figure out at what later).
I've never wanted that, I've only ever wanted to be compensated decently and work at a job where I can see measurable value in what I do, in my case that's writing production/factory management software that saves more money than it costs and makes the life of the end users more pleasant, it's also not particularly stressful and I go in at 9 and leave at 5 every day with complete technical freedom and time for that rarest of rare things, documentation.
After spending the last 5 years in high pressure, insane demand environments I'm never going back, I'll go do something else before I go back to that, it's simply not worth it (to me).
I agree with you 100%. However, the $INDUSTRY label that a company receives, is often a huge factor in its valuation. Compare the forward P/E of Netflix vs. other entertainment companies getting into streaming. Netflix receives a significantly higher P/E due it being considered (right or wrong) a 'Tech' stock with more growth potential.
What about a company specialized "say" in web socket. That is it provides Web Socket related products and consulting. Doesn't that make it a Technology company?
Netflix is clearly a "technology + entertainment" company.
The "technology" distinction isn't mutually exclusive with another vertical—exactly the opposite. Companies can outmaneuver competitors by applying "technology" to a specific vertical. The reason Netflix has been able to crush competitors is both because they get entertainment AND because they get technology.
The only pure "technology" companies I can think of are developer tooling products, or research labs.
To some degree. It can define their various positions. Pure technology company for example can be easily against DRM and copyright maximalism, while for media company that's a more novel view on things. It's not an inherent relation, it's just most media companies are conditioned to think that way.
This is spot on. Apple is going to start making self-driving cars; does this make them an automotive company? No, they are still a technology company and frankly who cares? The real story here is how Netflix went from swapping DVD's for you to spending $7B on content alone.
I think it would likely depend on the distribution of labor and expenses within the organization. Early on, Netflix (ignoring pre-streaming, mailed-DVD-movie days which I'm sure was an entirely separate metamorphosis) didn't produce any content but merely delivered existing content, leveraging technology to do so. I imagine the vast majority of the org and the expenses were on engineers and engineers' salaries. In that sense, certainly I think we can agree it'd be defined as a tech company.
Now, I'd be very much interested to see how the expenses and org makeup has shifted. I'd predict that much of their budget has been shifted to purchasing and producing content. The question then is, how much of their actual org is doing that work? Is that work outsourced? Are they merely spending money on contractors and production teams in LA/etc? Or is it in-house?
If they're outsourcing the actual content production, then I imagine it requires a small subset of the org to lead acquisition and curation of this content. Thus I'd lean towards saying they're still mostly a technology company. But if the vast majority of their budget is spent on content acquisition, then maybe it's more of a media production company at that point.
Another good heuristic for deciding what a company "is" is to look at the part of the business that once removed would redefine or cripple the business the most. What seems more valuable? A Netflix that only produces content that is then streamed through someone else that handles the technology? Or the Netflix of old that only streams content they had no hand in creating? Whatever's more valuable is most certainly the direction the business will go, and consequently gives you the framing for how the company would define itself.
Netflix will always be a tech company, mostly given through the fact that they use their large amounts of data to both recommend users new shows to watch, and also use that same data to decide what kind of shows to green light.
What separates a traditional company from a tech company these days really just revolves around how much the company values tech. Do they have a CIO who goes to IBM and asks them to use cognitive computing to transform their business, or do they have engineers in house to build machine learning models to keep customers engaged with the company as a whole.
> What separates a traditional company from a tech company these days really just revolves around how much the company values tech.
I dunno; netflix has nice tech, but it's hardly without competition. I don't think you could even consider their tech a differentiator for customers; they could switch onto whatever tech HBO uses and leverage their existing content without subscribers even noticing.
Every large company has a tech component. Why do you think outsourcing data analysis vs doing it in house changes how an outsider should evaluate the business? What matters are why people pay them.
They value tech, but Netflix without their proprietary content is just a dumb pipe. In comparison to, say, a telco it's not very different -- nothing more than a commodity.
The tech stack in itself can be cool for an engineer to work on, but business wise it has little value. The only way to progress in this market is to focus on content. That's what makes (or breaks) a service.
>Why do you think outsourcing data analysis vs doing it in house changes how an outsider should evaluate the business?
This is the crux of the matter. Why roll your own tech when you can buy off the shelf?
Off the shelf tech is, by definition, old tech. If you roll your own you can have a new feature, optimisation or bug fix in production the same day it comes out of QA. The lead time for vendor tech can be months, or even years. If you prioritise a new feature likewise you can have your devs working on it the same day it gets green lit. Try that with a vendor. Controlling your own technology stack, sometimes even developing your own dev tooling internally, can be a decisive competitive advantage.
I wouldn't expect any major studio (which is what most of these companies basically are at this point) to handle their streaming by calling IBM and write a check. On the other hand, implementing a reliable streaming platform--while requiring a lot of developers, ops people, and money--is a fairly well-understood problem at this point.
I expect that a branded streaming-as-a-service platform will absolutely exist at some point relatively soon. But I'm not aware of examples today.
That said, I'll bet on the company with the content rather than the company with an incrementally whiz-bangier streaming platform.
But surely you can perceive a difference between MLB, which developed in-house tech that gave them a competitive advantage versus other sports groups and enabled them to build a successful business providing that service to other companies, and the ones that buy in that tech. MLBs investment put them years ahead of their competition in that area.
I'm not sure how much was the tech. It wasn't all developed in-house anyway; they were a big reference for at least EMC ages ago. But certainly, like a number of the more successful media/entertainment companies, they recognized that technology was important at a time when you couldn't just get it off the shelf.
Today it's less clear that the tech is still as compelling a differentiator relative to the content.
I think it does. If you substantially develop your own technology stack, you're a tech company. It can be a small or large part of your business, but it's still a fact.
they could switch onto whatever tech HBO uses and leverage their existing content without subscribers even noticing.
I disagree; subscribers would definitively notice if Netflix lost its global ISP-hosted dynamically-allocated caching network, for example: https://openconnect.netflix.com/en/
There's more tech than what's visible on the surface.
Well, I agree their data center technology is impressive, but—again—it's hardly unique. HBO and MLB both serve similar levels of peak traffic with similar quality, though netflix manages to deliver some bitrate at almost all times whereas HBO sometimes hiccups.
I'd be interested if you could demonstrate there's a strong correlation between that and peak traffic—but I suspect things like GOT premiers will be highly competitive with netflix.
Furthermore, this is highly cacheable content. Again, netflix's tech is impressive, but at its core caching is a problem that has been solved and solved again. You aren't going to differentiate yourself by being a dumb pipe.
I highly, highly, highly doubt that netflix's tech is going to be a differentiating factor when people choose them so they can watch Kimmy Schmidt.
Going by the engineering salaries they seem to value tech quite a bit. I haven't heard that Netflix hired a bunch of IT vendors to deliver next-gen delivery platform, the way Sony / Warner Bros etc do.
There's no such thing as a "tech company" - technology is a means to an end, nothing something to sell in itself.
Netflix is a video/entertainment provider using newer technology to deliver better, faster and cheaper than others. The modernity of the technology is a spectrum that varies for each company and building-vs-buying to accomplish a goal has nothing to do with tech but is a tenant of running a business as old as the discipline itself.
I'm curious, what does the difference mean to you? I classify them as a technology company because they continue to innovate. With your argument, you could classify Facebook or any other social media site an entertainment company.
If forced to supply the XX one-word answer for which one Netflix is than it is entertainment. Doubt it's very useful to reduce things to one word in general though. Both entertainment and technology would delineate it from a car company though I guess.
I think the direction is clear. They are going to be a fully content based company in the near future. I think they should spin out their streaming technology arm into a separate company or license/sell services so other companies can benefit from it.
>At what point is Netflix no longer considered a technology company?
heh. This reminds me of "teams" where everyone is "qa" or everyone is a "developer". What's your mission if you're on the QA team? To QA all the things? That's not a mission.
What is a "technology" company's mission? It'meaningless. Technology is just a means to an end. Consumers don't buy technology - they buy products.
Netflix sells content. Using some cool tech, sure.
Whenever people get sufficiently used to streaming, I suppose. Cable TV/Internet and Satellite TV used to be new technology too, but now we consider them more communications and entertainment.
With more and more content providers pulling content, I'd say Netflix is the middle of the pivot from technology focused distributor to content creator already.
