Evan Johnson wrote a blog post titled The End of Streaming’s Golden Age (July 1, 2022).

« In their quest for streaming domination, Netflix engaged in what I called the ‘Uber cash incineration strategy.’ »

« The reason I call this strategy ‘cash incineration’ is that it’s a terrible strategy. Business is a competitive marketplace where most outsized returns to companies are competed away over time. The second that a Netflix or Uber no longer provides the benefit its customers are used to a market opportunity emerges for another schmuck to come in and try the disruption game all over again. However, even if the business value goes to zero in the long run, in the short term there’s money to be made so this behavior remains motivated. »

« Netflix lost Friends after paying $100-million for an additional year of rights in 2019. They then replaced the show with Seinfeld to the tune of $500-million over five years. Around the same time, The Office was pulled off the platform in the US despite Netflix being willing to pay $90-million a year for it… Shonda Rhimes has a deal that could run into the $350 to $400-million range in its current form. »

« Over the past three years, Netflix has spent over $13-billion, $11-billion, and $17-billion on ‘additions to content assets.’ For context, General Motors spent $7.9-billion, $6.2-billion, and $6.8-billion over those same years on research and development. Before anyone says that Netflix ought to spend more on asset creation because it’s a high flying tech company, I’d point out that Tesla spent $2.5-billion, $1.4-billion, and $1.3-billion over those years while Microsoft spent 12% of revenue in 2021 on R&D which at Netflix’s level would equal around $3.6-billion. »

« As I type these words Netflix’s stock price is down 70% year-to-date. »

« Netflix got lucky in that its growth occurred during a time of extremely low capital costs… They are currently sitting on $15.5-billion in long-term debt principal obligations. »

« This leads us to the myth of innovation. I am on the record multiple times – some say far too many – claiming that innovation as currently peddled in the market is nothing more than cheap capital covering up old business models. »

« In short, contemporary disruption and innovation consist of taking cheap as shit capital, using it to subsidize users so as to garner a customer base, and engaging in capital attrition with competitors, only to then revert to pre-disruption business models that were proven to generate profits. »

« Don’t even get me started on how the FinTech, Web3, and crypto bullshit all vibe with this narrative arc. »

« The reason why Netflix (and others) are scheduling content releases in batches is for the purposes of coming up with advertising models. »

« You have to value it like a media company, not a tech firm. »

« this phenomenon is also happening in music streaming. Look at Spotify »


Related article from 2018: Stephen McBride wrote an article for Forbes titled Netflix’s Worst Nightmare Is Coming True (December 10, 2018)

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