My thouhghts on Netflix

I have been speculating about the future of Netflix for the past couple months and I have been reasonably accurate.  I had predicted the fall of Netflix about 7 months ago but everyone kind of brushed me off.

Anyway, I don’t think they’re completely doomed just in need of a big change. In fact, when they decided to spin off their DVD business to Qwickster I was sure they were actively pursuing acquisition.  Now that they have closed Qwickster I am left confused and just curious if there is any strategy in place.    Anyway, let me explain my assessment.

Think about it this way.  Netflix was a pioneer and was surprisingly successful as a very small player in a huge market.  I don’t think Netflix purposefully targeted such a big industry, instead I think they were just jazzed about being innovative and forward thinking.   The fact that they offered a complete TV solution with DVD and streaming was a very attractive offering,.  When they broke the combo service apart I think they fundamentally undermined their own value proposition.

Regardless of their success their industry was/is attracting a lot of attention(as it should have). What they eventually found is that they’re were up against the likes of Google, Apple, Amazon, ABC, FOX, CBS, TimeWarner, Cox, etc.  You get the idea, it’s a big player industry!

Being in the ring with such big players presents a lot of problems.  First, Netflix doesn’t have the cash (~330m) to go toe-to-toe with any of these companies.  In an industry were demands are increasing and studios are hiking prices up this is a huge disadvantage.  Secondly, if Netflix stock price continues to drop they might attract the attention of the hawks.  As these big players charge ahead into streaming TV their will be a lot of cash to play with which might mean goodbye Netflix (acquisition).

Well, all of that being said that, the announcement that they are killing Qwickster seems to contradict my assessment.  On the other hand, dropping the Qwickster brand may have been a defensive move to avoid the hawks.  Who knows what will happen from here?

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