Some Questions for Netflix

Netflix killed the game in 2015.

For starters, they cemented their name as something having to do with new and original content…they’re officially no longer the place you go to just to look at old stuff.

Then they made their stockholders money. The stock price was up 130% in 2015, built off strong revenue performance as the company continued to grow their subscriber base at a great pace overseas.

Then of course there was the dethroning. For the first time in some 14-odd years, Netflix took away the Golden Globe nomination lead by getting 8 nominations to HBO’s 7.

And let’s not forget “the decision” to allow up to 1-year off of work, with pay, for any (non-warehouse) employee having a child.

That, my friend, is a good year if your name is Reed Hastings–or if you or your significant other is pregnant.

But with all that success, what should we expect from Netflix in 2016, and can this performance run really sustain itself for another 24 months? I’ve got a few questions for the Hasting’s led media powerhouse.

What happened with that whole missing your estimates thing? 

For a company that missed its subscriber growth estimates (while stating that it went conservative at times with those estimates), its stock price sure did go up a lot. It’s hard to think of a company that led the stock market in growth after disappointing analysts 2 out of 4 times, but Netflix’s timing, helped them a great deal. Mainly, analysts didn’t seem to notice it all that much. Sure, the stock took a little hit, but it always recovered–rarely with any financial reason to reverse the original line of thought. Instead, Netflix rose and rose and rose–mainly off the backs of the studios and cable operators Netflix owes its entire existence to. Essentially, when that fateful day in August of 2015 arrived in which Disney admitted to receiving fewer affiliate fees than anticipated, all of the traditional video world went down on Wall Street, and folks turned to Netflix to dump the cash.

This was your typical Wall Street move. A isn’t working, so let’s try Z out since it’s at the opposite end of the spectrum. And while that sometimes works in sports, it’s not going to work for Netflix. The difference here being that Netflix isn’t the opposite of the cable networks and operators. It’s the distant cousin of traditional video–not the twice your age step brother. Netflix has essentially tied itself more and more to the studio model. Now with bundles of cash and a warchest of subscribers that give Netflix money each and every month, it can definitely survive the ups and downs that a typical studio cannot. But if Netflix doesn’t produce hits, they don’t produce new subscribers. I can only wonder how much in terms of never-gotten or dropped-out subs they had as a result of Marco Polo being a remarkable flop. My point–getting back on track–is that Netflix, while certainly less risky than a studio, stands to struggle with some of the same issues a studio will. And if Wall Street thinks that cable churn rates are getting too high, I suggest they look inside their crystal balls and make sure Netflix’s customers don’t appeal to the same type of behavior.

Is the competition going to catch them? 

It’s almost impossible to expect one of the copy-cats to even come close to Netflix in 2016, but 2017 is but a year away, and the groundwork gets laid now. Say what you will about Amazon Prime, but they’re doing some cool stuff, too. Working with Spike Lee and Woody Allen could be the beginning of something special for Amazon. Then again, it’s not just the big companies doing work, but it’s also the smaller ones. Roku has sold a million smart TVs. Vimeo is having success selling content via the EST model. And Vessel…well, they’re still hanging on.

But it goes even deeper than that. CBS, HBO and Showtime all launched heavily marketed VOD apps last year. Meanwhile, companies like VHX and Zype look to make creating your own Netflix no harder than creating a YouTube channel.

Again, I don’t think any one player will catch or threaten Netflix in 2016. But collectively, they can easily eat away at Neflix’s maketshare, and make it harder and harder for Netflix to reach those subscriber goals.

Will Netflix dare go live? 

Netflix doesn’t appear to be interested in live programming, but who’s to say they’ll feel this way 11 months from now. Truth (and by truth, I mean guessing) be told, Netflix just doesn’t have the technology to make this a feasible option right now, and I wouldn’t be at all surprised if they’re working around the clock to get this out to market. Because for a company that thrives on experimenting, one can only imagine that a live special of some sort is on its way. With Netflix, there’s little immediate financial value in having a livestream event as they don’t do advertising. But, if it means signing up new subs and retaining the ones they’ve got–they’ll do whatever it takes.

Oh, and just as a hint, Reed. Those Thursday Night Football games are up for renewal this off-season. 

This entry was posted in Media, Tech and tagged , . Bookmark the permalink.