Great Debate: Will Netflix emerge from its big collapse a long-term winner?

Moderated by Lawrence Dignan | November 7, 2011 -- 07:00 GMT (23:00 PST)

Summary: Will Netflix emerge from its big collapse a long-term winner? Steven J. Vaughan-Nichols sees big gains ahead. Christopher Dawson sees more pain.

Steven J. Vaughan-Nichols

Steven J. Vaughan-Nichols

Yes: Big gain

or

No: More pain

Christopher Dawson

Christopher Dawson

Best Argument: Yes: Big gain

Closing Statements

Why Netflix can still win

Steven J. Vaughan-Nichols

So, with management missteps, grumpy content providers, disillusioned customers and potential competition from Amazon, Apple, and Google why do I think that Netflix can still win? It's simple: They still have no real competition.

Netflix is still the largest one price for all you can watch DVD and streaming video company out there. Its non-video rivals may be bigger, but their video-on-demand services still use a pay to watch a single model. Netflix's video rivals, such as Redbox and Blockbuster, have little streaming presence and they've also raised their rates in the last few weeks.

It's not easy to set up a big-time video streaming company. You've got semi-hostile media companies; you have to partner up with content delivery networks (CDN)s; you've got to get your player software in DVD players, media-extenders, etc.; you must set up serious video server data farms. It's a big job. Netflix already has all the parts and its one price business model. No one else does.

Netflix - It's terminal

Christopher Dawson

My colleague, Steven J. Vaughan-Nichols, outlined some very reasonable arguments explaining why Netflix will thrive in the future. Most importantly, he cited their subscription model, noting that "no other streaming service offers so much for so little." He’s right, of course, but this is hardly a defensible market position.

Perhaps the clearest reason that the company's unfortunate fate is already sealed, though, is the changing hardware, software, and content landscape. Ubiquitous streaming HD content on mobile and other connected devices is just around the corner. With Apple retaining dominance in the tablet space and Amazon dumping their Kindle into the market, the concept of ecosystem has never been more critical.
 
Too many strong competitors, too many PR gaffes, and too clueless a leadership team mean that Netflix was in the right place at the right time 10 years ago, but missed the boat for 2012.

Netflix will survive, thrive

Lawrence Dignan

This debate was a bit strange because the two parties often agreed. Dawson argued that Netflix has more pain ahead---and could be right. Vaughn-Nichols agreed that Netflix may still take its lumps, but will recover in the long run. In the end, the winner comes down to time frame. I'll side with Vaughan-Nichols on this one: Netflix's mistakes were messy, but not fatal. Netflix has its issues, but the business has scale and can be defended against rivals.

Doc's final thoughtsIN PARTNERSHIP WITH Ricoh

Doc

Doc has to agree with Christopher on this one. Only the death of Netflix may not be long and painful, it could be short and painful. As Christopher points out, this is a public company and subject to the whims of the market along with the whims of customers. The company’s stock has already dropped from a high of near $300 to $90 per share – that’s a stunning loss of corporate value.

You only have to look at the fate of video-rental mega-chain Blockbuster to see this movie play out. At its peak, Blockbuster had over 43 million members in the United States, over 6,500 stores worldwide, 60,000 employees and $4 billion a year in revenue. But then technology changed, the market was not kind, and in April Blockbuster was purchased out of bankruptcy by Dish Networks for $320 million. Yes, it’s still around, but is a shadow of its former self and clearly no longer the leader in video rental, streaming or anything else (despite trying very hard to make the appropriate transitions).

Netflix worked because it was the right service at the right time. There is no guarantee that the new streaming model for Netflix will be successful, despite the company’s 28 million subscribers. People dropped their loyalty to Blockbuster pretty quickly when something better came along so Netflix needs to be careful. It’s a fast moving world and customers will go where there is convenience, good pricing, and the right technology. Today’s Netflix could easily be tomorrow’s Blockbuster. Brand loyalty isn’t what is use to be.

Talkback

39 comments
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  • RE: Great Debate: Will Netflix emerge from its big collapse a long-term winner?

    Marketing ploy, it worked for coke so why not NetFlix
    wazusa
    Reply Vote I'm for Yes: Big gain
  • RE: Great Debate: Will Netflix emerge from its big collapse a long-term winner?

    I predict more pain ahead for them if they don't come up with something innovative soon!
    LOUIETR ...
    Reply Vote I'm for No: More pain
    • RE: Great Debate: Will Netflix emerge from its big collapse a long-term winner?

      The bottom line is Netflix wants so change it's business model to streaming only... because they make a ton more money on streaming than with DVD (although that is still very lucrative for them). However, they've made one bad deal after another with the studios, and have made lots of sacrifices and concessions that will haunt them (let's ignore the recent price hikes and stupid decsions for now).

      For starters, their streaming content sucks, period!! Their customers have to wait 28 days to get new releases (on DVD only), that's fine, but they should have conceded the 28 days only if they could stream new content. Without streaming new releases their streaming service will go nowhere, and to me it's currently worth $0 per month.

      Starz has already walked away from Netflix, studios are now in the power position and dictate their terms and conditions to Netflix, more money, less streaming content etc. The studios have absolutely no desire or motivation to stream new releases. They want to sell DVD and BluRay discs. Hollywood lobbyist have Senators and Congressmen in their pockets and "our" representatives will do whatever the studios want and pass almost any law the studios write up.
      Masari.Jones
      Reply Vote I'm for No: More pain
  • RE: Great Debate: Will Netflix emerge from its big collapse a long-term winner?

    It's not really up to Netflix or Apple or Google or Hulu. Securing content deals is key. Companies like Netflix and Hulu live or die by the content they can secure. And here it's the content owners who will determine the winners or losers. This is why i'm not sure I'd want to invest with any movie streaming service. Unless there's a compulsory licensing scheme for movies just as there is for songs on radio, comapnies like Netflix will utlimately be pawns on the movie studios' chessboard.
    dsf3g
    Reply Vote I'm Undecided
  • ATV2 Supports Netflix out of the box

    btw
    bloveless
    Reply Vote I'm for Yes: Big gain
  • Good enough

    Netflix doesn't have to be the best anymore. They have to be good enough to not lose customers. If they could come up with a killer app - something that makes them more attractive on one hand while making it more difficult to switch services on the other - that would cement them as #1
    kiz
    Reply Vote I'm for Yes: Big gain
  • titles, titles, titles

    what it all comes down to..is titles. I browsed my Netflix instant streaming catalog the other night...finding myself saying "Seriously" and "What the ___ is this" more than "sweet" or "awesome" "can't wait to watch this". Now without literal DVD/BR services (I dc'd after the price hike), they never have anything remotely close to new releases, instead having a bunch of movies I don't want to waste my time with. Even at 7.99, i would rather cash that in and get TWO new releases through Best Buy's Cinema Now or Vudu app (3.99 HD New Releases) through the PS3 each month. With these options and as a Amazon Prime member, with a slew of instant videos there, Netflix better step it up in way of titles or it may have just lost another customer..
    Lttlwing16
    Reply Vote I'm for No: More pain
  • RE: Great Debate: Will Netflix emerge from its big collapse a long-term winner?

    Even thou I???m undecided ??? my true answer is I DONT care - I have so many ways to receive video one more or less isn't a big deal - price increase for less than new content, meh, go someplace else.
    eric_s@...
    Reply Vote I'm Undecided
  • Too much competition

    Content has been the Netflix streaming achilles heel for ages. I do sometimes find things I wish to watch but I have to REALLY dig and get creative. I usually spend more time finding something I want to watch than I do watching it. Sometimes have good TV shows, but never the seasons that you need.

    With VUDU and Movies on Demand from the cable companies there is almost always something I legitimately want to watch. At one movie a week, it is more expensive than Netflix, but mostly higher "value per dollar".

    And Netflix really hasn't shown that they CAN improve that selection. The studios want them to fail and will charge them through the nose. And they have lost the good will of the customer in a big way. No scrappy upstart "fighting the man for you" status any longer.
    SlithyTove
    Reply Vote I'm for No: More pain
  • RE: Great Debate: Will Netflix emerge from its big collapse a long-term winner?

    Money has a way of incenting competition. Netflix messed up, big-time, not just with the move being debated here, but more so IMHO with the loss of Starz. 800,000 defectors and counting. I almost bought a Netflix device myself, but then the Starz debacle emerged, and I said, "No, thanks." Netflix does NOT care about their users.
    paulstanley
    Reply Vote I'm for No: More pain