Why I am very bearish on Netflix

I’ve been a subscriber to Netflix for 15 years. It’s a small cost. There are months I go without watching anything. But it’s there. And that’s how I want it.

That being said, I just want to put it on the record (again) that I’m bearish on the future of Netflix. The proximate reason is that major competitors with deep pockets and huge corporate backing are coming into the field of streaming (hello Disney!). But the ultimate rationale is that I think Netflix’s “superstar” system in relation to employees is going to kill any ability to navigate a tough patch with all hands on deck.

Here is a positive view of the firm’s system, How Netflix Reinvented HR.

Basically, Netflix’s culture is hyper-rational and takes for granted that its employees are similar. “Grown-ups.” This is fine during a growth phase, or when times are good. But if Netflix seems like it might not be the future, why wouldn’t all the superstar employees find better opportunities? And once some superstars start leaving, that will reduce Netflix’s prospects, meaning all the superstars will leave en masse, accelerating the decline. And according to Netflix’s credo, they would be behaving entirely rationally.

The company doesn’t make a pretense of loyalty to its employees beyond what they can bring to the table for the company. Similarly, the company won’t be able to lean on any sentimental loyalty from its employees if it needs to right its ship or seems like anything less than a sure bet.

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4 thoughts on “Why I am very bearish on Netflix

  1. Most people I spoke with dread the upcoming Streaming Wars as every media conglomerate (and non-media ones) is trying to prop their new, exclusive, etcetera streaming. For the low price of 1$ less than Netflix.

    The big threat to Netflix is that almost all of its back catalogue is going to disappear pretty soon as all those hopefuls will be pulling their IP back onto their own service. While Netflix is aware of the possibility and has massively invested in original content, the mass of the existing movies and series is what’s keeping a lot of people around.

    I think the most likely scenario is that Apple sweeps in and buys them out. They have more in common in term of culture (they’re both mainly tech firms, not media firms), and Apple is looking at boostrapping its original content for Apple TV, something that Netflix now has a good experience at doing. The alternative is Amazon, but Amazon is ramping up a lot faster at original content.

    The Disney mastodon is going to come out on top. They’ve got a captive audience in terms of family programming, so nearly every family is going to have a subscription. The real fight is going to be who gets the second sub.

    And of course, we’ll see Bittorrent numbers surge back up, after the drop when one-shop subscription seemed to be there to stay and provide the all you can eat buffet that people want.

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  2. My customer service experience with Netflix has been absolutely stunning. It has induced a lot of customer loyalty in me.

    But there have always been things on content that bug me:

    1. A lot of the British and American content that I want to watch is not available to me in my ‘geography’ (Asia – this is a perennial bugbear for me, and not just with Netflix; it happens with all sorts of stuff). I tried gaming the system by accessing Netflix via a VPN, and that worked for a while until Netflix cottoned on that lots of people in HK were doing it and shut down that work-around; also it resulted in me paying German value added tax (the VPN server I was going through was evidently in Germany, and I need my money more than the German government does). So I’m stuck with the geography problem. I watch a few Chinese movies and the occasional Japanese classic, but I don’t want Bollywood movies or Korean soap operas. I talked to the Netflix customer service people about this problem, and although they said (very nicely and apologetically) that there was nothing they could do about it, it does seem to have improved a lot since I bitched at them about it. Given how many people in HK (and no doubt in other parts of Asia, and in India it would be huge) were gaming their system via VPNs, maybe they got so many complaints about the geography thing that they decided they needed to do something real about it. Or maybe they have just become a lot more careful about not telling me about content that I can’t access anyway.

    2. Most of the old movies that are available that are any good, I have already seen. Most of those I haven’t seen are junk. Occasionally I stumble on a gem, but I have to work through a lot of dross to find one of those – I only need to watch about 10 minutes of a film to know whether I want to continue or not, but I end up watching 10 minutes of a lot of really junk films – which is of course why I never watched them originally when they came out.

    3. The Netflix original content is patchy. Some of the films are good, some are not. A lot of the series are bad – for whatever reason, they always seem to use different writers for each episode, which is virtually guaranteed to produce a disjointed story line and very variable quality, but they are not alone in that; CBS did the same with Star Trek – Discovery, which I started out liking, but quit on part way through the third season because it had turned into emotional garbage (I obviously differ with the critics on that – seems like most people enjoy watching other people endlessly emoting instead of actually doing stuff; not me). Hey, Michael Burnham was raised on Vulcan, and in the first series was suitably unemotional and logic driven, but by the third series she had become a blubbering mess, having an anxiety attack at every turn. I loved Sonequa Martin-Green when she was being all noble, strong, gutsy and Vulcan-like; as a weak, overwrought, hyper-neurotic woman, not so much. Wasn’t her, she’s fine, it was the script, which descended fairly quickly from very good to patchy, disjointed awfulness.

    As much as I hate to say it because of my generally excellent customer service experience, I think you are right; ultimately Netflix is doomed by their own HR model, and competition. Don’t know what I will do then. I can’t access Amazon Prime – not bloody available in my bloody geography, and I need Disney like I need a hole in the head. Apple TV maybe.

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  3. Believe Tetlock’s “outside view” is the right way to think about this. So ask: of major tech companies, how many had cut throat atomized superstar culture, and what happened to the ones who had it, and the ones who did not.

    Had/have superstar culture: Microsoft, Amazon, Facebook, Google, Netflix

    Didn’t: Apple, Slack, Twitter

    Just off top of my head. I think product/market fit more important than superstar culture. Netflix will do fine in downturn, since even when most energetic superstars leave, they’ll have enough to just keep doing the same old same old. At that point they don’t need to innovate. Just execute same playbook over and over.

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  4. From Wolf Street last year:

    “So here we have it: A mature company that has been publicly traded for about 16 years, and has been bleeding cash at ever larger amounts, and that has to sell ever more junk bonds or shares to fund its bleeding operations, finds enthusiastic demand for its debt, backed by nothing other than its sky-high stock price, which is premised on its being part of the FAANG stocks whose shares can never decline”.

    …LOL Obviously, he is not a fan.

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