Friday, 18 January 2019

Netflix burns $3 billion of cash in 2018

The Netflix story itself should be made into a movie and released on......Netflix. The evolution from physical video distributor to video streamer (blockbuster in the home - remember them ?) and now content creator is amazing and the Netflix team have achieved what many thought was impossible.

It was always likely to be the case that vertical integration was unavoidable as online distribution of itself becomes of marginal value. Amazon, Disney etc have the capability to stream worldwide and in the case of Amazon a very powerful online marketing and monetisation platform.

Netflix however have decided to go for it big time and are gambling that as their competitors withdraw content from the Netflix platform they can compete and win with alternative original content such as BirdBox.

This represents quite a profound change to the Netflix consumer model which offered a very broad range of strong content at a super competitive price. They did not go for the Blockbusters - quite wisely in my view - as piracy has dented the ability of the blockbusters to drive online value.

This set of links on Reddit makes the point 

Now - with original production of their own - Netflix will need to protect their exclusivity to achieve a return on investment from original production - or the cash burn may prove impossible to put out.

On the other hand if they can crack the production and worldwide distribution of streamed video content at an attractive and viable price point the hall of fame awaits.

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