Subscription-based media (almost) only works for niche publications. NYT is an exception but it's only partially funded through subscriptions. The New Yorker took decades to turn a profit, and has ads as well.
Based on the fact that his user base is so large, it makes sense that advertising works best. Especially considering how many listeners he would lose if he only released it to subscribers. The user base may be more valuable to advertisers, than the podcast is to subscribers.
I find this to be off-base in a number of ways, starting with the premise that Netflix is a two-sided platform like Facebook, Google and Amazon.
Netflix used to be a distributor. It paid content owners to license its back catalog which no longer had any value in primary channels, namely cinemas. It then charged users for access. In contrast, two-sided Facebook's user do not pay anything, but the advertisers pay for access to them. The relationship is roughly the reverse.
Netflix also do not have suppliers that build up the attractiveness of the platform to end users. Netflix paid for back catalogs. Amazon doesn't pay its merchants.
Today, Netflix is both a distributor and a producer. This doesn't make Netflix twice as strong but introduces a number of dilemmas into the organization. In the same way that Disney would look to external distribution channels to maximize the return on its investment in content, Netflix now has the same incentives. Netflix has no suppliers in the sense of Amazon - it pays for all the productions on its platform. It supplies itself.
In fact, they could theoretically make more by having staggered releases where premium channels like cinema receives new titles first. Why? First, because a single ticket to the cinema costs more than a month's subscription to Netflix. Second, because the direct income from Bird Box is $0.
Certainly Bird Box has a positive effect on subscriptions but it can only be inferred. This is an enormous problem. How can you justify spending say $100 on a production which could directly generate $700M at the box office, and then just release it to a limited audience? There are going to be numerous internal battles over this. I bet we'll see Netflix go for wide cinematic release of some titles.
Another issue is capital. Not only does Netflix has to produce content from which there is no direct return. They also have to market it. A $100M production may receive half or the same amount of spend on marketing. They have to build IP that is as relevant as Marvel.
In summary, the challenges Netflix has is contradictory incentives between distribution and production, mastering the art of production and building of IP, and spending on marketing new productions.
What's interesting is that the same thing Diller attempted at QVC/Home Shopping Network is being done again my publishers are attempting to combine content with commerce.
I find this to be off-base in a number of ways, starting with the premise that Netflix is a two-sided platform like Facebook, Google and Amazon.
Netflix used to be a distributor. It paid content owners to license its back catalog which no longer had any value in primary channels, namely cinemas. It then charged users for access. In contrast, two-sided Facebook's user do not pay anything, but the advertisers pay for access to them. The relationship is roughly the reverse.
Netflix also do not have suppliers that build up the attractiveness of the platform to end users. Netflix paid for back catalogs. Amazon doesn't pay its merchants.
Today, Netflix is both a distributor and a producer.
This doesn't make Netflix twice as strong but introduces a number of dilemmas into the organization. In the same way that Disney would look to external distribution channels to maximize the return on its investment in content, Netflix now has the same incentives. Netflix has no suppliers in the sense of Amazon - it pays for all the productions on its platform. It supplies itself.
In fact, they could theoretically make more by having staggered releases where premium channels like cinema receives new titles first. Why? First, because a single ticket to the cinema costs more than a month's subscription to Netflix. Second, because the direct income from Bird Box is $0.
Certainly Bird Box has a positive effect on subscriptions but it can only be inferred. This is an enormous problem. How can you justify spending say $100 on a production which could directly generate $700M at the box office, and then just release it to a limited audience? There are going to be numerous internal battles over this. I bet we'll see Netflix go for wide cinematic release of some titles.
Another issue is capital. Not only does Netflix has to produce content from which there is no direct return. They also have to market it. A $100M production may receive half or the same amount of spend on marketing. They have to build IP that is as relevant as Marvel.
In summary, the challenges Netflix has is contradictory incentives between distribution and production, mastering the art of production and building of IP, and spending on marketing new productions.
Apple isn't a company without a middle management layer and never was, of course. The quote is used to illustrate a point.
Middle management is a structural requirement in an organization past a certain size. If it's not working out, it's more likely just _poor_ management skills that's the cause.
This was actually (part of) MUJI's concept at launch. An example is selling broken-off mushrooms:
"For example, there was a poster of dried shiitake mushrooms that were slightly damaged during the production process. In the Japanese market, only perfectly round shiitake were sold, but MUJI sold imperfectly shaped shiitake because they taste just as delicious. In another poster, the copy reads “The entire fish is salmon.” This is straightforward copy reminding readers that salmon is delicious head to tail, so all of it should be eaten. Even as the Japanese economy moved closer and closer toward an economic bubble, we had positive feedback from so many consumers back then who wanted to focus on the simple things in life."
https://www.muji.com/us/flagship/huaihai755/archive/koike.ht...
It shows that you can package almost anything as long as you do it with conceptual integrity. If you sell discounted goods, don't try to pass it off as as good as something more expensive, because that is not credible or interesting. Emphasize that it's less expensive, and why. When I google "conceptual integrity" which is funny in a way because I'm not a developer, and also interesting because it shows that many foundational ideas are cross-disciplinary.
For Netflix, it doesn't work to only show their original productions on their own platform. We will likely see them start to show their films in theaters to maximize revenue, and even offer one-time access for people to watch a film but not sign up for a subscription. What's more, they're probably going to have to turn their series into events by showing new episodes on schedule, once a week. By becoming producers, they are forced to completely abandon their old model, I believe.
It's highly questionable that you can produce _great_ shows based on data.
You can't just go to a producer and tell them, make something about Japan, because it's trending, and use these two actors because they're the most popular at the moment. Creatives don't work based on directives.
Producers are dependent on distributors, and distributors are dependent on producers.
Producers thought they'd improve their position by going into distribution. Distributors (Netflix) thought they'd better themselves by going into production.
Perhaps they would have been better off focusing on either producing or distributing. A distributor improves their bargaining position by growing the audience they can reach. Producer, by making better films that more people want to see.
It probably will. Compare their challenge before - paying to acquire users with a huge content library - to what they have to do now - pay to acquire users with a content library that does not really exist, that they have to pay to build out. I can't imagine how they can manage this financial burden, not to mention actually producing good stories, and recognizable IP.
You're right. Many industries still haven't digitalized, and there, adopting "tech" gives a temporary advantage. But it's really just one infrastructure replacing another. It's a hurdle to get over, not a lasting advantage. Tech is commoditized just like it commoditizes other industries.
You're right that they probably weren't going to be able to license all that content indefinitely, so they had to move on and create some other competitive advantage.
But then they lost the advantage they had. The subscribers they have today subscribed to the variety it had in its catalog, not Netflix Originals that have replaced it.
Netflix is an organization built around distribution, where dependability and efficiency wins. I am highly doubtful that Netflix can produce great stories, whether in movie or series format. They do take a lot of risks (and arguable they would have to because do they have leaders that understand story?) but that in itself is not an advantage. It is only an advantage if it produces better stories and we haven't seen that.
In fact, there is a company that is much, much more exciting and successful when it comes to production: Blumhouse Productions. I recommend reading up on their model.
Tech companies are valued based on future potential and as future becomes present, that potential is replaced by a reality that is often much less grand.
Netflix is a great example. It went from having a large library because the producers were its friends, to entering production itself, and alienating its former partners. Now, they have to offset investment into production with higher subscription fees which in turn reduces future potential. Netflix in 2015 is significantly more disruptive than that of 2019, which is just another HBO, and increasingly will be valued like HBO (Time Warner).
"Tech" here is actually just infrastructure; it's table stakes and not interesting at all.
I work at Makeblock so I will chime in. We design our robots to be a tool for educators that, as you mention, helps them make classes so much more engaging.
The number of students who will be able to learn, and be interested in learning, to program or to engage with scientific subjects when they see their instructions executed by their own coding companion right in front of them is so much greater than those who will find an IDE exciting. I started programming in QBASIC when I was around 10 but got bored pretty quickly as writing text-based games isn't that exciting, and started playing games instead. I probably could've been a lot better at programming today if I'd had something to keep me engaged.
Based on the fact that his user base is so large, it makes sense that advertising works best. Especially considering how many listeners he would lose if he only released it to subscribers. The user base may be more valuable to advertisers, than the podcast is to subscribers.