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A Tale of Two Companies: Apple and Netflix

October 25, 2011 Leave a comment


You could write a textbook on this topic but I’ll try to do it in 600 words or less.

Netflix, once a phenomenally successful company has seen its stock price tumble 35% this week on news that it managed to lose 800,000 subscribers over the past six months and that four different analysts downgraded them because no one can make sense of their business plan. Apple just lost its CEO and resident genius but is riding an I-Phone computer voice and plans for a new TV that just might revolutionize how you watch the medium- all the way to the bank.

Earlier this year, Netflix hiked prices 60% when they decided that’s what you’d have to pay to get both DVD’s sent to your home and get streaming. And they did it rather arrogantly without much of an explanation or even, an “I’m sorry, it’s the cost of bringing you all this great quality.”

Then when they finally did apologize, they announced they were splitting into two companies, Qwikster, which would be the old DVD-sent-to-your-home business and Netflix, which would now be the streaming part. The two companies would keep separate data bases and be basically disconnected from one another- which confused their customers and made them mad all over again, because you’d no longer be able to go to one place to figure out if they had the programming you wanted to watch.

Then they changed their minds and dropped the Qwixter idea and said, nah, we’re going back to what we originally intended.

Meantime, they seem intent on cutting really expensive content deals with companies like Dreamworks in order to be able to provide decent streaming services- except with their current business model charging what amounts to about $10 a month, there’s no way they bring in enough revenues to pay for these content deals. Seems to me you either collect good (and expensive) content, suck it up, and tell your customers it’s going to cost more but its worth it- or you keep being a real cheap monthly service wih average to below-average offerings of old movies and TV shows. But you can’t have both.

It’s all stated best by a guy named Tony Wible with Janney Capital Markets who gave this analysis to his customers, as quoted by Marketwatch.com:

We believe the [Netflix business] model is unsustainable, as the company faces rising costs that it hoped it could pass on to its [subscribers],” who appear unwilling to accept them, Wible wrote to clients. “The company has paid exorbitant prices for content while painting itself as a cheap rental service. Simply put, the company’s brand does not fit with its large/growing content obligations.

Meantime, Apple sold about 4 million of it’s new I-Phones a week after launch, mostly because of one added feature- Siri. This is the friendly computer voice you can interact with that looks stuff up for you and offers suggestions, tips, reminders, etc., etc. You can even talk dirty to Siri, though her sense of humor is such that all you’ll get back is words like “dirt and compost.” For the record, I have not tried this but so I’ve read.

And I see today that the “next big thing” Apple is up to is the launch of Apple TV. This would be a smart television that with a few easy, typically Apple-like steps, would allow you to see what’s available to watch without having to wade through category after category of Cable TV, Netflix and Hulu menus. And, of course it would incorporate a Siri-like application so you could ask your TV what’s on or have it find you the program you want to watch.

With their on-again, off-again, customer-belligerent and confusing business strategies, one of these two companies is coming off like New Coke on steroids. The other seems to be confidently pursuing its climb toward global domination. I’m going with the ghost of Steve Jobs over the seemingly aimless and perplexing strategies of Netflix CEO, Reed Hastings.

iSad


That’s what someone wrote on a post-it note and put on the glass wall of an Apple store last night. A lot of people are doing that today. Paying heartfelt tribute in one form or another to Steve Jobs.

I thought about him this morning as I slipped my I-phone into my jacket pocket after checking my e-mail and my messages. I thought about him last night as my girlfriend tapped away on her I-Pad. And then again as I used my mouse and clicked and dragged an item on my non-Apple PC. I thanked him silently on the subway as I put in my ear-buds and listened to a beautiful song composed and performed by my own son- a tune I had transferred from my I-Pod to my I-Phone. And I think about him as I write this- knowing he was the guy who produced the first personal computer designed to interact with the internet.

Many have compared Steve Jobs to Thomas Alva Edison (very interesting piece on that here). In terms of impact on the everyday lives of billions of people throughout the world, the analogy is spot-on. And like Edison, he didn’t exactly invent any of this stuff. He figured out how to put it all together. He’s the guy who understood the creativity that could be realized if only computer technology were made simple enough to use by anyone, not just techie geeks who knew how to maneuver through MS-DOS.

And when he got fired at Apple, his way of dealing with unemployment was to revive a then dormant animation studio called Pixar.

Of all the lovely tributes being penned about the genius of Steve Jobs, one of the most eloquent came from the White House in a statement released by the press office at 9:15pm last night:

By building one of the planet’s most successful companies from his garage, he exemplified the spirit of American ingenuity. By making computers personal and putting the internet in our pockets, he made the information revolution not only accessible, but intuitive and fun. And by turning his talents to storytelling, he has brought joy to millions of children and grownups alike.

Steve was fond of saying that he lived every day like it was his last. Because he did, he transformed our lives, redefined entire industries, and achieved one of the rarest feats in human history: he changed the way each of us sees the world.

I’ve always been taken by the sleek, modern simplicity of Apple products. Their lap tops were the lightest and thinnest. The I-pod was the size of a pack of gum, but thinner. The I-Phone is a simple rectangle activated by one button. Besides a virtual one, the I-Pad doesn’t even have a keyboard. And here is the essence of what I think was one of Steve Jobs’ guiding philosophies; that there is great virtue and elegance in simplicity.

Thank you, Steve Jobs, for your spark and your vision and your good sense and good taste; for the lessons you leave behind about how to live life and for your undying belief in the enormous creativity and possibility that can be unleashed by the digital age you helped create and that you made accessible to us all.