Archive

Posts Tagged ‘TV’

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.

Labron and ESPN

I seem to be drawn to unseemly spectacles so, yes, I will tune in at 9 pm to watch the Lebron James/ESPN one-hour special on his decision about what city he will choose to go make a zillion dollars with.

Seven years in the NBA and the guy has been to the finals once and never a champion. This looks to me to be the move of a great big ego wrapped in a charity (The Boy’s and Girl’s clubs of America) to escalate the brand of one Lebron James.

And am I being too prissy or traditional or something to be slightly uncomfortable with the relationship here between Lebron and ESPN? I heard this morning on NPR that Lebron has been allowed to choose all but one of the sponsors of the show and also has had a hand in choosing who will interview him following the announcement.

I know this is a sports/entertainment story. But isn’t it also a news story? Aren’t reporters and commentators and hosts at ESPN sort of in the news business?

To be honest, I love ESPN. I love their programming and I like them as a business. They’re cocky and brash and creative and entertaining. If I was in one of their executive suites today as an ESPN employee (and I know more than one of their executives), I’d probably be high-fiving and fist-bumping with the rest of them because it’s a hell of a broadcast coup.

But I don’t work for ESPN and I can see the forest for the trees and the active merging of a media company’s business interests with an athlete’s business interests seems…like uncomfortable new ground.

What happens when an NBA star who has actually won a championship goes on the free agent market- like Kobe Bryant? Will he be able to cut a deal with all the major broadcast networks for a simultaneous announcement not unlike a Presidential news conference? Will ESPN start bidding for the announcement TV rights of other famous free agent athletes?

But even as I watch uncomfortably, I will, nonetheless, still be watching. My guess is that ESPN will welcome my viewership tonight regardless of my ethical sensitivities.