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Roy Dassow

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Aug 2, 2024, 12:17:19 PM8/2/24

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I was working with the board and senior management of a radio station last Friday on their strategy. The inevitable topic of digital disruption came up. It's clear radio is going to look very different over the next decade, but the question no one can answer is what will it look like and when?

Of course there are some principles here, which are probably the topic of a future post, about predicting the future. In fact I've blogged about this already. But in this domain of technology's impact on traditional industries (media, finance, transport, retail etc) it's safe to say that technology takes longer to bite than many expect, but its eventual impacts are far more profound than many predict.

Anyway in this workshop we started discussing the classic Netflix vs Blockbuster cautionary tale. This has become something of a business moral fable in recent times. You know how it goes. Blockbuster was caught wrong-footed by video streaming services. It could have bought Netflix for $50m in the mid 2000s, but it didn't, because Blockbuster misnamed the business it saw itself in. It was actually in the entertainment distribution and curation business, but it thought it was in the physical retail business (with its emphasis on turning its stores into convenience shops). Variations on this moral tale include: management wasn't competent enough to see the inevitable endgame; no-one wanted to disrupt the H1 business of physical stores and hasten their demise; etc.

And then the morality tale turns to Netflix. It had started as a business mailing out DVDs, with no late fees. It had then disrupted itself to become a streaming business of other people's content. And then it disrupted itself again to become a production house and produce its own content (Frank Underwood being the best character to emerge from their stable so far without doubt!). In this tale, Netflix management is competent, far sighted, courageous.

All of this may be true. But I can't help thinking that as we try to tell ourselves this story to discomfit ourselves ("don't be like Blockbuster's management") we are at the same time actually doing the opposite. It's kind of comforting to tell ourselves that Blockbuster's management was too incompetent to see the end game. Too timid to disrupt their physical stores. Too obtuse to know what business they were actually in. It's comforting to say: "We are not like that. We are smarter, more far seeing, more courageous than Blockbuster's management. Their fate isn't ours. In fact, we are like Netflix's management - agile, far seeing, brave enough to blow up our own business to let new growth bloom."

In fact, I wonder whether there was something far deeper going on. Bigger than management and strategy. Something in the respective "systems" and cultures in Blockbuster and Netflix, bigger than the people themselves, that almost inevitably meant that their fates were sealed. I wonder whether there was something in the DNA of the organisations, in their business models, in their ways of measurement, that meant that the decisions they would make were pretty much locked in. I suggest, in fact, that if you transplanted Netflix's management into Blockbuster, I reckon Blockbuster would still have collapsed. There were bigger forces in play here than leadership and management decisions on strategy.

Now, I don't have proof for this. I just find the current analysis a little bit too convenient and self serving. When I tell myself that morality tale, I feel comfortable, and I'm not sure that's a good way to feel in business these days.

So, is this a counsel of despair? Is your business's fate sealed by bigger forces beyond your control? Well, to some extent, maybe. But hopefully not. I guess this is an appeal to look deeper at what happens when businesses get disrupted by technology and not to assume that the incumbents were too fat and lazy to see what was about to happen to them.

And I do wonder whether the answer is less in trying to see the future and come up with a great strategy, and more in creating the kind of organisation - systems, business models, culture, etc - that makes it a bit easier to be a Netflix and not a Blockbuster as the future unfolds.

It's hard to know what to do when you have millions of users and have such a huge market share. However, it seems like Netflix could have grandfathered in people, even for a period of time. I suspect their subscriber base is so large that it would not have been advantageous. I watch mostly streaming now anyway so I'll probably drop the 2 disk to 1 disk to keep my price point.

I don't really understand why people are so up in arms about this. Everyone that I know who has Netflix with the DVD plan simply did it because it was next to nothing over the price of streaming alone. The discs just sit on a bookcase or in a drawer somewhere and collect dust. It has been obvious through the way Netflix have been marketing themselves that they are trying to move away from the discs because of the hassle and cost of everything that goes along with having to mail the discs. They were probably hoping that this bump in price was the nudge that got people off their seats to find those discs, send them back, and switch to streaming only.

My thoughts exactly! The people who were with Netflix from the beginning should take a second and remember the prices and plans from back then. When the streaming was introduced, it wasn't unlimited, it was expensive, and the selection was pretty laughable.

Bottom line is, if you want Netflix to continue offering up a great selection of video AND continue (like they have) to aggressively add new content to the fold, then the pricing will have to periodically need to be adjusted. Especially since their contracts with the studios are about to end.

And I would rather have one big increase than several smaller ones. But that's my opinion. In a few days, it'll settle down (it already is), and I'm sure Netflix will be just fine. After all, they have more customers than Comcast (and if that company can hold onto customers, Netflix certainly can).

And I would much rather pay $15 or $20 to Netflix and have an almost endless supply of great things to watch than spend $80 to Comcast and be constantly flipping channels trying to find something decent to watch.

Where it gets complicated is Comcast is my ISP and I have been completely without cable television for almost 2 years. Comcast has recently set bandwidth caps for internet use. They also own several cable channels. What's to stop them from doing everything in their power from making Netflix's services run slower, lower the caps even more, or even block services like Netflix when they see that I am not dishing out the big bucks for their premium cable services?

These are interesting times we live in. As these companies that offer conflicting services along with services that rely on other companies to be fair and honest they will resort to shady actions. Not necessarily illegal, but the Comcasts and Time Warners are going to do everything in their power to make Netflix as inconvenient as possible.

I am considering the switch to Blockbuster for my Blueray rentals, the priciing is the same except you get moves a month earlier , they have a larger Blueray selection and with also having a larget inventory that means less waiting once a film is available.

Blockbuster does not have a streaming service that i would use but this means that I can reduce my Netflix bill from shy of $30- and now only pay them $8- per month or $96- per year and that is if Amazon Prime which has the same content as Netflix does not become my streaming provider.

so now that netflix has crush every mom and pop store and look's and feel above everyone knowing it was from the help of millions of people who have an account with them who thank's when someone say's i have something cheap then what you have would last forever this company did what they needed the do by putting people out of work and this company has now showed other company's if you wanna pocket millions of dollar's offer something cheap over the internet and by mail and you will shut down every local store and mall and in this store's are people who like you and i have the pay bills keep a roof over you and you kids head and food in they're mouth this company does not care cause if they did why don't you hear all hiring they're doing all you hear is how big this company is getting and all the money thats being made cause people love staying home and being lazy streaming all day so keep raving about have great is the stream and how cheap the price still is and that is the first of more the come

This is really about a price hike, with zero improvement to the plan. Netflix streaming has never been great. Typically old or foreign movies dominate the selection. Add to that the deals made with studio's to release new DVDs late, and you could argue that they are decreasing their services , and increasing prices. Not a good combination.

It's just amazing that Netflix didn't invest more in PR consultation. The method employed basically gave their customers REASON to LOOK for a better deal. It's hard to maintain customer loyalty when you basically say, "Yup, we're raising your bill! You've been getting a heck of a deal up until this point, now you're going to have to pay what you ought to for what you were (actually for less than you were) getting."

It seems that Netflix wanted to send two messages with this tactic:
1. Netflix is going to move to primarily a streaming service, and that's final.
2. Netflix is supremely confident that they have a superior service at the lowest price, and will continue providing said superior service for the foreseeable future.