March 17, 2014

Netflummoxed


In what will surely be a case study in a future edition of Clayton Christensen's The Innovator's Dilemma, Netflix out-innovated and out-marketed Blockbuster--in 2000 it could have acquired Netflix for a paltry $50 million--into bankruptcy.

Dish Networks scooped up the remains, only to dump the brick & mortar stores and the DVD-by-mail rental service two years later, leaving a few dozen franchise-owned stores still in operation.

But then something ironic happened: Netflix so thoroughly followed Clayton Christensen's advice "to kill its own business" that it actually did it.

I have to wonder now if Blockbuster had seen the writing on the wall even a year or two earlier it could have maneuvered itself to occupy the same retail space that Netflix is now abandoning and that Redbox quickly pounced on.

As Matthew Yglesias points out, quoting Chief Content Officer Ted Sarandos, Netflix has since set out to "become HBO before HBO became them."

The thing is, I'm not interested in subscribing to "HBOflix." With few exceptions, I don't watch serials dribbled out in weekly installments (cable or broadcast), especially the kind of programming that wins HBO and its kin all that high brow praise.

"Free preview weekends" only make me wonder why people are so willing to pay so much for satellite/cable "premium" content. Though you sure can't argue with the business model, not as long as people are shelling out $200/year to watch one or two shows.

I originally subscribed to Netflix because of its anime library, but it's all but stopped buying anime DVDs and streams only a fraction of those. Dozens of titles are listed in its catalog with no availability listed for streaming or discs.

If you haven't subscribed, you have to use third-party sites to find out what streaming titles are available. As far as anime goes, the results do not impress. Netflix is playing these bait and switch games while it figures out how to keep the licensors at bay.

And keep itself from being throttled out of business.

Deliberately welding itself to the old cable model gives HBO all the bandwidth it needs. Netflix ironically finds itself at the mercy of the same Internet providers who look to HBO as their bread and butter.

Sure enough, according to the Wall Street Journal, Netflix is paying Comcast for preferred access to its networks. Verizon wants a piece of that pie too. If Verizon gets a slice, every ISP in the country is going to want to slap on a cover charge.

But as XKCD illustrates here, the old-fashioned sneakernet has enormous bandwidth. Some of us were happy to put up with the equally enormous ping times, and Redbox has gone about picking all the low-hanging fruit.

There are a handful of companies that specialize in renting anime discs. But without Netflix's next-day distribution network, the sneakernet ping times do become intolerable.

The only options left are buying the discs (I do having a growing library) and getting a Roku. Both Hulu and Crunchyroll keep their anime catalogs well-stocked and up to date. And searching through them doesn't require you to sign up for anything.

With backing from Disney and News Corp., Hulu shouldn't have to worry about getting throttled. For now, though, Amazon and Netflix are outmarketing Hulu, making Netflix's decision to out-HBO HBO perhaps the better business decision.

But not better for the anime consumer. Once I get to the bottom of my current queue, I'll be through with Netflix.

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