Netflix spinoff isn’t about costs or diversification, it’s about a future without discs

The spinoff was necessary strategically, regardless of how it may have been handled PR-wise or whether customers were ready for the change. It’s really about Netflix moving towards being a streaming-only business as fast as they can.

09/23/2011


IMS research: excellence in market intelligneceWith all the fervor over the Netflix/Qwikster move and Reed Hastings’ response to criticism, it seems the collective media has perhaps lost some perspective on what the deal really means, and if it was actually necessary. In my eyes, it was necessary strategically, regardless of how it may have been handled PR-wise or whether customers were ready for the change.  It’s really about Netflix moving towards being a streaming-only business as fast as they can. Let’s explore why.

Netflix’s renewal of existing content deals and acquisition of new ones will not come cheaply, given that content owners have realized that the prior deals that were in place for streamed content were severely undervalued. The company’s content acquisition costs are sure to climb substantially. Also, if all the commitment to OTT video from every corner of the consumer electronics and pay-TV industries is any indication, streamed content is the future, physical media is not. Given these factors, I would be shocked if this move isn’t in the end just the first step in divesting or closing the physical media business and for efficiency streamlining down to a streaming-only brand within the next two years. Simply getting rid of their mail-based business in the near term before consumer adoption of OTT video reaches critical mass would be premature, given the customer backlash and the revenue stream that their traditional customer base still provides. I don’t buy all the other reasons being thrown around as the main drivers for the move. Trying to reduce the amount paid in streaming fees is somewhat valid, but an extremely near-term concern -  those costs pale in comparison to keeping around a logistically-costly discs-by-mail business within which the future of the company clearly does not lie.

The Qwikster move separates the main Netflix brand from the physical media business as they expand outside of North America. This seems appropriate, as it wouldn’t make a lot of sense to go through the cost and logistics to recreate discs-by-mail in South America, Europe, and eventually Asia. The company has stated it plans to be streaming-only in a few years anyway, and it will need all the capital it can get to potentially afford higher aggregate streamed content costs. Not just from Hollywood but also from all the regional content providers with which they will need to sign deals, in order to deliver local content in the new international markets they’re expanding to over the next several years.

So, in summary, Netflix:  Good move. Bad handling.



Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2017 Top Plant.
Product of the Year
The Product of the Year program recognizes products newly released in the manufacturing industries.
System Integrator of the Year
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
May 2018
Electrical standards, robots and Lean manufacturing, and how an aluminum packaging plant is helping community growth.
April 2018
2017 Product of the Year winners, retrofitting a press, IMTS and Hannover Messe preview, natural refrigerants, testing steam traps
March 2018
SCCR, 2018 Maintenance study, and VFDs in a washdown environment.
April 2018
ROVs, rigs, and the real time; wellsite valve manifolds; AI on a chip; analytics use for pipelines
February 2018
Focus on power systems, process safety, electrical and power systems, edge computing in the oil & gas industry
December 2017
Product of the Year winners, Pattern recognition, Engineering analytics, Revitalize older pump installations
Spring 2018
Burners for heat-treating furnaces, CHP, dryers, gas humidification, and more
April 2018
Implementing a DCS, stepper motors, intelligent motion control, remote monitoring of irrigation systems
February 2018
Setting internal automation standards

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

The Maintenance and Reliability Coach's blog
Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
One Voice for Manufacturing
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Maintenance and Reliability Professionals Blog
The Society for Maintenance and Reliability Professionals an organization devoted...
Machine Safety
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
Research Analyst Blog
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Marshall on Maintenance
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
Lachance on CMMS
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Maintenance & Safety
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
Industrial Analytics
This digital report explains how plant engineers and subject matter experts (SME) need support for time series data and its many challenges.
IIoT: Operations & IT
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Randy Steele
Maintenance Manager; California Oils Corp.
Matthew J. Woo, PE, RCDD, LEED AP BD+C
Associate, Electrical Engineering; Wood Harbinger
Randy Oliver
Control Systems Engineer; Robert Bosch Corp.
Data Centers: Impacts of Climate and Cooling Technology
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
Safety First: Arc Flash 101
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
Critical Power: Hospital Electrical Systems
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me