Moving On From Red Envelopes
Two years ago, in one of my first posts on this blog, I wrote that Netflix was moving from a Blockbuster model to a HBO model.
That same year, I summarized why this move was necessary:
HBO is an appropriate role model for Netflix, and it appears that Netflix has molded itself in that way. Selling a service for $10-20/monthly both distributing non-original content and producing groundbreaking original content has proven to be incredibly profitable. HBO is sui generis, but the advantage that Netflix potentially has is that HBO is “tied to the cord” and is hurt by the constantly escalating prices of basic packages which consumers are increasingly unable to pay, since consumers cannot access HBO without buying the bloated basic package. As the Economist put it, “imagine a supermarket where, in order to buy the item you really want, you first have to buy almost everything else in the shop. Now imagine the price of all those other items is constantly rising.” In contrast, Netflix can position itself as a cable alternative. There is tremendous opportunity in this model and positioning.
This month, the Chief Content Officer of Netflix defined the mission statement of Netflix as:
“The goal is to become HBO faster than HBO can become us.”